For at least the last few generations it was assumed that a college education was the ticket to success in life. Parents encouraged their children to strive for that college degree. But, like all assumptions, it’s a good idea to examine them periodically.

       A provocative article in USA Today by Patrick Welsh, a high school English Teacher does just that. And, what he found could provoke some heated discussions. His main concern is that many of the kids you enter college have no chance at earning a bachelor’s degree. He points to cases where 70% of students entering college drop out. His wonders if colleges are admitting students that they don’t expect to succeed solely to grow their schools and make more money.

       That’s the type of thing that’s almost impossible to prove, but sure looks like it could be true. More students means more professors and clerical workers. It means bigger paychecks for the administrator’s, too. It also means more clout in the community and with every one the school does business with.

       Unless I miss my guess, none of those administrators will have their pay reduced if too many students drop out. Nor will they bear any responsibility if students end up with debts that are much too big for their income level. In fact, they won’t have to face the problem since student debt doesn’t require payments until the student leaves school.

       Studies show that the average graduate has more than $23,000 in debts (NY Times). Which is a lot of debt for someone who might be making $30k per year or less. But, debt is especially nasty for students who don’t complete a degree. Their income potential and ability to repay student loans is even less.

       Now I’m not saying that everyone should avoid college. Far from it. Based on what I see many, many jobs will require continuous education. It will become very difficult to find a job where you don’t need to continue learning.

       But, I expect college to change in the next decade. The idea of devoting full time to college and attending classes in person will gradually give way to a different approach. One that’s not nearly so expensive. One that doesn’t require as many professors and ivy covered buildings. A continuing education model that will take what we need from colleges and blend that with an internet world. A new paradigm that will be much, much more affordable for students (yes, you can call it more frugal!).

       In the meantime, don’t be surprised to see an explosion of college debt defaults. There’s a little more than $600 billion in federal education loans outstanding (FinAid.org) and $45 billion are in default (7.5%). It’s almost impossible to get relief on student loans. Generally even declaring bankruptcy doesn’t make them go away. So the former students will drag these loans around. For some the choice will be between food/shelter or paying their loans. Guess which choice will win out.

       So should you plan on going to college? Well, maybe. If you know what you want to do and going to college is the only way to do it. But, for many people, the idea of going to college just so you can say that you went is becoming a very expensive luxury. A luxury that you might pay for the rest of your life.

       Keep on Stretching those Dollars!

_________

       Gary Foreman is the publisher of The Dollar Stretcher.com, a website dedicated to frugal living. Click here for more information about how to find money for college.

Related Articles at Provident Planning:

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2. Lower Your Taxes: Deduct Your Student Loan Interest
3. You Don’t Need to Be an Expert to Be Successful
4. How to Get Out of Debt: Step 6 – Make a Plan to Pay Off Your Debt
5. Weekend Reading – 02/26/2010

       ¹ Therefore I urge you, brothers, by the mercies of God, to present your bodies a living sacrifice, holy, acceptable to God, which is your spiritual service. ² Don’t be conformed to this world, but be transformed by the renewing of your mind, so that you may prove what is the good, well-pleasing, and perfect will of God.

Romans 12:1-2 (WEB)

       These verses encourage us to live changed lives in light of God’s overflowing mercy toward us. I would not begin to imply that it relates specifically to finances. However, the choices you make with the money God has given you can clearly reflect where your heart is focused. When you make your money decisions are you thinking in terms of God’s will, or are you continuing in the patterns of the world?

       This doesn’t mean that you are perfectly holy and good if your account statements show that you give all your money away (or even live on very little and give the rest away). Outward appearances are not necessarily an indication of the heart. Jesus spent most of His time teaching this exact idea. If you do not have God’s love and your actions are not motivated by that same love, then your pious actions will help you in no way.

       The challenge I want to present to you (and myself) is simply this: In your earning, spending, and managing money, how are you presenting yourself as a sacrifice to God and seeking His will? In other words, are your money decisions in alignment with God’s principles and values?

       It’s very easy to live just as the rest of the world does. In many ways, Christians are indistinguishable from non-Christians. But we are called to live differently. This doesn’t necessarily mean rejecting everything the world does, but it will often look that way. Rather, we must give everything over to God (as a response to the gift of salvation) and seek His will.

       A transformed life may not look very different from the world. Much personal finance advice is good regardless of your faith (though the motivations may be quite different). On the other hand, it may be the exact opposite of the world’s ways. Giving is one example. It simply doesn’t make sense if you look only at the numbers.

       How your life will look is not the point. A transformed life could look different from one Christian to another (though there will be some similarities). The point is whether or not you are seeking that transformed life, seeking God’s will, and striving to persevere until the end. A life of following Jesus is not marked by the absence of sin. It is marked by striving against sin, by denying your own will, by giving up those things that keep you from God, and by taking up your cross each day. If you’re willing to do that (you’ve counted the cost), then God will transform your mind and your life as you grow in the likeness of Christ.

       So take time (at least each month, if not more frequently) to ask yourself this question as you review your finances: Am I following Jesus, or am I following the world?

Related Articles at Provident Planning:

1. What Makes Christian Personal Finance Different?
2. New Covenant Giving: Give in Response to Jesus’ Gift
3. Who or What Is Mammon?
4. Are You Giving Sacrificially?
5. Selfish or Selfless?

The Engine That Makes It All Go

       Contentment in Christ and hard work form the engine that make all the other parts of God’s Provident Plan possible. Together, these two principles are the driving force that give you the “extra” that you need to follow God’s plan for your finances. Contentment in Christ helps you spend less and less money on your own wants and needs as you realize what’s truly important in life. You no longer see Stuff as desirable or Money as a goal in itself. Instead, the Spirit gives you a burning passion to help others – especially the poor. Hard work helps you earn more income so you’ll have more money to manage according to God’s principles and to give in His name. Together they give you the momentum you need to walk faithfully with God in your finances.

       A budget has three main parts: income, expenses, and what’s left over. If you increase your income, you increase what’s left over. If you decrease your expenses, you also increase what’s left over. When you follows God’s plan of hard work and contentment in Christ, you do both at the same time – drastically increasing what’s left over. This leaves you with more to give to those in need. That’s why contentment and hard work are the foundation of the Provident Plan. Without them, you won’t have much at all to manage well and give in the name of the Lord.

Our True Motivation

       While anyone could apply these principles and find success, there’s a drastic difference between a Christian finding contentment in Christ and working for God and a non-Christian who wants to spend less and earn more. The non-Christian’s motivation can only come from their desire to achieve those goals. If they fail to reach their goals, it can be a crushing blow to their personal value and self-esteem. And some who actually reach their goals find themselves lost and without purpose because they based their identity on their attempt to achieve those goals.

       This doesn’t happen for the Christian who makes it their goal to follow God’s Provident Plan. Our value and identity come from being children of God – not in what we do or fail to do. While we can stray from the path, our motivation comes through God’s Holy Spirit and not the goals we set for ourselves or our own efforts. We rely not on our own power – but on God’s. We don’t do it for our own glory or satisfaction – we do it for God and others.

       I wish I had a better way to describe the difference between a Christian applying God’s principles and a non-Christian attempting to do the same. If you have a good example or the Spirit has given you the words to make this distinction, please leave a comment and share what you can.

Related Articles at Provident Planning:

1. What Is God’s Provident Plan for a Christian’s Personal Finances?
2. Start Here
3. What Makes Christian Personal Finance Different?
4. New Covenant Giving: Give Under Grace Not Commandment
5. Preaching Christ Crucified

Calculating Your True Hourly Wage

       In discussing the net value of a second income, Amy brings up a useful technique that’s also discussed in Your Money or Your Life by Joe Dominguez and Vicki Robin. The idea is to calculate exactly how much money you’re making from your job after you account for all the related expenses. Divide that by the number of hours you spend working, getting ready for work, getting to work, and relaxing after work and you’ll have your real hourly wage.

       How much do you really make after you take out taxes, transportation costs, clothing, meals, the things you do to relax after a hard day at work, and all the things you pay others to do because you don’t have enough time? How many extra hours do you spend getting ready for work, driving through traffic, or watching TV to de-stress?

       This number is useful for two reasons. First, you’ll open your eyes to what you’re really bringing home from your job. Second, you can use this figure to decide if it’s worth it to pursue certain activities or to do things yourself instead of hiring someone.

What about Bob? (An Example)

       Let’s use a simple example to show how you’d do this calculation. Bob makes $18/hour working 40 hours a week at his job – making a total of $720 each week. First, we’ll take out taxes. His federal, state, and local taxes add up to about $110/week leaving him with $610/wk after taxes.

       Bob lives 10 miles from work and estimates he spends 2.5 hours driving every week and about $30/wk on gas & maintenance for his car. So now he’s down to $580/week for 42.5 hours spent.

       Bob doesn’t have to wear anything special for work, but he does have a tendency to eat out instead of bringing his lunch from home. Additionally, he usually ends up eating out for supper twice a week because he just doesn’t feel like cooking after getting home from work. His lunches and eating out cost him about $80/week. While he could eliminate those expenses now, Bob is honest with himself and admits he probably won’t do that as long as he’s still busy from work. This drops his net pay down to $500/week.

       Bob figures he must have at least an hour every evening in front of the TV just to relax after work. He could do something else if he didn’t feel so stressed out from work, so he adds 5 hours/week to his total bringing it to 47.5 hours. Additionally, Bob spends Friday and Saturday nights going out with his friends to get away from thinking about how much he hates his job. He figures this costs him about $40/week and 2.5 hours. (Now he’s at $460/week and 50 hours for those playing at home.)

       Finally, Bob pays about $20/week in services he buys because he doesn’t have enough time due to his job. These are things like home maintenance, simple car repairs and maintenance, and someone to mow his yard. So he’s down to $440/week for 50 hours of effort – or $8.80/hour. That’s less than half of what he “earns” at his job!

Your Own Situation

       Bob’s calculations aren’t going to work for you. But you can follow the same sort of process to figure out your real hourly wage. Carefully consider all the expenses and time attached to what you do to earn money but also try to be realistic. This can be an especially eye-opening exercise for two-income households with kids. If both parents work and you have to hire babysitters or pay for child care, you could easily be better off if one parent quits their job to stay home with the kids.

       Make sure the expenses you relate to your job will actually go away if you quit your job. If you’re not willing to do some of those things, that’s not going to change if you work less. This is especially true when thinking of the frugal activities you could pursue if you had more time. You have to be willing to actually do them or you’re not saving any money at all!

       Finally, don’t take my example of Bob too seriously. There are definitely things he could do to improve his real hourly wage by making some simple choices (like brown-bagging his lunch). But the point is that Bob’s job pushes him to do those things because of stress, time constraints, or whatever other reasons keep Bob from eliminating those extra expenses.

Sign Up for Free Updates!

       If you want some more good ideas on saving money from The Complete Tightwad Gazette, make sure you sign up for free updates from Provident Planning. I write on a wide variety of personal finance topics, so even if you’re not interested in frugality I’m sure you’ll find something useful here.

This article contains affiliate links. Read my ad policy here.

Related Articles at Provident Planning:

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       This guide is a review of the steps I took to incorporate in Pennsylvania. This guide is primarily for people who want to do business in Pennsylvania and want to incorporate in Pennsylvania as well, though most states have a similar process. (You don’t have to incorporate in the state you do business in.) While this guide is not a replacement for specific advice from an attorney and an accountant, it should familiarize you with the process of incorporation and prepare you for the steps you’ll need to take. I incorporated on my own, but I have a pretty good understanding of accounting, taxes, and business law due to my training in financial planning. You may or may not wish to do everything on your own. Regardless of what you choose, I am not responsible for what you do with the following information. This information is not to be taken as legal advice. This also does not mean that I recommend everyone incorporate when starting a business. Your specific situation and needs will determine the best business structure for you.

       The most helpful website I found for starting a corporation in Pennsylvania came from the Citizen Media Law Project. Their page about forming a corporation in Pennsylvania is quite extensive. However, I’m reviewing the steps I took for my benefit and yours. I’m also linking to a better source of the Pennsylvania Consolidated Statutes. (The links they use at Citizen Media Law Project are slow and difficult to navigate.)

1. Choose the Business Name

       When you choose a name for your business, you need to consider two aspects. First, you have the marketing aspect. Does your business name describe your product or service effectively and help you achieve your marketing goals? Entrepreneur.com has a good article about how to name your business which covers the marketing aspect and some of the legal aspects.

       From a legal perspective, you need to make sure that your business name meets the following requirements:

• Meets State Law Requirements – In Pennsylvania, a corporation’s name must contain the word “corporation,” “company,” “incorporated” or “limited,” an abbreviation of any of these words, or words or abbreviations of like import in languages other than English. There are also some limitations on which words your corporate name can contain. You can find all of those limitations in 15 Pa. Cons. Stat. § 1303.

 

• The Name Is Available – You can check to see if the name is being used by another corporation in Pennsylvania using the Corporation Search from the Department of State. Your name must be distinguishable from other corporate names according to the guidelines outlined here. The Department of State also has additional information regarding name availability.

 

• Does Not Violate Federal or State Trademarks – Read up a little on trademark law. Then you’ll want to search for trademarks that others may have registered. You can search for federal trademarks using TESS, the federal trademark database. Pennsylvania does not have an online database of registered trademarks. To check for trademarks in Pennsylvania, you’ll have to call the Department of State at (717) 787-1057.

       You may want to register a trademark for your business name. You can find out more information in Citizen Media Law Project’s article about registering trademarks. If you’re going through the trouble of registering a trademark for your business, you might as well register federally with the U.S. Patent and Trademark Office. I didn’t do this for my business. There is some common law protection for unregistered trademarks, but it can be prudent to register your trademarks.

2. Recruit a Director or Directors for the Corporation

       Pennsylvania requires all corporations to have at least one director. Directors must be at least 18 years old, but they do not need to be residents of Pennsylvania or shareholders in the corporation. You can set requirements for directors in your corporate bylaws, but they are not necessary. When you write the corporate bylaws (in a later step), you should state how many directors the corporation will have. If you don’t state how many directors you will have, Pennsylvania law requires 3 (three) directors. You can be the director of your corporation and hold all the offices for the corporation. I chose to be the director of my corporation.

3. File the Articles of Incorporation

       In Pennsylvania, you can file your articles of incorporation online through the Online Business Registration Interview (OBRI). Most of the application process is self-explanatory, but here are a few key things to keep in mind:

• Most corporations will be “for profit” “stock” corporations. If you’re creating a different kind of corporation, this guide will not cover everything you may need to know.

 

• When choosing how many shares you will authorize, 1500 is a good number because it is easily divisible by 2, 3, 4, 5, 6, 10, 12, 15, 20, and 25.

 

• If you choose to publicly trade your stock, you will need to meet additional requirements that are not covered here. For a small business run by a single owner, you do not need to publicly trade your stock.

 

• During the registration process, you are asked if the corporation will be an S corporation. There are some advantages to making your corporation an S corporation. You can read more than you’ll ever want to know about S corporations with a simple Google search. It’s relatively easy to elect S corporation status if you meet the requirements, and an S corporation is taxed similar to partnerships. That means the corporation doesn’t pay income taxes. It all flows through to the shareholders. I elected S corporation status for Crackerjack Greenback, Inc.

 

• As long as your corporation will not do business under any name other than its legal name, you do not need to file a fictitious business name registration.

 

• You do not need a commercial registered office provider unless you do not have a physical location or mailing address in the Commonwealth of Pennsylvania.

 

• You can register for taxes and some licenses in OBRI as well. You’ll need to sign up for at least the Employer Withholding Tax, Unemployment Compensation, and Workers’ Compensation. Even as an officer of the corporation, you will be considered an employee and you’ll have to pay employer withholding taxes and unemployment compensation taxes. However, there is an exception for Workers’ Compensation for those employees who are officers and shareholders of the corporation. You’ll need to call the Bureau of Workers’ Compensation at (717) 783-5421 and request forms LIBC-509 and LIBC-513. You may need to sign up for additional taxes and licenses, and this is where an accountant or attorney may be able to help you. This guide does not cover every possible situation.

 

• The fee for filing your articles of incorporation is $125.

4. File a Docketing Statement

       After you file your articles of incorporation, you’ll want to send in a Docketing Statement. It’s a very simple, one-page form. You should send it in to the Corporation Bureau. Their contact information is on this page. Once your application has been received and approved, you’ll receive an official acceptance letter from the Department of State. However, your corporation’s existence begins when you file the articles of incorporation – not when the Department of State accepts them.

5. Fulfill the Advertising Requirement

       Your next step is to fulfill the advertising requirement. You are required to publish notice of incorporation in two newspapers of “general circulation”, one of which should be a legal journal if possible. This just means you need to publish in your closest major newspaper and the legal journal for your region. Your notice must simply state the name of the corporation and the fact that you have incorporated or will incorporate under the laws of Pennsylvania. You can see examples by checking the legal notices section of your local newspaper. Here’s my example:

Notice is hereby given that: Crackerjack Greenback, Inc. has been incorporated under the provisions of the Pennsylvania Business Corporation Law of 1988.

       Since I’m in Lancaster County, I published in the Lancaster newspaper through their website. You’ll want to publish in the legal notices section of the classifieds. The Pennsylvania Department of State has a geographical listing of legal publications with contact information for legal journals. It cost me about $30 to publish in the local newspaper and $78 to publish in the legal journal for Lancaster County.

       You don’t need to send in proof of publication to the Department of State. Just make sure you file it away with your corporate documents. I created a folder to hold all my important corporate documents: articles of incorporation, corporate bylaws, meeting minutes, corporate resolutions, and other important papers.

6. Write the Corporate Bylaws

       There are no requirements for your corporate bylaws, but they’ll typically cover things like: existence and responsibilities of corporate offices (the officers), size of the board of directors and how they’re elected, length of term for a director, how and when board and shareholder meetings are held, who may call the meetings, and how the board of directors will function. The Citizen Media Law Project has more information about corporate bylaws.

       To save you some time, I’m going to share the corporate bylaws for Crackerjack Greenback, Inc. with you. These may not include all of the bylaws you’ll want for your corporation, but they’re a good start. I’ve also highlighted all of the sections you may want to change to fit your needs. I’ve listed four corporate offices in my bylaws: Chairman, President, Secretary, and Chief Financial Officer (or Treasurer). The names don’t matter very much, but the duties of the offices must be completed by someone. See 15 Pa. Cons. Stat. § 1732 for more information. Click the link to download a copy of Crackerjack Greenback, Inc.’s Corporate Bylaws in Microsoft Word Document format.

7. Purchase a Corporate Seal

       Many documents will require the Corporate Seal to prove that the board of directors has officially adopted, signed, or otherwise recognized the document as binding to the corporation. You can purchase a Corporate Seal online quite easily for about $30. I purchased a self-inking stamp for about $27 after adding shipping and handling. Your corporate seal must have your corporation’s full legal name, the year of its incorporation, and the words “Corporate Seal” and “Pennsylvania”. You’ll need it to officially adopt your meeting minutes and issue stock certificates in the steps below.

8. Hold the Organization Meeting

       The first official meeting for your corporation will be the organization meeting. This meeting allows the incorporators or initial directors (if named in the articles of incorporation) to adopt the corporate bylaws, elect directors if they are not listed in the articles of incorporation, and handle any other business necessary. You must keep formal meeting minutes to prove that this meeting actually occurred and that the corporation is being run correctly. Failure to do so could dissolve your corporate status in a future lawsuit.

       Pennsylvania law requires that the incorporator who calls the organization meeting notify all other incorporators in writing at least 5 days prior to the meeting. However, there is a provision in the law for any corporate meeting that allows the attendees to sign a written waiver of notice to get around this formality. I’m including here a copy of the minutes of the organization meeting for Crackerjack Greenback, Inc. which has a written waiver of notice included. You’ll want to read through it carefully to understand the minimum that should happen at your organization meeting and to determine if you’ll need to conduct additional business. Click the link to download a copy of the Minutes of the Organization Meeting of the Incorporators of Crackerjack Greenback, Inc. in Microsoft Word Document format.

9. Hold the First Meeting of the Board of Directors

       Immediately after you have held the organization meeting and have elected the directors, the directors may hold their first meeting. If you’re the only director, feel free to meet with yourself. Just keep the arguments to a minimum. During the first meeting of the board of directors, you’ll approve the minutes of the organization meeting, elect corporate officers, adopt a stock certificate form, adopt your corporate seal, give the corporate officers the power to open a bank account, and authorize the issuance of stock certificates.

       Again, I’ll offer you the meeting minutes, stock certificate forms, and bank resolution I used for Crackerjack Greenback, Inc. First, the Minutes of the First Meeting of the Board of Directors for Crackerjack Greenback, Inc. in Microsoft Word Document Format. Next, a blank stock certificate in Adobe PDF format that meets the requirements of 15 Pa. Cons. Stat. § 1528. Finally, a sample bank resolution in Microsoft Word Document format authorizing the officers to open a bank account for the corporation.

       The price you issue your stock certificates for will depend on how much initial capital you need to have in your corporation. You can always contribute more and increase the shareholder’s capital contributions account, but if you don’t understand that concept you’ll want to hire an accountant. Make sure you fill out the stock certificate correctly by filling in the shareholder’s name and address, the number of shares, the full legal name of the corporation, and the date. Have the President of the corporation sign the certificate and affix the corporate seal. The Secretary of the corporation should then record this information in the corporate stock ledger including the date the shares were issued, the shareholder’s name and address, the price per share, and the total number of shares. You may also want to track the shareholder’s Social Security number, especially if you’ll be electing S corporation status (you’ll need all shareholders’ Social Security numbers).

10. Request a Federal EIN for the Corporation

       You can do this easily via the IRS online application. There is no fee and you can print your confirmation letter after you complete the application. The IRS will let you know which tax forms you will need to file and when. If you need help with the tax and accounting side of things, hire an accountant.

11. Take Care of Employee Hiring Paperwork

       Any time you hire an employee, there are certain steps you must take to gather information about them. Corporate officers are considered employees of the corporation. The IRS requires that you complete a Form I-9 (Employment Eligibility) and a Form W-4 (Withholding Certificate) for each employee. You don’t need to file these with the IRS, but you should keep them with your other records.

       Each state has new hire reporting requirements to enforce child support orders. Here is Pennsylvania’s New Hire Reporting website. You’ll need to report all employees (including corporate officers).

12. Open a Bank Account for the Corporation

       You should keep all of the corporations finances separate from your own. The best way to do this is to open a separate bank account for the corporation. You’ll most likely need your Federal EIN, a copy of your articles of incorporation, and either your own or the bank’s version of a corporate resolution. If your business is small and won’t involve a lot of financial transactions each month, you may want to look into a free business checking account. Just about every major bank offers a free business checking account, and your local bank may offer one as well. Check around to find one that suits your needs.

S Corporation Election

       If you’ve decided that becoming an S corporation is right for you, you’ll just need to fill out Form 2553 (instructions here)and send it in to the IRS. If you’re going to elect S corporation status, you should do it within 2 months and 15 days after filing your articles of incorporation in Pennsylvania. Federal S Corporations are automatically considered S corporations in Pennsylvania, so you’ll need to let the Pennsylvania Department of Revenue know if you don’t want to be taxed as an S corporation in Pennsylvania. Once you receive confirmation from the IRS for your S corporation election, send a copy to the Pennsylvania Department of Revenue to notify them. You should send notification to:

       If you don’t understand the accounting and tax requirements for an S corporation, hire an accountant.

Ongoing Maintenance of the Corporation

       You should continue to hold the board of directors meetings and annual shareholders’ meetings as outlined in the corporate bylaws. Additionally, Pennsylvania law requires that certain records be kept at the corporation’s place of business. See 15 Pa. Cons. Stat. § 1508 for a list of the required documents. These documents must be made available to any shareholder who wishes to examine them.

Final Thoughts

       If you’re starting a simple one-person corporation, you can probably follow these steps and do just fine. However, if your situation is more complicated in any way you may want to hire an attorney. If you don’t understand the accounting and tax requirements of running a corporation, then strongly consider hiring an accountant to help you. It’s not worth going through all the trouble of incorporating if you’re going to neglect the requirements you need to meet to maintain the corporate veil of limited liability.

       I hope you found this guide helpful. If you have any suggestions or additional notes, please feel free to leave them in the comments section below.

Related Articles at Provident Planning:

1. Weekend Reading – 05/28/2010
2. Hiring a Financial Planner: The First Phone Call
3. Do I Need to File a Tax Return?
4. Process
5. Services