Archive for 'Money'
Most people, at some stage or another, will need to save money. Whether it is for a large purchase such as a house deposit or money for a rainy day, similar savings principles apply.
Consider the following tips to boost your savings account:
Automate your savings
One of the easiest ways to get into a saving habit is to automate your savings when you get paid. Create an account that is separate from your everyday expenses such as bills and groceries and allocate a set amount to be transferred each payday to this savings account. Having the money in a separate account will help to avoid the temptation of spending your whole pay packet.
Hold onto small cash
Holding onto small cash, i.e., $5 dollar notes, can significantly add up over time. Challenge yourself to keep a hold of small notes or coins left over after running your errands or a night out; you might surprise yourself as to how much you can save with little to no effort.
Save extra sources of cash
Anytime you come across an extra source of money such as a raise, bonus or a tax return, consider banking it. If you have managed to get by on your salary or wage up until now, you can continue to live off the same amount and you will thank yourself later when you can afford that holiday or car, etc.
Whenever or however you choose to invest, there will always be risk involved. Luckily, there are strategies you can adopt to manage this risk in the best way possible for you and your investment goals.
Unfortunately, volatility in financial markets can cause an investor to lose their confidence. The Australian Government has provided Australians with a number of tips on how to minimise the risks involved in investing, to ensure they remain confident and their investments stay strong.
Consider the following:
Goal setting is particularly important in a volatile market. Without a plan in place, when the market drops, an individual can be quick to panic and pull their money out. Reacting like this can cause you to lose out, so ensuring you have a goal and a plan will help you handle these times, without losing your head.
A profile that is diversified is much more secure in times of market volatility because it is less exposed to the negative impacts of a specific economic event. Investing in a number of different industry sectors, asset classes and even geographic locations will see your portfolio become more diversified.
Knowing what is going on with your investments is important, as a significant loss in one or more of your assets could cause your portfolio to become unbalanced and less secure. You should receive periodic transaction statements that indicate the value of your investments, as well as the fees and taxes paid. Analysing and responding to this will help you stay involved.
Look out for scams
When markets are volatile, investors are more vulnerable and this is the time that scammers will arise and try to take advantage of the situation. Many scammers catch people out by offering something that sounds too good to be true, by saying they are a representative of a well-known company when they aren’t, or when they contact you in a way that seems suspicious, like a random phone call or through social media. Scammers may offer you investment options that provide high and quick returns, tax free benefits, no risk or low risk investments or even a discount for investing early before a public float. Be weary of all of these. If you are interested, you should always say you need time to think about it and do your own research before committing.
Financial advisors are there to offer you assistance and to help you make the best possible decisions for your investment portfolio. Find a professional that you feel confident with, and don’t hesitate to contact them for help and guidance.
Freeing up working capital can help businesses fund growth, reduce debt levels and lower costs. One way to improve working capital is by managing your accounts receivable.
Many businesses fall into the trap of poor accounts receivable management, for various reasons from extending credit to customers, to ignoring payments terms to guarantee a new sale. These behaviours and behaviours like these can quickly cause disastrous effects on your cash flow.
There are a number of strategies you can practice to improve your accounts receivable process, including:
Customer credit approval policies
One great strategy is to create a clear customer credit approval policy before entering into any business deals with a customer. By assigning credit limits, payment terms, discounts and return policies to specific customers, you are protecting yourself from getting caught out. Introduce a system to determine a new customer’s creditworthiness, such as background and credit history checks.
Criteria for approving or rejecting requests for credit
Reviewing your credit approval process is an essential component of business, as a customer’s financial situation may cause a change to warranting a reviewal of their credit terms.
Sound invoicing procedure
One of the necessary strategies to maximise accounts receivable is to establish a solid invoicing and billing procedure, as generating timely invoices is a major aspect of collecting account receivables on time. Do your research and create a strategy that works best logistically for your business; perhaps it includes a staff member taking on this role, or perhaps you will look for automated options. Sending electronic invoices is ideal as it fast tracks the process due to reduced delivery time.
Efficient collection process
Developing a collection process for all staff to follow will increase efficiency, ultimately resulting in improved management of accounts receivable. You can do this by training all staff on the necessary process for collecting money owed, and train them in how to deal with difficult or non-compliant customers. They should be aware of how to apply discounts, how to negotiate payment plans, and how these aspects should be sufficiently documented.
Poor cash flow is one of the biggest reasons why small businesses fail.
A healthy cash flow allows you to operate your business free of hassle; allowing you to pay your staff and bills on time. Having enough working capital to meet your business’ needs can help you stay out of debt and in business.
Consider these three tips to improve your business’ cash flow:
Create a forecast
Predict your sales and outgoing expenses for the year. You may do this by looking at last year’s sales figures and adjust accordingly. When estimating inflow, account for GST rebates, tax refunds, additional equity added to the business via owners, government grants, loans paid back, etc. Calculating outflows means you need to factor in administrative and operative costs. Also, consider expenses such as buying new assets, ‘one off’ fees, loan repayments and so on.
Consider leasing major assets instead of purchasing them to avoid tying up money in assets that will depreciate over time. Look for ways to cut back on spending such as lowering electricity bills and seeking better deals on insurance and internet costs. You may choose to negotiate payment terms with your suppliers, for example, extending your time frame to pay quarterly.
Control your invoicing
Issue invoices on time and be prepared to follow up on them if you are taking cash flow seriously. Send the invoice separate from other documents and make sure it is sent to the right person. For speedy payments, make it easy for customers/clients to pay you by providing multiple payment options. Automate reminders in your accounting software to notify overdue customers.
Managing debt in your small business is essential in maintaining the financial health of your business as well as preventing bankruptcy.
Consider the following tips to ensure your small business debts do not spiral out of control:
Reshuffle or remove expenses
Reviewing your expenses is one of the first steps to take when tackling debt. Look at the costs you can cut out and find alternative solutions. Whether this means cancelling unnecessary subscriptions, getting rid of expensive systems or selling assets such as a company car. If you cannot completely cut out costs plan to delay them. For example, take the full amount of time to pay an invoice so you have some extra cash to pay for unexpected expenses.
Consider incorporating low-cost marketing techniques to generate additional revenue. Create low-cost promotions, such as special discounts for loyal customers, coupons, limited-time sales or offering discount codes in your email marketing for subscribers. Look for opportunities for improvement within your business – there may be an underutilised area that could make more sales and needs heavier promotion.
Evaluate all of your debts and prioritise them according to the size of each debt and interest rates. Depending on the debt amount and what types of debt you have acquired, you could either choose to pay off the debt with the highest interest rate first or pay off the smallest debt first. Paying the smaller debts first may help psychologically as you may feel as though you are making progress. However, paying off debts with higher interest rates can help you save money on interest over the long run. Regardless of which option you choose, be sure to continue making the minimum repayments of all your debts.
Talk to creditors
Don’t be embarrassed to contact creditors to inform them of your situation. Letting your creditors know your financial situation may put you in a better position to negotiate payment terms and conditions. For instance, if you have debt through a bank you may be able to arrange a hardship plan or consolidate your loans into one single monthly payment and so on.
Good credit management is an important business strategy to maintain cash flow and stable finances.
A cornerstone of managing credit is not only making sure an invoice gets paid, but gets paid on time. Before a debt recovery process commences (which may delay payment further and damage a relationship with a customer), it is worthwhile for businesses to put a few processes in place to avoid customer debt in the first place.
Prepare your customers
Making sure the customers understand their payment terms from the start is the first step in training them to keep track of outstanding invoices and payment due dates.
Keep detailed records
Businesses should keep all customer records such as payment term agreements, customer limits and outstanding sales to date.
Follow up regularly
Starting following up procedures once a payment becomes overdue will help speed up the process. It is also very important to know exactly who to speak to about payment matters, it may be different to the person you had been dealing with during the transaction process. Being consistent when following up debts will help businesses maintain good customer relationships.
Implement payment in full
Most businesses adopt this policy in regards to payment procedures. This way the customer has a full amount to pay by a concrete due date. Sometimes ‘making it easier’ for the customer by staggering payments and due dates can confuse and delay payments even further. If there are ongoing problems of overdue payments, businesses can consider mediation or debt collection services.
For labour and time intensive work, some businesses ask for a part payment or deposit up front. This works as a way of showing that the customer is financially committed to the project. It also allows a business to better manage cash flow, knowing that there won’t be months at a time when there are no payments coming in because of works in progress.
Legal action is very expensive and should be considered as a last resort.
A loan can be great help. It can assist you in achieving your goals faster, such as buying a house, purchasing a new car or getting your business up and running.
However, there are many considerations to make before taking on a loan as choosing the wrong loan can cause financial and legal havoc down the track. Take note of the following tips before applying for a loan:
How much do I need?
Before applying for a loan, carefully calculate how much assistance you need. The more you borrow, the more you will have to pay back in interest and fees. Calculate the benefits from saving for an extra month or sixth months and consider how this will impact on the loan you need. The amount you need may limit you to applying for only a small number of loans with stricter conditions.
Which loan to pick
Consideration needs to be awarded to working out which loan is best for your needs. Some loans only allow you to spend money on set things, e.g. student loans may prevent you from using loaned money for rent.
Loans have different terms and conditions. There are a number of fees that may be hidden in the fine print. Speak to your accountant to help you understand what these conditions mean for you to avoid getting caught out on choosing the wrong loan.
Can you afford the repayments
There is no point taking on a loan if you can’t manage the repayments. This will only see you fall into debt, which can impact on your business, your assets and your credit rating. Don’t jump at the opportunity to receive a substantial loan without appropriate calculations to ensure you are more than capable of making the repayments.
Getting a good loan can save you thousands of dollars in fees and interest, so it is important to shop around for the best deal.
There are many considerations when choosing a loan. After you have decided on the amount you need to borrow, the features you need and the time frame to pay it back you should consider the following:
The interest rate is most likely the first thing you will want to know when searching for a loan. You will need to decide on whether you prefer a variable or fixed rate. If you decide on a variable rate, account for potential interest rate rises. Some lenders offer ‘honeymoon’ rates for the first 1 or 2 years of your loan where the rates are low then rise after the ‘honeymoon’ period ends. If you take this option, make sure you will be able to make repayments at the higher rates.
The comparison rate
The comparison rate is the interest rate plus all the fees and charges you will pay on the loan. Comparison rates help you work out the true cost of a loan and can assist you in comparing the cost of different loans. In addition to the comparison rate, you should compare the features of each loan, i.e., the ability to make extra repayments and so forth.
Using a broker
It may be beneficial for you to use a broker to find the most suitable loan, especially for larger loans like a mortgage. A broker will negotiate with financial institutions on your behalf. They can offer a variety of options, help select a loan and manage the process until settlement. Compare brokers and find out about their fee structures before deciding.
There are no steadfast rules for saving money. Everyone’s financial situation is different; people earn different amounts, need to save different amounts and have varying expenses. Luckily, the following tips can apply to anyone.
Planning ways to cut your expenses and save money is important if you want to save but at the same time, it’s important not to over-restrict yourself otherwise you’ll burn yourself out. Be realistic in your budget, if you earn $500 a week, it’s probably unrealistic to say you will save $450 a week. Start with a budget that’s achievable and work your way up.
One way to stop spending on things you don’t need is to keep a list of all your expenses. There are so many things you spend money on because it’s cheap and you think it doesn’t matter, but it all adds up. If you record each time you buy a $3 coffee, or a spend $15 on lunch instead of packing your own, you’ll realise how it all adds up. You will be amazed at the money you spend on things you can go without.
Change the way you view money
So many people look at money as a barrier, despite how much they have. Regardless of how much money you earn, if you are ruled by money you will always find yourself in a position where you blame money for not being able to afford the things you want or resent that you have to use half your paycheck to pay your bills and living expenses. When you free yourself and stop looking to blame money for all the things you can or can’t afford, you are more likely to relax into saving and not feel the need to spend as much.
Be more materialistic
This may seem counterproductive, but if you view materialism in the true essence of the word, you are bound to save money. True materialism means placing value and appreciating the materials you do have; it means buying what you need and not spending frivolously on things you don’t.
Term deposits are an easy and secure way to invest your funds. But it is always a good idea to do your research and shop around first to find the best return before investing.
Although there has been a significant decrease in term deposit rates over the past few years, they remain a popular investment strategy for many savers, due to their safety and reliability. And if you are prepared to shop around or switch providers, it is almost a guarantee that you will achieve excellent returns on your term deposits.
Below are some tips for putting money into a term deposit:
Do your research: try to find an impressive rate instead of simply accepting what’s on offer from your provider. Lower rates mean that those who want a high return need to be switched on about where they’re putting their term deposit.
Look for promotional rates: if you’re prepared to look around and chase a special rate, you might just be able to catch one.
Don’t automatically roll over: always compare what is available both inside and outside of your organisation. You can do this by setting a reminder for yourself just before your term deposit matures to allow time to check for the next best rate.
Be prepared to change terms: if you usually invest for 12 months and find a better promotional rate on an eight-month term deposit, be prepared to make the change to the better rate.
Consider alternatives: if you are tempted by profits elsewhere, such as in the property market or equities, don’t be afraid to consider those options as well to better your investment returns.