They are key risk-mitigation tools that can insulate business owners from financial harm and reassure consumers that you’re committed to consumer protection. They’re also mandatory for scores of industries and business types, from construction and health care to travel agencies and janitorial services.

But they’re also often misunderstood, if they’re even considered at all.

How Surety Bonds Work

Surety bonds are basically three-party agreements among a principal (the company performing the duty), the obligee (the entity receiving or licensing the work) and the surety company that issues the bond. In the construction industry, contract bonds help ensure that projects get completed, subcontractors get paid and bids are legitimate.

For example, contractors in Chicago and across the country are required to post Performance Bonds on public construction projects. These bonds essentially guarantee that the work will be finished and the contract will be followed. If the contractor defaults or somehow fails to follow the contract, the surety company makes sure the work gets completed or the project owner is financially compensated.

A surety bond in Illinois also protects consumers and taxpayers at large. Many businesses that need state licensing to operate often require a surety bond as well. Posting a bond with the state ensures that consumers who might be harmed by a business have a way to be made whole — they can file a claim against the bond. There are thousands of commercial surety bonds, including ones for:

• Mortgage brokers
• Travel agents
• Health clubs
• Auctioneers
• Durable Medical Equipment providers (DMEPOS)
• Notaries public

Why They Matter

Surety bonds are obviously crucial for companies required to obtain them. Without a bond, thousands of start-ups can’t get off the ground and secure the necessary licensing to legally operate. But surety bonds are also important for entrepreneurs who aren’t required to purchase them.

First, surety bonds convey a sense of security, legitimacy and consumer protection. Being bonded means that consumers have a clear path to recourse if they’re harmed. It also means the business owners has the financial profile and credit necessary to secure a surety bond. That can be an important marketing tool for entrepreneurs looking to separate themselves from their competition.

Surety bonds can also protect business owners themselves. Fidelity bonds and other bond types can insulate entrepreneurs from harm if their employees engage in illegal or illicit activities, like theft.

How to Purchase Surety Bonds

Surety bonds require a look at a entrepreneur’s financial health, credit profile and at times more. As with insurance, sureties rely on underwriters to make a determination about an applicant’s suitability for a bond.

Bond costs will vary based on the bond amount, the type required and the applicant’s financial standing. Typically premiums range anywhere from 1 to 3 percent of the bond’s face value. Entrepreneur with less-than-perfect credit may wind up in a high-risk category and pay substantially higher bond premiums.

Sometimes start-ups wind up seeing higher bond costs because they don’t have a lengthy track record of sound finances. But rates can also vary by the surety provider, so entrepreneurs should shop around for the best deal possible.

** A featured post by Matt Bruns of suretybond.com

While at first it seems like a great way to teach college students about credit, the new shiny credit cards don’t come with instructions or lessons.  For those kids who have never managed money in the past, it can be a nightmare – one that is hard to overcome as credit card bills keep pouring in.

The topic of handling money is not often taught in schools, leaving kids to get their information from friends, and what they think their parents are doing.  Parents themselves often don’t talk about money with their children.  Money is a taboo subject in many households; considered too crass of a topic to bring up.

But where does that leave our children?  Credit card debt among college students has doubled in the past 10 years and often students enter the working world with as much credit card debt as student loans.

New Federal regulations that come into effect in February are aiming to quell the tide of student debt.  Children under 21 will now be required two have a parent or other adult co–sign on the credit card account, putting the co–signers’ credit rating at risk.  If the student can’t get a co–signer, he or she will have to show that they have the financial means themselves to repay the debt.

Restricting access to student credit, however, is not the same thing as teaching our children how to handle money.  Kids need to learn about debt and its consequences.  They also need to have supervised experience in handling money, making budgets, and tracking expenses.

Children who don’t learn about money at a young age often grow up to become adults who have few money smarts.  These are the adults that are not discussing money with their children because they themselves do not know the best ways to handle it.  The best thing we can do for our children is to teach them the financial skills they will need later in life.  Discussing the family’s own financial situation with children is a good way to start.  It helps children to understand the value of money and what things cost.  It also helps them to understand that money is not an unlimited resource and that it doesn’t actually come from ATM machines.

Teaching the next generation fiscal responsibility will help the country to avoid the deep recession it has experienced in the past year and it will help our children to become truly financially independent.

Technorati Tags: children, money, Saving Money

Here are three of the most often missed tax deductions.

Non-cash Donations

It is easy to remember to claim cash donations on tax returns as receipts are issued by charitable organizations.  However many taxpayers do not remember to track the value of the goods they donate throughout the year.  Used goods donated to organizations like the Salvation Army and Goodwill can save you money in your taxes.  From the tax year 2007 forward, all noncash donations require a receipt.  Make a list of the goods that were donated and value each one.  There are several different ways to do this.  You can go into the stores and look at the prices they are charging for similar items.  You can also use programs like TurboTax’s It’s Deductible to place an approximate value on your items.  Keep in mind that the items have to be in good or better condition in order to qualify for tax deduction.

When it gets close to the end of the year, it’s always a good idea to prepare a tax estimate, outlining what you estimate your taxes owing will be on your return.  This still gives you time to do some tax planning.  If you’ve been waiting to clean out your attic or basement of unneeded goods, now is a great time to do that.

Health Insurance Premiums

Premiums that you pay on almost any health insurance plan can be deductible on your taxes.  For individuals, health insurance premiums are added to other medical expenses.  If the total medical expenses are over 7.5% of adjusted income, they can help save you money on your taxes.

For those who are self employed, the deduction is even greater.  You can deduct the premiums you pay in your health insurance directly in Adjusted Gross Income, as long as you are not covered under any other employer-based plan.

Energy Savings Home Improvement Credit

This incentive credit is an opportunity to upgrade many features of your home in order to save electricity or other energy sources.  The credit covers energy efficient upgrades including windows, skylights and insulation.  Check the IRS web site for a full list of covered improvements.  The credit allows for a 30 percent credit dollar for dollar on these improvements up to $1500 total.  The energy savings home improvement credit has been extended through to the end of 2010 and may be extended further beyond that.

Technorati Tags: income taxes, tax

A good accountant, however, can be worth his or her weight in gold- literally. Here are some important tips on choosing the right accountant and getting the most out of the relationship:

1) Choose a qualified accountant. The word accountant is not standardized or protected. Anyone can call themselves an accountant and it can be difficult to assess an accountant’s credentials. A Certified Public Accountant in the US or a Chartered Accountant in Canada and the UK, however, must undergo certain levels of education and examination to be able to use those titles. Selecting a designated accountant will give you comfort about the level of expertise your advisor has.

2) Interview accountants before you choose one. Your accountant can be a critical foundation in the strong financial house that you are building for yourself and your family and he or she should be a good fit. That means not only that your accountant should understand your needs but should be able to communicate in a straightforward, non-jargon way that you can understand. You will be discussing potentially sensitive personal financial information with your accountant so it’s important that you feel comfortable with him.

3) Tell your accountant everything. We’re not always comfortable with every financial decision we have made over the years, especially when we have to explain it to our accountant. It’s important, however, that your accountant has the full picture of your finances in order to advise you effectively. So, for example, if you withdrew ten thousand dollars out of your retirement fund last year, or you ran up a new credit card to its limit, be assured that your accountant won’t judge you and will be able to make better recommendations with this knowledge. Also, make certain that your accountant is aware of your spouse’s financial situation even if your spouse is having taxes prepared elsewhere. You and your spouse’s finances are intertwined legally and your accountant needs to have the whole story to advise you correctly.

Your accountant can help you protect your assets and build your financial dreams. Spending time upfront to choose the right one and build the relationship will help your bottom line.

Technorati Tags: accountant, accounting principles, tax accountant

But what do you do if this is the very first time that you are investing? You may be just graduating from university or trying to put away some money for your children’s college tuition. How can you ensure that you make good decisions in this shaky economy?

1) Find the right advisor. An effective investment advisor knows the current state of the market and can help you understand the risks and rewards of each of its sectors. Choose an advisor who does not earn income based on how much or what types of investments you buy. Your investment advisor should also be experienced. This recessionary financial market is no time for you to try out a wet-behind-the-ears advisor.

2) Don’t invest all your money at the same time. With the uncertainty in the markets today, it is wise to invest small amounts at a time and keep some cash back to protect your capital. The market can turn up or down at a moment’s notice and investing at intervals reduces your risk of following the market down.

3) Invest in different market sectors. This is the same advice as the age old “don’t put all your eggs in one basket”. It is especially important in the current market to diversify. That way, if any one market sector tanks, you have assets working in other sectors to make up for it.

Investing for the first time can be scary at any time, but even more nerve-wracking with the roller coaster market of 2009. Getting the right advisor on board and taking your time to place your investments can help you make the best of today’s investment arena and position yourself for growth in the future.

However, this difficult employment market may be the perfect time to seek out a better job and the best way to do that is with a career coach. When the job market is contracting, it is the positions that require knowledge and skill that will remain the longest. Upgrading your education and skills can not only bring in a bigger paycheck but can solidify your position in the market and make you more attractive to potential employers.

It can be difficult to know what you need to upgrade and how to market yourself to potential new employers. That’s where career coaches come into play. A career coach’s job is to obtain a clear understanding of your strengths, weaknesses, and aspirations as it relates to the employment field. A career coach can help you fill in the gaps in your skills in your chosen profession and can lead you to leveraging your existing skills in a new direction. For example, if you have done general office work- filing, responding to email, and organizing for a small veterinary office, a career coach may help you realize that those skills are in great demand in the government sector, where wages can be substantially higher.

Another benefit of hiring a career coach is that his or her finger is on the pulse of human resource management in the real world. A career coach knows what experience levels and skills employers are asking for in each industry and where you can spend your limited time improving your skills to meet those requirements. This is a far more efficient way to build your educational portfolio than taking the splatter gun approach and signing up for a bunch of courses that you hope will help.

Using a career coach to obtain a better job can be one of the best investments in your financial future. Increasing your income by even $5,000 a year can mean the difference between having financial freedom and living paycheck to paycheck. And it can mean being a desired commodity in a shaky job market.

Technorati Tags: Career, career coach

But is mortgage insurance really worth the cost? In order to make that assessment, it’s important to understand what it really is. Mortgage insurance is a form of life insurance. Unlike life insurance, however, whose proceeds can be used for any purpose, mortgage insurance only pays down the balance left outstanding on the mortgage at the time of death. There is no flexibility to use the proceeds for any other financial obligations.

A mortgage may be one of your largest financial debts and would likely be paid off with the proceeds of a life insurance policy anyway. There are a few differences between life insurance and mortgage insurance that make the former a better choice for insuring your mortgage.

1) Life insurance premiums are often less expensive than mortgage insurance premiums for the same amount of coverage. The reason for this is that life insurance applications go though a rigorous underwriting process that weeds out bad insurance risks so that those who are in good health will get a low rate. Mortgage insurance, on the other hand, often doesn’t go through the underwriting process or goes through a much less thorough one. This means that the premiums have to cover even bad insurance risks. This raises the premiums for everyone.

2) Mortgage insurance premiums don’t decrease as the mortgage balance decreases so it becomes relatively more expensive over time. For example, if your mortgage is $200,000 when you first apply for your mortgage insurance policy, your premium might be $50 per month. You will pay the same $50 per month even as you begin to pay down your mortgage. A policy that would have paid $200,000 at inception might only pay the remaining $40,000 balance if you die ten years into the policy. A life insurance policy, on the other hand, always pays the face amount of the policy.

3) You can not choose which mortgage insurance company you deal with. Mortgage insurance is tied to the mortgage lender you choose. In some cases, they provide the insurance themselves. In others, they have relationships with insurance companies and you have to deal only with those companies.

When arranging your insurance needs, in almost all cases, life insurance is superior to mortgage insurance to protect your assets effectively. As always, discuss the options with your independent financial advisor.

But is now a good time to buy a first home or to upgrade from your existing one? The answer is “it depends”. It may be a very long time before real estate once again becomes a solid investment strategy. The days of steady housing price increases we have seen over the last decade may even be over forever.

It’s important to separate out your investment goals from your need for shelter. The latter you will need no matter what form it takes: a house, an apartment or even a tent in the woods. Evaluating whether buying a house meets your need for shelter is a simple task of comparing it to the alternatives. How does the monthly mortgage payment compare to rental payments you would have to make on a leased property? What happens to rates when you have to renew the mortgage? What is the condition of the house (i.e. could it result in thousands of dollars in repairs)? What other expenses would you incur that you wouldn’t have to with renting?  

Deciding whether buying a house now makes sense from an investment perspective is a very different value proposition. If the house would be your largest investment, the current market makes it a potentially risky investment right now, especially if you need the money for retirement or other purposes in the next ten years. While most experts agree that the housing market will turn around in the future, there is no universal agreement on when that will happen. It may be next month, next year or not until 2030. If your investment time horizon is long enough, the combination of low mortgage rates and low housing prices may make the investment attractive, but, as always, consult your independent investment advisor before making such a large investment decision.

So, is now the right time to buy a house? The answer to that will be as individual as each person’s financial goals. It is, however, a perfect time to re-evaluate those goals and to determine if buying a new house fits.

Unemployment not only means the loss of a steady income but also the end of group health insurance. That can put a family at risk until a new job picks up the slack. COBRA health benefits can help in this situation.

COBRA stands for Consolidated Omnibus Budget Reconciliation Act. The Act was originally drafted in 1986 and has been recently updated as part of the presidential stimulus bill. COBRA provides for a continuation of health benefits for employees and independent contractors in certain situations.

All employers who have 20 or more employees are required to maintain group health insurance benefits for terminated employees for a standard period of 18 months. The catch for the employee is that he or she now has to pay the premium that was once paid by the employer. That can still be a substantial amount of money monthly but it is often less expensive than paying private individual health insurance premiums.

If the employee is or becomes disabled, COBRA health benefits can be extended for up to an additional 18 months. COBRA may also be available for families of a deceased employee.

Under the new stimulus bill, if you were let go from your position between September 2008 and December 2009, you may be eligible to pay only 35% of the premium for COBRA benefits for up to nine months after which time, you pay the full premium. Employers can choose to continue to pay a portion of the health insurance premiums for terminated employees but they are not obligated to.

While COBRA health benefits can be expensive while you are seeking a new job, it is a better solution than losing group benefits altogether and having to purchase more expensive individual insurance. It can make the transition between jobs less risky and financially dangerous.

Technorati Tags: cobra, cobra health insurance

One of the most popular types of life insurance is term life. Term life is straight life insurance without any of the bells and whistles. Whole life, on the other hand, usually carries an investment portion which grows in value and can be cashed out over time. Term life pays the face value of the policy at the time of death of the insured.

Term life insurance has both positives and negatives in comparison to whole life. On the positive side, the premiums are usually significantly lower than whole life premiums because there is no investment portion. Many individuals with term life insurance find that having a separate investment account allows them to have more control over both their insurance and investments.

The major downside of term life is that it has a limited life or “term”. It must be renewed at intervals, usually every 5 or 10 years. As you are older at every renewal date and may have increasing health issues, the renewal rates are generally progressively higher. Whole life policies last for just that- the whole life of the insured without having to re-qualify.

The amount of term life insurance you need depends on your circumstances and your family’s financial goals. Think about what income your spouse would have to replace if you died. How many liabilities do you have right now including your mortgage, credit cards and car loans? Would it make your spouse’s life easier to have those obligations paid off on your death? You also may choose to include college funds in your term insurance face value but a better option is to set up an education fund separately an contribute to it regularly.

Term life insurance makes sense for many families who need an economical way to protect themselves financially against the risk of death. Speak with your independent financial adviser about the type and amount of insurance that’s right for your situation.