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Financial Tip

The Rule of 72

You can easily see how the rate of return can impact your investments by applying the "Rule of 72." This is a simplified way to show how long your money takes to double at a fixed annual interest rate.

Dividing 72 by the following percentages shows the time needed:

# of Years
to Double
2% 36
4% 18
6% 12
8% 9
10% 7.2

How to Set up Your Home-Based Business

Listen carefully and you just might hear opportunity knocking at your front door - from the inside!

Maybe you have a special talent or hobby you'd like to turn into a business. Maybe you were laid off, and you're ready to pursue the dream of working for yourself. Whatever the circumstance, a home-based business might be the perfect way to earn, or supplement, your income.

If you believe your product or service is marketable, you should take a professional approach to setting up your business. These suggestions also apply to kids who may be thinking about summer jobs or ways to earn some extra money.

Develop a plan - Put your objectives in writing. This requires that you think about issues such as finding customers, budgeting, evaluating competition, and setting up day-to-day operations. If you need financing, submitting a solid plan will be essential.

Choose your business structure - Talk to an accountant or lawyer about the tax and liability implications of setting up your business as an LLC, S Corp, C Corp or simply a sole proprietorship.

Open a business bank account - To protect personal assets and ensure that legitimate business expenses can be claimed, be scrupulous about keeping business and personal expenses separate. In addition to a business bank account, you may need a business credit card and phone line.

Establish an identity - This includes choosing a business name, developing a website, and creating business cards.

Set up your office - An unused bedroom, loft or other area away from the family hustle-bustle is ideal. Consider saving money by purchasing used office furniture and computers or, better yet, use what you already have.

Protect your assets - This includes your health. Minimally, you should consider having catastrophic health insurance (which could be a deductible expense). You may also need insurance protecting against loss of equipment or data, and an umbrella policy protecting you against liability if, for example, a client falls on your front step.

Save for retirement - If you're coming from a corporate background, you'll see that the process of contributing to an individual IRA can be different than a 401(k). Talk with your tax advisor about your retirement plan options.

Network - Connections you make may lead to new customers. One of the ways to connect with others in your industry is to join trade associations and business groups. Build your network by going to the meetings and take advantage of the programs offered to help you stay current in your industry.

Getting your home-based business off to a strong start can help ensure your long-term success.

Teachable Moments

It's not unusual for a child to want to follow their parent's career path. If they are interested in pursuing the dream of running their own business, talk to them about their career ambitions and the things they need to do today to reach their goals. Also, encourage them to see if their school offers Junior Achievement (JA). JA helps students understand the importance of entrepreneurship, financial literacy and work readiness.

At the college level, approximately 1,600 universities participate in Students in Free Enterprise (SIFE). SIFE helps students make a difference in their communities while developing skills to become socially responsible business leaders.