How to Plan For Your Future Without Giving Up Your Present

Future-mindedness is a personality trait that scientists and psychologists have puzzled over for centuries. Studies like the “marshmallow test” show that people tend to hold one of two primary viewpoints (with lots of shades of grey): Those who prioritize the future at all costs, and those who live for the moment.

When it comes to planning for the future from a financial perspective, there’s a whole new layer to add into the equation. Planning for retirement can feel like throwing hard-earned savings into the ether for an ambiguous “future self” you can hardly imagine — especially when there’s an enticing social activity or purchase on the horizon that’s guaranteed to provide instant gratification.

But the idea that saving for your future means completely sacrificing your present is a fallacy. The truth is that having a plan in place to ensure financial security provides some peace of mind —and there’s immediate value in that.

Seeking professional advice is often an integral piece of the process. Certified financial planners Neal Frankle and Rich M. Groff II shared some of their top pieces of advice for planning for the future without fully sacrificing the present.

Think about goals on a three-tiered scale

Frankle said the first step to developing a viable financial plan is to define goals on three levels: Short-, mid- and long-term. Then, assign concrete value to each of those scenarios.

“Put a price tag on these goals,” he said. “So it’s not, ‘Well I want to buy a house or I want to retire.’ It’s putting numbers behind the dream (i.e. ‘I want a house and I will need to have $100,000 in 3 years to do it’).”

Placing these goals in order of priority and investigating the relative importance of each is the next step. Frankle said people should ask themselves, “How will I feel if I achieve this goal? How will I feel if I don’t?” From there, assess daily spending and expenses. See how much you can afford to save — and automate these savings, so they come directly out of your paycheck each month.

Think of your finances as you would your health

Especially for “now” thinkers, investing is closely tied to risk-tolerance. As with a doctor prescribing medicine to patients, Frankle prefers to prescribe incremental steps.

“If someone is very risk-averse, even if they should be more ‘growth-oriented,’ I’ll put them in a balanced situation for three months or six months, and see how they’re doing with it,” he said. For savings plans, it’s a similar process: Start slowly, and assess based

on perceived rewards. “Once people start getting into the pattern [of saving], it becomes kind of fun — and there’s reward in it. Other things shift. Maybe you don’t need to go to [coffee] every day or go out to dinner four times a week.”

Revisiting the doctor analogy, Frankle said that periodic assessments are paramount. People should sit down with an advisor every few months to discuss how they’re adjusting to a new savings plan — and note any lifestyle restrictions they’ve encountered. If these restrictions feel suffocating, it’s possible that the plan needs tweaking.

As with any positive lifestyle change, it doesn’t take long for rewards to become evident. With financial stability generally comes greater peace of mind, more surety and reduced stress levels — benefits that can have subtle but immediate impact on your overall wellbeing.

Don’t put all your eggs in one basket

On the opposite end of the spectrum of cautiousness, Frankle warned that one of the worst mistakes you can make is to throw all of your money into one attractive technology, stock or fund. This is yet another reason why seeking advice from a professional is...

Should You Structure Your Business as a Nonprofit?

The Staff of Entrepreneur Media, Inc. • Entrepreneur Staff

In their book Start Your Own Business, the staff of Entrepreneur Media Inc. guides you through the critical steps to starting your business, then supports you in surviving the first three years as a business owner. In this edited excerpt, the authors discuss what's involved with structuring your company as a non-profit organization.

Unlike a for-profit business, a nonprofit corporation may be eligible for certain benefits, such as sales, property, and income tax exemptions at the state level. The IRS points out that while most federal tax-exempt organizations are nonprofit organizations, organizing as a nonprofit at the state level doesn't automatically grant you an exemption from federal income tax.

Another major difference between a profit and nonprofit business deals with the treatment of the profits. With a for-profit business, the owners and shareholders generally receive the profits. With a nonprofit, any money that's left after the organization has paid its bills is put back into the organization. Some types of nonprofits can receive contributions that are tax deductible to the individual who contributes to the organization. Keep in mind that nonprofits are generally organized to provide some benefit to the public.

ADVERTISING

Nonprofits are incorporated under the laws of the state in which they're established. To receive federal tax-exempt status, the organization must apply with the IRS. First, you must have an Employer Identification Number (EIN) and then apply for recognition of exemption by filing Form 1023 (Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code) or Form 1024 (Application for Recognition of Exemption under Section 501(a)) with the necessary filing fee. Both forms are available online.

The IRS identifies the different types of nonprofit organizations by the tax code by which they qualify for exempt status. One of the most common forms is 501(c)(3), which identifies organizations that are set up to do charitable, educational, scientific, religious, and literary work. This includes a wide range of organizations, from continuing education centers to outpatient clinics and hospitals.

Sponsored Content

Keys to Building a Passionate, Engaged Team

By Staples

Sponsored Content

How These Entrepreneurs Attracted an Army of Loyal Customers

By Staples

Sponsored Content

Branding Your Business for Maximum Exposure

By Staples

The IRS also mandates that there are certain activities that tax-exempt organizations can’t engage in if they want to keep their exempt status. For example, a section 50l(c)(3) organization cannot intervene in political campaigns.

Remember, nonprofits still have to pay employment taxes, but in some states, they may be exempt from paying sales tax. Check with your state to make sure you understand how nonprofit status is treated in your area. In addition, nonprofits may be hit with unrelated business income tax. This is regular income from a trade or business that's not substantially related to the charitable purpose. Any exempt organization under Section 501(a) or Section 529(a) must file Form 990-T (Exempt Organization Business Income Tax Return) if the organization has gross income of $1,000 or more from an unrelated business, and pay tax on the income.

If your nonprofit has revenues of more than $25,000 a year, you must file an annual report (Form 990) with the IRS. Form 990-EZ is a shortened version of Form 990 and is designed for use by small exempt organizations with incomes of less than $1 million.

Form 990 asks you to provide information on the organization’s income, expenses, and staff salaries. You may also have to comply with a similar state requirement. The IRS report must be made available for public review. If you use the calendar year as your accounting period, you have to file Form 990 by May 15.

For more information on IRS tax-exempt status, download IRS Publication 557 (Tax-Exempt Status for Your Organization).

Even after you settle on a business structure, remember that the circumstances that make one type of business organization favorable are always subject to changes in the laws. It makes sense to reassess your form of business from time to time to make sure you're using the one that provides the most benefits.

When It Makes Sense to Turn a Passion Project Into a Nonprofit

Karim Abouelnaga • Guest Writer

In 2010 myself along with five Cornell students came together to start a program that believed that all children -- regardless of their race or socioeconomic status -- had equal potential to compete intellectually in our society. We were tired of children being written off because of where they were born or whom they were born to. Three of the team members had attended large, failing, inner-city schools and were the first in their families to graduate from college.

The program evolved into an organization called Practice Makes Perfect and has a full-time team of 10, a fully operational board of directors, a 501(c)3 status and almost 1,000 individual donors and foundation as we work to narrow the achievement gap by addressing one of the single largest, researched causes of the disparity: summer learning loss or summer slide.

Having had the good fortune of being at the helm of the organization through this evolution, I am often asked by student groups and individuals for advice about starting and building a nonprofit.

ADVERTISING

Here are a couple of things to consider before you decide if this is a project or worth considering as a nonprofit:

Sponsored Content

How These Entrepreneurs Attracted an Army of Loyal Customers

By Staples

Sponsored Content

Branding Your Business for Maximum Exposure

By Staples

Dream Vacations

Passion Is Key to Entrepreneurial Success

By Dream Vacations

Scope

Start by giving thought to how large the impact is that you would like to have. Begin to think about the number of people you want to impact. Give some thought to how long you want to impact them for and how much that will cost. Ask yourself if you could imagine having several people working on your efforts full time.

If you decide you want to start a volunteer mentoring program between college students and local high school students for one summer you probably don’t need to start a nonprofit. If you decide you want to provide three-year job training for dozens of formerly incarcerated people, then you should probably incorporate and apply for a tax-exempt status.

Funding

Most of the time when people ask me if they should incorporate a nonprofit it is because they want to raise money to support their cause later that week or that summer. They come to me with a sense of urgency. They believe that foundations and individuals won’t fund them until they have a 501(c)3 status. And once they receive that designation -- with a little bit of work -- that funding will start to come in from individuals, foundations, and corporations. It took us over a year to get incorporated and receive our exempt status. That didn’t stop us from soliciting people for support. When you’re starting out, the donations you’re likely to get will be under $500, which for most people doesn’t have a large impact on their taxes.

People will support you because they believe in you and the work you’re trying to carry out, not because of a tax deduction. Yes, you won’t get funding from a foundation or a corporation but most of them won’t give you money immediately after you have your 501(c)3 either. They care more about your governance and alignment. Those are things you can work on without the tax-exempt status.

If urgency of funding is what is driving your desire to get a tax-exempt status, consider crowdfunding through a site like Indiegogo, Crowdrise or GoFundMe. You don’t need to be a tax-exempt organization and you can customize your profile to share your story. I highly encourage crowdfunding or peer-to-peer fundraising if it is going to be a short-term project or eventually become a nonprofit. If you’re on the fence and have an opportunity to collect funding from a foundation or a corporation, consider finding a fiscal sponsor. Organizations like Social Good, Net Roots Foundation, or TSNE allow you to use their tax exempt status to receive donations and provide your donors or funders with a tax deduction. I encourage most organizations, projects or nonprofits to seek out fiscal sponsorship during the early stages of their development.

Generally, I don’t advise starting a 501(c)3 until you’ve run a project and tested out your assumptions unless you absolutely know that you’re ready to commit a significant amount of time and resources into building an organization....

How to Plan For Your Future Without Giving Up Your Present

By Brighthouse Financial

Future-mindedness is a personality trait that scientists and psychologists have puzzled over for centuries. Studies like the “marshmallow test” show that people tend to hold one of two primary viewpoints (with lots of shades of grey): Those who prioritize the future at all costs, and those who live for the moment.

When it comes to planning for the future from a financial perspective, there’s a whole new layer to add into the equation. Planning for retirement can feel like throwing hard-earned savings into the ether for an ambiguous “future self” you can hardly imagine — especially when there’s an enticing social activity or purchase on the horizon that’s guaranteed to provide instant gratification.

But the idea that saving for your future means completely sacrificing your present is a fallacy. The truth is that having a plan in place to ensure financial security provides some peace of mind —and there’s immediate value in that.

Seeking professional advice is often an integral piece of the process. Certified financial planners Neal Frankle and Rich M. Groff II shared some of their top pieces of advice for planning for the future without fully sacrificing the present.

Think about goals on a three-tiered scale

Frankle said the first step to developing a viable financial plan is to define goals on three levels: Short-, mid- and long-term. Then, assign concrete value to each of those scenarios.

“Put a price tag on these goals,” he said. “So it’s not, ‘Well I want to buy a house or I want to retire.’ It’s putting numbers behind the dream (i.e. ‘I want a house and I will need to have $100,000 in 3 years to do it’).”

Placing these goals in order of priority and investigating the relative importance of each is the next step. Frankle said people should ask themselves, “How will I feel if I achieve this goal? How will I feel if I don’t?” From there, assess daily spending and expenses. See how much you can afford to save — and automate these savings, so they come directly out of your paycheck each month.

Think of your finances as you would your health

Especially for “now” thinkers, investing is closely tied to risk-tolerance. As with a doctor prescribing medicine to patients, Frankle prefers to prescribe incremental steps.

“If someone is very risk-averse, even if they should be more ‘growth-oriented,’ I’ll put them in a balanced situation for three months or six months, and see how they’re doing with it,” he said. For savings plans, it’s a similar process: Start slowly, and assess based

on perceived rewards. “Once people start getting into the pattern [of saving], it becomes kind of fun — and there’s reward in it. Other things shift. Maybe you don’t need to go to [coffee] every day or go out to dinner four times a week.”

Revisiting the doctor analogy, Frankle said that periodic assessments are paramount. People should sit down with an advisor every few months to discuss how they’re adjusting to a new savings plan — and note any lifestyle restrictions they’ve encountered. If these restrictions feel suffocating, it’s possible that the plan needs tweaking.

As with any positive lifestyle change, it doesn’t take long for rewards to become evident. With financial stability generally comes greater peace of mind, more surety and reduced stress levels — benefits that can have subtle but immediate impact on your overall wellbeing.

Don’t put all your eggs in one basket

On the opposite end of the spectrum of cautiousness, Frankle warned that one of the worst mistakes you can make is to throw all of your money into one attractive technology, stock or fund. This is yet another reason why seeking advice from a professional is...

Should You Structure Your Business as a Nonprofit?

The Staff of Entrepreneur Media, Inc. • Entrepreneur Staff

In their book Start Your Own Business, the staff of Entrepreneur Media Inc. guides you through the critical steps to starting your business, then supports you in surviving the first three years as a business owner. In this edited excerpt, the authors discuss what's involved with structuring your company as a non-profit organization.

Unlike a for-profit business, a nonprofit corporation may be eligible for certain benefits, such as sales, property, and income tax exemptions at the state level. The IRS points out that while most federal tax-exempt organizations are nonprofit organizations, organizing as a nonprofit at the state level doesn't automatically grant you an exemption from federal income tax.

Another major difference between a profit and nonprofit business deals with the treatment of the profits. With a for-profit business, the owners and shareholders generally receive the profits. With a nonprofit, any money that's left after the organization has paid its bills is put back into the organization. Some types of nonprofits can receive contributions that are tax deductible to the individual who contributes to the organization. Keep in mind that nonprofits are generally organized to provide some benefit to the public.

ADVERTISING

Nonprofits are incorporated under the laws of the state in which they're established. To receive federal tax-exempt status, the organization must apply with the IRS. First, you must have an Employer Identification Number (EIN) and then apply for recognition of exemption by filing Form 1023 (Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code) or Form 1024 (Application for Recognition of Exemption under Section 501(a)) with the necessary filing fee. Both forms are available online.

The IRS identifies the different types of nonprofit organizations by the tax code by which they qualify for exempt status. One of the most common forms is 501(c)(3), which identifies organizations that are set up to do charitable, educational, scientific, religious, and literary work. This includes a wide range of organizations, from continuing education centers to outpatient clinics and hospitals.

Sponsored Content

Keys to Building a Passionate, Engaged Team

By Staples

Sponsored Content

How These Entrepreneurs Attracted an Army of Loyal Customers

By Staples

Sponsored Content

Branding Your Business for Maximum Exposure

By Staples

The IRS also mandates that there are certain activities that tax-exempt organizations can’t engage in if they want to keep their exempt status. For example, a section 50l(c)(3) organization cannot intervene in political campaigns.

Remember, nonprofits still have to pay employment taxes, but in some states, they may be exempt from paying sales tax. Check with your state to make sure you understand how nonprofit status is treated in your area. In addition, nonprofits may be hit with unrelated business income tax. This is regular income from a trade or business that's not substantially related to the charitable purpose. Any exempt organization under Section 501(a) or Section 529(a) must file Form 990-T (Exempt Organization Business Income Tax Return) if the organization has gross income of $1,000 or more from an unrelated business, and pay tax on the income.

If your nonprofit has revenues of more than $25,000 a year, you must file an annual report (Form 990) with the IRS. Form 990-EZ is a shortened version of Form 990 and is designed for use by small exempt organizations with incomes of less than $1 million.

Form 990 asks you to provide information on the organization’s income, expenses, and staff salaries. You may also have to comply with a similar state requirement. The IRS report must be made available for public review. If you use the calendar year as your accounting period, you have to file Form 990 by May 15.

For more information on IRS tax-exempt status, download IRS Publication 557 (Tax-Exempt Status for Your Organization).

Even after you settle on a business structure, remember that the circumstances that make one type of business organization favorable are always subject to changes in the laws. It makes sense to reassess your form of business from time to time to make sure you're using the one that provides the most benefits.

When It Makes Sense to Turn a Passion Project Into a Nonprofit

Karim Abouelnaga • Guest Writer

In 2010 myself along with five Cornell students came together to start a program that believed that all children -- regardless of their race or socioeconomic status -- had equal potential to compete intellectually in our society. We were tired of children being written off because of where they were born or whom they were born to. Three of the team members had attended large, failing, inner-city schools and were the first in their families to graduate from college.

The program evolved into an organization called Practice Makes Perfect and has a full-time team of 10, a fully operational board of directors, a 501(c)3 status and almost 1,000 individual donors and foundation as we work to narrow the achievement gap by addressing one of the single largest, researched causes of the disparity: summer learning loss or summer slide.

Having had the good fortune of being at the helm of the organization through this evolution, I am often asked by student groups and individuals for advice about starting and building a nonprofit.

ADVERTISING

Here are a couple of things to consider before you decide if this is a project or worth considering as a nonprofit:

Sponsored Content

How These Entrepreneurs Attracted an Army of Loyal Customers

By Staples

Sponsored Content

Branding Your Business for Maximum Exposure

By Staples

Dream Vacations

Passion Is Key to Entrepreneurial Success

By Dream Vacations

Scope

Start by giving thought to how large the impact is that you would like to have. Begin to think about the number of people you want to impact. Give some thought to how long you want to impact them for and how much that will cost. Ask yourself if you could imagine having several people working on your efforts full time.

If you decide you want to start a volunteer mentoring program between college students and local high school students for one summer you probably don’t need to start a nonprofit. If you decide you want to provide three-year job training for dozens of formerly incarcerated people, then you should probably incorporate and apply for a tax-exempt status.

Funding

Most of the time when people ask me if they should incorporate a nonprofit it is because they want to raise money to support their cause later that week or that summer. They come to me with a sense of urgency. They believe that foundations and individuals won’t fund them until they have a 501(c)3 status. And once they receive that designation -- with a little bit of work -- that funding will start to come in from individuals, foundations, and corporations. It took us over a year to get incorporated and receive our exempt status. That didn’t stop us from soliciting people for support. When you’re starting out, the donations you’re likely to get will be under $500, which for most people doesn’t have a large impact on their taxes.

People will support you because they believe in you and the work you’re trying to carry out, not because of a tax deduction. Yes, you won’t get funding from a foundation or a corporation but most of them won’t give you money immediately after you have your 501(c)3 either. They care more about your governance and alignment. Those are things you can work on without the tax-exempt status.

If urgency of funding is what is driving your desire to get a tax-exempt status, consider crowdfunding through a site like Indiegogo, Crowdrise or GoFundMe. You don’t need to be a tax-exempt organization and you can customize your profile to share your story. I highly encourage crowdfunding or peer-to-peer fundraising if it is going to be a short-term project or eventually become a nonprofit. If you’re on the fence and have an opportunity to collect funding from a foundation or a corporation, consider finding a fiscal sponsor. Organizations like Social Good, Net Roots Foundation, or TSNE allow you to use their tax exempt status to receive donations and provide your donors or funders with a tax deduction. I encourage most organizations, projects or nonprofits to seek out fiscal sponsorship during the early stages of their development.

Generally, I don’t advise starting a 501(c)3 until you’ve run a project and tested out your assumptions unless you absolutely know that you’re ready to commit a significant amount of time and resources into building an organization....