Tricks Tax For The Owner Of Small Business

Our firm does not do taxes, even though I did them for 12 years. When I began my practice that was a service I simply did not want to offer. However, we do partner with CPAs and other tax professionals to be certain that the guidance we provide our clients is in line with the advice their tax professional give them.

As part of that guidance, there are a few tax advantages that most business owners either don’t know about or simply don’t take advantage of. There are also some “deductions” that should be avoided due to misguided tax information. Here is a list of the five most common.

Track All Expenses Consistently

Track all of your expenses including the ones you pay for personally. Business owners always ask me “what about the stuff I paid for on my personal credit card?” Yes it is all deductible; you just need to get it on the accounting records and account for it. Keep in mind that the credit card is personal so don’t add that account to your chart of accounts. They will count as owner or shareholder contributions. TIP: Record these charges monthly so you don’t forget at the end of the year.

Avoid Money Leaks

As a small business owner you are sometimes faced with cash flow issues. As a result you get behind on paying your bills and your taxes. While your vendor may not assess late fees, you better believe the IRS will in the form of penalties and interest. And these my friend are non-deductible. Nope not even the interest portion. TIP: Plug this money leak by paying your taxes on time and use those funds on an expense that is deductible.

Maximize Retirement Contributions

Most small business owners are so busy working in their business that they never stop to think about what they will do once they retire. I’m not even sure you think about retiring at all. But the fact is you will — one day. So you have to sure to have some sort of nest egg. There are several retirement plan options that will allow you to put aside some funds tax free for your retirement and they are all tax deductible to the business. Yes you can have your own company retirement plan. Cool right? TIP: Contact your tax advisor and your financial advisor to discuss retirement plan options.

Expenses Paid Personally

I cannot say it enough – stop co-mingling your personal expenses through the business. They are not tax deductible and us accountants — we know when you try to do it. Believe it or not we are smarter than the average bear. TIP: Don’t co-mingle.

Section 179

The IRS allows you to expense the purchase of a major fixed asset all in the first year instead of depreciating it, baring certain qualifications. You can deduct up to as much as $500,000 and reduce your taxable income to zero. TIP: Hold off buying any and all equipment until December if you can so you can buy just enough and not too much.

What tax tips have you taken advantage of to help keep more money in your business?

Tips To Get Biggest Tax Refund

During tax season, millions of Americans anxiously wait for W2’s, 1099’s, 1098’s and other documents needed to file income taxes. Some get excited about the lump sum refund owed to them but most professionals cringe at the thought of filing taxes. Usually praying to just break even and not owe the government any money.

The government does not give the middle class many tax breaks. Most tax credits have income limits. So climbing the corporate ladder and shooting for that six figure salary means paying more taxes. That is just the way American tax system works. However, there is a way to create credits regardless of income. Start a business. Having a small business that you run out of your home sets you up to write off expenses that normally would not qualify. Who gets the biggest tax breaks in America? Big business. Become a business.

Most cannot write off any of job related expenses paid for after taxes. For example, a $50,000 salary becomes $42,500 after taxes. That means all living expenses come from $42,500, not $50,000. Dry cleaning, meals, gas, car maintenance, utility bills, etc. Owning a business allows you to pay taxes on what’s left after paying expenses. What is deductible? Dry cleaning, meals, networking events, cell phones use for business, vehicle interest, car maintenance, mileage on your car used for business, business travel, the list could go on. Deducting all of those expenses before paying taxes and lowers the tax rate.

No Business

  • Earn a $50,000 salary
  • Bring Home $42,500 after taxes
  • Live off of $42,500
  • Owe more/break even after filing income taxes

How does owning a business help with income taxes? If you earned $5,000 from your business while working to earn a $50,000 salary, part of day-to-day expenses, now business expenses, are deductible. The cost to run your business is also deductible. For example, deduct $7000 in business expenses from total income of $50,000 plus $5,000. The taxable income is now $48,000 instead of $50,000. Since $50,000 is taxable income over the course of the year, a refund is in order when it reduces to $48,000.

With a Business

  • Earn a $50,000 salary
  • Earn $5,000 from your home based business
  • $7,000 in living expenses are now business expenses
  • Taxable income is now $48,000 instead of $50,000

Individual income tax and small business refunds will vary. This is just an example of how owning a small business can benefit you. Turn a marketable talent into a business. Start a direct sales business for an immediate solution. Filing income taxes does not have end with another bill.

How To Prepare Your Tax

It’s one of the few times we look forward to tax-related tasks, and when it comes to saving versus splurging, CNBC reports that we have a tendency to treat ourselves this time of year. The IRS reports that the average refund is $3,116, which is a good chunk of change whether you want to pay off some bills, save or get yourself something nice.

MIT Sloan School of Management Professor Jonathan Parker says that there’s a lot of needless (but fun) spending happening in households reporting in a survey that they plan to save the money. That’s not to say that these households aren’t saving part of their refund, but it also seems too tempting to get a big check and not spend at least part of it on yourself or family.

Helping the Economy Out

Edward Jones, a financial services company, also has polled those getting refunds and discovered that only 8 percent of people admit to spending their refund on a fun but unnecessary treat for themselves (the key word here is “admit”).

Just over half, 52 percent, said refunds were earmarked for necessities such as household expenses or paying off debt. Another 30 percent say they plan to save, 8 percent want to invest it and just 2 percent weren’t sure yet how they would spend their windfall.

Some people even plan costly events like weddings around tax refund season. In 2015, a couple from Portland, Oregon, planned their destination wedding in Jamaica in early May because they knew friends and family would be flush with tax refunds that time of year. This savvy planning paid off, as the majority of their invitees accepted and spent Uncle Sam’s refund on tropical drinks, souvenirs and of course wedding gifts.

Make More of Your Refund

There’s nothing wrong with treating yourself, especially if you put aside just a small percentage of your refund for something fun. However, those who really struggle with saving or investing can try some strategies to improve fiscal responsibility.

For example, the IRS offers direct deposit of refund checks, and all you need to provide is the bank name, account number and routing number. Choose an account you don’t regularly check or have access to, or open a new savings account and opt out of getting checks or debit cards, and have your refund routed to this account.

CNN Money reports that 80 percent of tax filers get a refund, which means most of us are likely facing the same conundrum right now. Regardless of how small or big your refund, how should you spend it? The majority of those getting a refund (84 percent) make less than $50,000 per year, so a significant refund can make a big impact on paying down debt, saving or investing. Make the most of your refund this year and map out where each dollar will go.

Guide To Choose Your Tax Accountants

When tax season rolls around, many businesses recall that they wanted to hire a new accountant, and new businesses are often hit with the sudden realization that they are desperate need of some assistance with their finances. Dealing with business finances on your own can be a nightmare, and can result in businesses missing out on important deductions that could save them a lot of money in the long run. Finding the perfect specialist for the job may take some extra time, but it is important to realize that not all professionals are created equally. Before spending all of your profit just to be left disappointed, take the time to read these tips that will guarantee that you wind up with a tax accountant that is perfect for both you and your business.

Shop Around

When you take the time to shop around, it guarantees that you find an accountant with the experience that you need. Hiring a specialist that is experienced in your area of concern is vital to the success of your business, and can help save you money. For example, you would not want to hire an individual that has limited or no experience in handling business situations if you own your own business, just like you would not hire a professional with no audit experience to handle your audit situation. Experienced professionals are aware of important rules, regulations and deductions that other professionals may not be.

Ask Questions

If an individual is fresh out of school and you are their first client, it is highly unlikely that they will be willing to divulge that information. Inquire about previous clients, issues that they may specialize in, ask for vague examples of previous clients and do not forget about their education. As you ask questions, it may seem a bit like you are interviewing your possible candidates in an effort to find the perfect one to hire, and that is exactly what you are doing. The end result will be the perfect professional for you and your business.

Get to Know Them

Hiring a new accountant is a bit like hiring a person for your wedding. If you hire a professional that you simply do not like or are not comfortable around, for any reason, it will make an already stressful situation much worse. Schedule free consultations when possible, and then use them as an opportunity to get a feel for the person behind the desk. If your personalities are compatible, it will make it easier to delve deep into your situation and work together as a team.

Affordability

Take the cost into account before hiring your next tax accountant. Often, specialists will make vague promises of saving you money on your taxes, and use that as justification for charging more to help you file them in the first place. Unfortunately, these scams do not always, if ever, work out in favor of the business. Be wary of companies that overcharge for their services. If one professional offers similar services at half of the price, it may be a wise idea to give them a chance.

Hiring a new financial specialist at the spur of the moment may seem a bit easier, and it is in the beginning, but the end result may not be as satisfying. Take the time to shop around and get to know the person or company that you may be hiring to make sure that you are hiring a specialist that will be able to help you for years instead of one that will leave you feeling disappointed after just a few months.

How To Cut Your Tax Bill

For many people, volunteerism is about more than simply doing something nice – it’s about enriching peoples’ lives and making the communities where we live and work a better place. But, did you know your stewardship and goodwill may also help you reduce your taxes? Gifts given to charity and other expenses related to volunteering may be tax deductible. For the avid volunteer, the savings could be worth the effort to track expenses related to your charity work.

Transportation expenses

While you cannot deduct the time you spend on the road driving to and from volunteer events, you may be able to write-off related expenses, such as parking, tolls and gas directly used in your charity work. It’s important to note that you cannot claim costs for car repairs, routine maintenance, registration fees, insurance or depreciation.

If your charity work requires you to travel, you may be able to write-off the amount you spent on public transportation, i.e., bus and subway tickets or taxi fare, airfare, meals and accommodations.

Generally for all travel and driving expenses, the primary purpose of the trip must be to perform services for the charitable organization. A deduction may not be allowed if the trip also includes a significant amount of personal, recreation or vacation activities.

If you’d like to include volunteerism as part of your tax strategy, keep reliable written records of your expenses, including the total amount incurred. With regard to driving expenses, keep track of the reason you drove and the date you used your car for the charitable activity.

Additional out-of-pocket expenses

If you need to make a purchase to perform your volunteer work, you may be able to claim the purchase as a tax deduction. For example, a committee member might deduct the cost of supplies needed to host an auction. Other expenses could be deductible depending on your situation. As a best practice, keep good records and review them with your tax advisor.

As you tabulate your costs, be aware that the amounts must be:

· Unreimbursed. (If the organization has repaid you for an item, you may not claim it on your tax return.);

· Directly connected with the volunteer services;

· Expenses incurred only because of the volunteer services you gave; and

· Unrelated to personal, living or family expenses (For example, childcare is not an eligible expense you can deduct.)

Financial contributions

Generally speaking, cash donations you make to a qualified charitable organization are deductible if you keep proper records and itemize deductions. Property you donate may be written off as well based on the fair market value of the asset at the time of the donation. Note: Special rules may apply to certain contributions.

If you receive something of value from a charity, such as a benefit dinner or an auction item, you need to subtract the value of the item from the total donation to determine the deductible amount.

As you prepare for tax season, there are a few important things to keep in mind. For you to write-off volunteer expenses or donations to charity, you must itemize deductions on your tax return and keep reliable written records of anything you intend to claim. Also note that you cannot claim a deduction on your tax return for the value of donated time or services. If you’re considering deducting volunteer-related expenses or donations on your tax return, meet with a tax advisor to get his or her perspective on your financial situation. You may also refer to IRS publication 526 for guidance on charitable deductions.

Ways for Planning for the Future

Whether your “Only Hillary” or “Only Trump” – or for that matter “Never Hillary” or “Never Trump” – one thing is undeniable. There is no person on earth that will correct the host of issues that are facing this country in a four-year or even eight-year term. It is simply impossible to course correct that quickly. There is a convergence of issues facing our economy – some have been caused by man and some are just the by-products of issues that no one ever considered such as people living as long as they are today.

Think of four or five major highways all coming to a point where they meet. This is a good way of visualizing what we are facing. The challenge is that no one knows if they will all meet at the same time and when that will be. These “highways” could be named “entitlements”, “money supply”, “world unrest”, “debt”, “jobs”, just to name a few biggies.

On the “entitlement” front our government (with possibly the best intentions) have created an atmosphere over the last 50 years where many citizens take the approach that the government is responsible (to what degree is debatable) for their well-being when in fact government was never intended to take this role. These social programs have caused a major drain on our productivity and correcting them (or eliminating them) is political suicide. On the “money supply” front the decision of President Nixon to remove us from the Gold Standard (where each dollar in circulation was backed by gold held in reserves) is turning out to be a tragic decision. The ability to print endless amounts of dollars is leading to the world reconsidering our dollar as the “gold standard” in trade. This is leading to a host of issues facing this country. This is not a republican or democratic caused problem. Think of it like this – if you had a printer in your basement that pushed out an endless supply of $100 dollar bills – how often would you use it?

On the “world unrest” front – the financial stage is so integrated internationally that splashes abroad can cause waves of concern here on our shores. China’s actions are of major concerns to the US and they are positioning their currency to someday be the “gold standard” around the globe. The amount of gold reserves that they are stockpiling – from what can be gathered – is staggering. They are of the opinion that the US is vulnerable.

On the “debt” front – with our National Debt now approaching $20 trillion – the interest payments facing our country are growing to a point where they may stifle (or strangle) our productivity. Interest payments on debt will soon be the fourth largest budget item for our country. Keeping interest rates artificially low (in actuality in real negative territory) helps keep the interest payments lower – but hampers our citizens from earning a reasonable return on their hard earned savings.

On the “jobs” front – statistically American’s are earning less now than they did in the 1970’s – even taking into account that most households are two-income. This data is compiled taking into account inflation – what it costs today versus what it costed back in the 1970’s. At the heart of this issue is the value of the dollar (see paragraph above) and entitlements which have caused governments (from DC to Main Street) to continually raise taxes to support programs. This in turn has eroded “discretionary income” for most American’s. Work harder – make less.

My clients today predominately comes in two forms. First – are those that are 12 – 30 years my senior. Most are retired (or soon to be) and have amassed what they could and are now implementing income and protection strategies to see them through their retirement. The second are my institutional clients – associations, religious, credit unions, corporate, etc. that are utilizing the products that I offer as a way to protect and create sustainable interest to enhance their income. Many of these institutions once flocked to traditional banking products but the low interest rates have caused them to seek other safe money strategies for their funds. I am 50 years old this year and will soon be a 30-year veteran of the financial services industry. I am more convinced today than at any point prior that the way that my contemporaries should plan for retirement come down to three simple courses of action (I use the word “simple” for levity purposes). And they are:

– No Debt – no mortgage debt, no car loans, no Parent-Plus loans, no credit card, no debt!!

– Guaranteed Income Sources – Social Security, Pensions (if one is so lucky to have), Annuity Payments, Cash Value Life Insurance, Income Producing Real Estate Holdings,

– Dividend Paying Quality Stocks

– Crisis Plan – cash on hand equal to at least 60 days of household expenses, some gold/silver in hand, food reserves for at least 30 days, some protection and ammunition on hand.

On the first goal – “no debt” – that may mean to own only one house instead of two like many of my contemporaries do. It may mean to downsize earlier than normal to provide time to pay off mortgage debt while still working. It may mean to drive cars that are good – not great. It may mean to place more of the burden of college tuition on the shoulders of our children then to take it onto our own balance sheets. It certainly means to practice “delayed gratification” which is a major issue for our generation.

On the second goal – “guaranteed income sources” – my thought is that with no debt folks can tailor their standard of living to the income that they have coming in each month – as long as that income is secure. As I have said to some of my buddies – that may mean drinking “Coors Light” instead of “Craft Beers” all the time. I may need to fish in the Pocono’s more than take trips north.

On the third goal – “crisis plan” – this is just common sense. If things in this country really went to hell – I would hope that order would be established in a short amount of time by our government. But in the meantime – while we are waiting for the “cavalry” to arrive – I want to be able to eat, drink, protect my loved ones, and if needed trade for supplies.

In closing – as the saying goes “no one has a crystal ball” and all we can do is look at the picture before us – not turn a blind eye or put our heads in the sand – and plan accordingly. This is the plan that I have begun to implement for my own family. My hopes are that in the next 10 years I will achieve these goals – God willing. I have told my wife Janis many times that my plans will never make us rich but should almost guarantee that we will never be poor.

 

Things You Should Do Before Transferring Money Online

Online money transfers have become more convenient in all kinds of transactions. There are so many online platforms, offering the services today and to get the best rates you must at least compare. There is also an importance of using platforms that keep you safe and secure considering how risky some of the transactions can be, especially with the increasing cases of identity theft and cyber crimes. Below are a few checks that you should make to have a pleasant and most cost effective online transfer of your money.

Exchange rates

The currency exchange rate is one of the most important checks you should make before transferring your money. Currency rates are ever changing and you can time your transaction so that you are able to take advantage of the best possible exchange rates. Remember that not all financial institutions offer the same rate and you should therefore compare offers by the unions or banks that you intend to use so you do not end up being ripped off. It helps to also be up to date with global currency markets so you are aware of what rates are reasonable and what rates are simply ambiguous.

Transfer amount

The amount of money you wish to transfer online can have an effect on the service that you get. If for instance you are transferring large amounts for business purposes, then a money transfer operator specializing in business operations can be a better option in getting you better service terms. For smaller amounts, make sure that the terms of transfer that you get are reasonable enough or consider sending a higher amount to enjoy better terms of transfer if need be.

Transfer fees

They also differ from one money transfer operator to another. The target country for the transfer can also determine the fees that you have to pay for the services and so will the amount of money that you want to transfer. Important to note is that whereas some institutions may offer very low transfer fees, they may end up charging you unreasonable exchange rates to benefit. Ensure that you are aware of all transfer charges, including those that might be applicable to the recipient so you can choose the best transfer channel and send the right amounts as necessary. It is especially very important that you find out about any hidden fees like processing fees and out of currency fees among others. Reading the fine prints on terms and conditions of service can go a long way in saving you from unnecessary charges.

Transfer window

One of the best ways of saving costs when transferring money online is by allowing yourself a transfer window that is long enough for you to make all considerations before making a decision. Scheduling your money transfer will save you from last minute rush that leaves you settling for any service even though the terms maybe ridiculous. When you have enough time to send the money, you will manage to do a thorough research on everything that matters so you send conveniently and cost effectively too.

Currency exchange rate is one of the most important elements when you want to transfer money online. It is beneficial that you compare the rates before settling for a service provider.

 

Tips To Take Income Easily

Creating passive income is the dream of everyone. Why not? Aside from requiring you not to spend lots of money, time and effort, you can also double or even triple the income you earn. The idea of building your own website, providing a service or product and sitting back to watch the flow of cash is really tempting. There are other ways in which you can earn money in an instant way. Here’s how to get started.

· Create money for the tasks you are doing

Yes, you can certainly create some money when doing some things you are used to. There are other platforms such as In-box-Dollars that allows people to generate passive income through searching the web, playing games, shopping online and more. You can take advantage of their services to make some extra income.

· Invest in real property

When you have a fully rented and established property, it is mostly a matter of managing your property and making sure it performs well. If you are busy with your work or have other important matters, professional property managers can handle the task. They can manage your property while making the investment more passive.

· Purchase and rent expensive tools, equipment, etc. repeatedly

You can consider photo booth, camera, treadmills, etc. This may not very passive, but this is another type of rental income you can capitalize on. Start with one, and you can buy second one or more if you see it is in-demand among consumers.

· Be a silent business partner

Maybe you have heard different horrible stories with regard to investing in a bar, pub or whatever. But, this is not always the case. As long as you do your due diligence, you can be a business investor or silent partner just like property investors. Sounds interesting, right? However, bear in mind to invest ONLY in a business where you are sure to get a cash flow constantly or yearly.

· Designs stuffs (e.g. mugs, t-shirts) and sell them through an online store

If you have talent in designing stuffs, this can be your cool passive income idea. Different sites make it very easy for people to submit designs. Therefore, you can create lots of designs and leave them up waiting for consumers. The main idea here is to make and design stuff for the niches you know.

· Design, manufacture and trade your own item, product, etc.

This type of passive income has been tried and proven by numerous people across the world, helping them achieve better living. Start by creating a product or item, manufacture and sell it through an online site. If not, you can build your own online store and start spreading your unique work through guest posts by an affiliate program or online networking.

There you have it! These are only some of the passive income tips you can use to start your own business and earn impressive passive income after some time. They are only simple to do, yet the amount of profit you can expect to produce is incalculable.

 

How To Become Financially Independent

Americans are terrible savers. No sense in beating-around-the-bush. The average savings rate in the USA in 2015 was 5.5%. But if you break it down by income, those at the top save much more of their income where the low-to-middle income earners save close to nothing, according to the Bureau of Economic Analysis. But why? We all know we need to save more, and yet, we aren’t.

One reason is we live for the moment. Pop culture has taught us to spend, spend, spend, and then spend some more. Obtain instant gratification and the future be damned. Another is debt, which kind of ties into the first. The USA is the largest debtor nation in the world in terms of household debt.

Living next to the Joneses can really take its toll. A third is a false sense of security with Social Security. We were told that social security would provide for us in our golden years. Therefore, we didn’t put much thought into saving for ourselves. Also, many of us worked for companies that offered pensions. Today, most pension plans are gone and Social Security is headed towards insolvency. If you’re under 40, you’ll be lucky to get a penny, and it probably won’t be worth much as the dollar keeps losing its value. Finally, many of us are financially illiterate. Schools don’t teach personal finance, and economics seems like a foreign language. So what can we do?

Think of this as the golden rule in personal finance: Pay Yourself First.

It seems so obvious, yet most of us do the opposite and pay ourselves last. We pay everyone else then save what is left over. The problem is, many times, nothing is left over. We convince ourselves that we’ll start next month and then something else comes up. Something else always comes up. It’s human nature to procrastinate and find excuses not to do the tough or disciplined thing. It’s like going on a diet. You always end up fatter. In this case, you end up poorer. How can you ever retire? Do you want to work forever?

Paying yourself first is easy to do. We just make it harder on ourselves. Simply set up an automatic savings plan so the money is withdrawn from your paycheck before you ever see it. A good place to start is with your 401K or IRA. You get tax savings and, in the case of the 401k, receive a company match most of the time. Whatever you do, always contribute at least enough to get the company match. It’s free money. Most companies match dollar-for-dollar up to 5% of your salary.

You want to aim for a minimum savings rate of 10%. If you haven’t already, create a budget. You’ll not only find where your money is going, but how it is being wasted. Don’t be surprised how easy you’ll find that initial 5%. In conjunction with the budget, use what I like to call the 24 hour rule. Since I do most of my shopping on line, I let my purchase sit in the shopping cart for a day. After sleeping on it, many times I’ll discover I really didn’t want that particular item in the first place. This eliminates that binge impulse. How many times have you asked yourself “why did I buy this thing? What a waste of money.” Automatic savings also helps you take advantage of compound interest (interest earning interest) and dollar cost averaging (avoiding the pitfalls of market timing).

The psychological benefits are significant as well. First, you have the peace of mind that you’ve developed a plan to retire or will have the money available to do what you want to do when you want to do it. Second, seeing success will help keep you on track and stick with it. As with most things, early failures can cause us to give up and not even try. Finally, you’ll develop good spending habits and live within your means, not above them. It usually takes four weeks to make something a habit.

Perhaps most importantly, you put yourself first, not someone else. You are worth more than someone else, so start treating yourself that way.

All About Collateral Loans

These are also referred to as secured loans. When taking out a collateral loan there are many pros and cons, which a person should consider before taking out such a loan. There is no risk to the lender because if the borrower does not pay back the loan the lender has the collateral that the borrower used. Many times with a collateral loan you can get a lower interest rate and a longer period of time to repay the loan. Before applying for a loan figure out how much money you are going to need. You should avoid taking out excessive collateral loans because in the end you will paying back more money. To get an idea of how much you can borrow you should calculate your monthly expenses and monthly income and then decide after seeing how much you have left, how much of a monthly payment you can afford.

Next you will decide what you will offer as collateral because many times what you offer as collateral will help to determine what the rate will be for your loan. A collateral loan can be used to consolidate a debt, home improvements, vacation, or major purchase. When applying for this loan the loans that the bank or lender will give you against collateral will usually be percentage of the estimated market value. For example, if you are using a car that is worth twenty thousand dollars the lender would most likely offer you a collateral loan of seventeen thousand dollars, or approximately eighty-five percent of the value of your collateral.

Pros

• It is an easy loan to get and usually is quickly approved
• The borrower can usually borrow more money that they could with an unsecured loan, which is the type of loan that you would need a good credit score, steady employment, good income to get it.
• If you are turned down for an unsecured loan many times a person can get a secured loan.
• There is not a cap on how much a borrower can borrow.

Cons

• What the borrower used as collateral is at risk if they cannot pay the loan back in the time agreed upon.
• A collateral loan is not available to just anyone as you will need to own a vehicle, house, or another piece of property that can be used as collateral and if you do not have any of the three you cannot get this type of loan.

As you can see there are more pros than cons when considering a collateral loan but do make sure that you do not borrow more than you can pay back.