Tax Efficient Investments

When it comes to investments there are four types from a tax standpoint:
1. Taxable Investments
2. Tax-Free Investments
3. Tax Advantaged Investments and
4. Tax Deferred Investments

The purpose of this article is to provide an overview of the types of investments that are the most tax efficient.

FEDERAL AND STATE TAX-FREE INVESTMENTS
1. Municipal Bonds – Exempt from state tax of the state in which the obligations are issued
2. Municipal Bond Funds – Exempt from state tax of the state in which the obligations are issued
3. Municipal Bond Trusts – Exempt from state tax of the state in which the obligations are issued
4. Cash Surrender Value Loans
5. Roth IRA
6. Roth 401(k)
7. 529 Plan distributions used for qualified higher education expenses, including room and board
8. Series I or EE Bonds – Earnings exempt if used for qualified higher education expenses
9. Coverdell IRA (aka Education IRA) – Earnings exempt if used for qualified education expenses (tuition:
elementary school, high school, tutoring and college)
10. Earnings on investments held in Health Savings Arrangements used to pay for eligible medical expenses

STATE TAX-FREE INVESTMENTS
1. Treasury Bills
2. Treasury Notes
3. Treasury Bonds
4. Sallie Mae Mortgage Backed Securities
5. EE Bonds
6. I Bonds

TAX ADVANTAGED INVESTMENTS
1. Real Estate Investments
2. Rental Properties
3. Principal Residence – Up to $500,000 ($250,000 if single) of gain excluded
4. Single Premium Life Insurance Products
5. Traditional IRAs
6, Stocks held more than one year
7. Exchange Traded Funds held more than one year
8. Mutual Funds held more than one year
9. Vacation Homes
10. Precious Metals/Collectibles/Coins – 28% maximum long-term capital gains tax rate
11. Real Estate Investment Trusts
12. Qualified Small Business Stock – 50% gain exclusion. Balance subject to 15% long-term capital gains
tax

TAX DEFERRED INVESTMENTS
1. I Bonds
2. Fixed Annuities
3. Variable Annuities
4. EE Bonds
5. Traditional IRAs
6. 401(k) Plans
7. 403(b) Plans
8. 457 Plans
9. Qualified Small Business Stock – Proceeds used to purchase new Qualified Small Business Stock
10. 529 Plan Investment earnings are deferred until used for qualified higher education expenses.

Some of the above mentioned investments may be subject to state and local income taxes as well as the federal alternative minimum tax. For more information regarding this, please consult with a tax advisor or attorney.

The Ultimate Photography Business Management Software?

As a professional photographer, you’re also a small business owner, I know that administration can take up a lot more time than I like.

I’m talking about:

  • scheduling appointments,
  • processing payments,
  • running reports,
  • managing clients,
  • managing staff,
  • dealing with supplies and inventory,
  • marketing, and
  • all the other “background” tasks that keep my business going.

That’s why in recent years I’ve become very interested in embracing technology to automate and centralize as much of these “administrative” activities as possible.

As a photography business owner, you no doubt love doing photography – but in order to do what you love, you must administer your business and get new business through marketing.

For example, how much time do you spend managing your appointment schedule or dealing with payments by cheque or cash, or sending out appointment reminders to minimize no-shows?

These tasks are necessary, but do take up a lot of time.

Of course no software will replace you and your vision, but you can use software to automate some processes to free up your administrative time. The key is getting the right photography business management software that won’t cost you a fortune.

Unless you shoot exclusively in a studio, you’re likely off-site regularly photographing clients. If you spend a lot of time off-site, it’s tough to administer your business – unless you’re able to access your photography business management software.

How You Can Bring Your Office Anywhere With You

The easiest way to bring your office with you is with a mobile computer and using cloud-computing software. The mobile computer is simple – an iPad or laptop will do. It’s the cloud computing software that you need.

What is Cloud Computing Software?

It’s software you can access entirely on the Internet. It’s also called web-based software and it’s growing dramatically in popularity. The days of desk-top software that requires installation on a local computer are disappearing.

Have you ever been on a photo shoot and get a call during down-time for an appointment? If you don’t have your schedule available, you have to call them back – possibly losing the booking. If you have complete access to an online schedule, you can book the appointment right away.

Automate Photography Bookings

If you offer set photography packages, you might want to consider offering clients the ability to book their own time on an online schedule they can access with an Internet connection. You could create a web page explaining your packages and the time required.

Put the control in your clients’ hands and they’ll be delighted they can book a photo shoot without minimal hassle. You’re delighted because you booked a client without getting involved.

Reduce No-Shows

One of the worst money-losers in any business that books appointments – such as a photography business are no-shows. Yet, you’re probably too busy to sit at a phone each day making reminder calls.

What if you could automate reminders? This is ideal, and with top-of-the-line photography business management software this is not a problem.

How it works is your online scheduling software is linked to a powerful e-mail delivery software application that automatically sends out e-mail and text messaging reminders to clients at a time before the appointment you specify. Even if you prevent 2 no-shows in a month, the software will pay for itself.

Running a Photography Business is More than Managing a Schedule

  • Do you hire independent contractors or have staff photographers?
  • Do you offer payment by credit card?
  • Do you have any time left to market to your existing and past clients?

You can certainly get individual photography business software applications to manage each of these 3 types of administrative activities. You can get payroll and staff management software.

It’s not hard to find credit card processors to integrate into your system. And of course there is no shortage of marketing software applications available – especially e-mail and text messaging software services.

But, if you could centralize all these types of administrative activities in one software application, you’ll not only save time learning how to use it all, you’ll save time and hassle integrating it all together… because it already is integrated.

What I’m talking about here is ramping up your administrative efficiency by using an all-in-one photography business software that offers all the systems and processes you need to manage your photography business.

I’m a huge fan of all-in-one software packages because I need only learn one type of software. How much software have you bought only to never really use it fully because you didn’t take the time to learn it.

I’ve got all kinds of software on my computer just sitting there. The software I do use extensively is that which is central to running my business and that basically manages most of my administrative activities.

Here’s the Real Value of All-In-One Photography Business Software

The true asset of your photography business is your database of clients – past and present. Those clients not only provide you work, but refer you to their friends, family, and acquaintances. Your database is your gold and so you must harness that database in order to build your business.

If you have different software applications managing individual tasks, you likely have a mish-mash of contact lists and client profiles scattered in various files and software applications.

When you centralize your entire photography business management software, you’re able to centralize your client database – and then leverage that database in all your business management activities.

An Example:

I’m a huge fan of communicating with my database of clients via e-mail. If you use different software applications for different activities, then when you book an appointment, you must load that contact into each database – perhaps in the scheduling database and then your e-mail marketing database. You end up managing multiple client contact lists.

It’s far more effective and efficient that when you book a client into your schedule, that client is automatically logged into a central database with all their information, from which you can then launch e-mail messages, text messages, and even then generate business reports informing you about how a particular client is contributing to your business.

The key is moving toward a one-step process. That step being once you have a new client scheduling, that client is now part of your entire photography business software platform from which you can completely manage that client.

The same goes for centralizing your independent contractor / employee details into the same system. You can then generate payroll reports showing your payouts to each photographer on your payroll by client.

Take Your Photography Business Software to the Next Level

Do you offer pricing packages? Probably. Is it a hassle managing all those packages? A centralized, all-in-one business management software specifically for photographers lets you create pricing packages that integrates with your credit card processing and your client management.

Not only this, but the right software will also make it easy for you to create gift cards, track your client’s referrals (then send out thank you messages), pricing packages, discounts, etc. – all in an effort to increase your sales and offer your clients more choice.

What About Selling Products on Your Website?

As a professional photographer, you can get great deals on photo-related products and services. You can create another profit center on your website by selling products and services. Because you know the business so well, you can offer only the best to your clients.

Moreover, because you’re a professional, you’ll have instant credibility and trust and could create a profitable e-commerce store that earns revenue with minimal effort and time.

In a nutshell, the best photography business software is web-based and offers the following centralized functions:

  • Scheduling – online, centralized, and self-bookings;
  • Credit card processing;
  • pricing packages and gift cards;
  • E-commerce and online store opportunity;
  • Payroll and staff management;
  • E-mail and text messaging capability – automated reminders and marketing channels;
  • Total client data management totally centralized;
  • Client referral tracking (this alone should be harnessed to the maximum);
  • Financial and performance reporting that uses all the centralized data for comprehensive, up-to-date information.

Issues In Investment Diversification And It Necessity

During the last decade of the twentieth century and beyond, many have achieved insurmountable success with reduction of risk in their investment through diversification. Financial diversification means reducing risk by investing in a variety of assets. If the asset values do not move up and down in perfect synchrony, a diversified portfolio will have less risk of its constituent assets.

Investment is the commitment of money or capital to purchase financial instrument or other assets to gain profitable returns in the form of interest income or appreciation of the value of the instrument in future. The simplest of example is provided by the proverb “don’t put your egg in one basket”. Dropping the basket will break all the eggs. Placing each egg in a different basket is more diversified. There is more risk of losing one egg, but less of risk of losing all of them at a time. Historically, diversification has it origin in many scriptural books in particular, the Bible, from Ecclesiastes which reads that “but divided your investment among many places, for you do not know what risk might lie” There is a disturbing reluctance in our time to talk seriously about matters if investment diversification.

Why? Perhaps it has to do with modern sensibility’s profound discomfort with the practices and ethos of investment behavior along with our bad habits, we’ve gotten used to not talking about the things that matter most. One will often hear that investment diversification is a private matter that does not belong in the public discussion arena because it all comes down to investors decision to decide its risk level while choosing investment commitment. But that analysis doesn’t hold water-at least on some important points. Whatever your financial investment or even if you have none at all, it’s a fact that when million of people stop believing in the indices that moves an investment enormous consequences follow and it becomes even greater when it is accompanied by major players aversion. How could it be otherwise? In modernity, nothing has been more consequential- or more public consequence than large segment of investors towing the same line of investment opportunity make a killing from it when there are no high competitions and make it saturated thereafter.

The risk reduction from diversification does not mean anyone else has to take more risk. If for example investor A owns $5000 of one stock and investor B owns $5000 of another, both A and B will reduce their risk if they exchange if they exchange $2500 for the two stocks, so each now has a more diversified portfolio.

If your expectations of return on all assets in the investment portfolio are identical, the expected return on a diversified portfolio will be identical to that of undiversified portfolio. Though, some assets will perform better than others, but since one does not know in advance which asset will perform better, this fact can not be exploited in advance. The diversified portfolio’s return will always be higher than that of the worst-performing investment. So by diversifying one loses the chance of having invested solely in the asset that comes out worst. That is the role of diversification. It narrows the range of possible outcomes.

Risk averse investors may find it beneficial to diversify into assets with lower expected returns, thereby lowering the expected return on the portfolio, when the risk-reduction benefit of doing so exceeds the cost in terms of diminished expected returns and since forex trading involves high risk, this will be highly reduced or eliminated with my system when you ride with today.