From Pensions to Parenthood: Working at Home

July 25, 2007 — -- The daily drudge and drag of work can be tough on even the most motivated, but throw in a howling toddler, trips to ballet class and a never-ending stack of dirty dishes on top of the workload, and the challenge goes from difficult to nearly impossible.

Welcome to the world of working from home. A constant juggling act in which the lines between your working life and your personal life blur into an insurmountable grocery list of tonight's dinner ingredients and that 3 p.m. conference call.

Many Americans call their offices home, or the other way around, and the responsibilities and financial concerns that come with the territory in many ways rival the trials and tribulations of commuting to and working in a traditional office environment.

Mellody Hobson, a "Good Morning America" contributor and president of Ariel Capital Management, is here to help. In an interview with ABC News Now, Hobson offers tips, tricks and solutions to the many problems facing the home-business owner.

You Won't Be Young Forever

One daunting question hanging above the heads of most Americans is that of retirement.

Though old age seems light years away, Hobson warns, "This is really important because a lot of people, especially those who start their business, put the business first. They reinvest all of their profits into the business and they think that in the end they will be OK, it will all work out, and they neglect preparing for their retirement."

Instead, Hobson recommends that individuals plan ahead and make an effort to contribute to a retirement fund early on. In fact, new government initiatives have made this preparation easier than ever.

"First of all you have a Sep-IRA. It's really simple. It's like going to set up an IRA, a regular IRA, but it's specifically for small-business owners," Hobson said.

The Simplified Employee Pension Individual Retirement Account was created especially for those business owners who don't have any employees other than themselves, and provides a simplified plan to help ensure financial stability later in life.

Hobson additionally recommends a solo 401(k) and a Roth IRA, which also target the solitary business owner.

"They have different limits and things like that attached to them but all are perfect long-term solutions for preparing for retirement," Hobson said.

Fortunately, it seems that home-business owners need not fear their golden years, and a hefty supply of early bird specials awaits the premature planner.

At the forefront of these concerns looms the question of health care. Just as these business owners may forget to plan for retirement, they also fail to provide themselves proper health insurance.

Wishful thinking won't quite keep lurking ailments at bay and the lack of health insurance is a leading cause of bankruptcy in the United States.

Hobson advises that one use his or her spouse's employer in order to obtain coverage if possible, but she stresses that even for the single, health insurance is a primary necessity.

"The bottom line is just make sure you're covered and you want to try the lowest-cost coverage you can find really to be there for the big events that could happen to you," Hobson said.

The Tax Man Cometh

Last but not least lies the taxation dilemma.

April 15 is seared into the minds of each and every American taxpayer, and those managing their own businesses are faced with even larger challenges.

Nonetheless, planning ahead may remedy this predicament as well. "It's something you have got to watch the whole year," Hobson said. "You want to make sure you are keeping very good books and records of what is going on, on a monthly basis, so you can tie all those numbers out at the end of the year."

Moreover, what the home worker may not be aware of are the many deductions that are available through this self-employment.

Everyday items such as supplies and day care may be subtracted, resulting in a much more pleasing sum in the end.

But Hobson cautioned, "Don't over deduct there because that is like a bull's-eye for the IRS for an audit so you don't want to be too aggressive."