Archive for January, 2014

Sitting down and managing your finances and accounts is never going to be something you look forward to. However, it is essential for keeping your company afloat and keeping heaps of debt at bay. Here you will find advice on how to find fresh cash flow and the best ways of managing your business’s finance.

wad of money

New Business Financial Issues

 

The majority of start-up businesses aren’t profitable for the first few years of trade, therefore it’s not uncommon to find yourself losing money if you’ve just got into the game. That said, you need to ensure that your business isn’t haemorrhaging money, as this is a one-way ticket to failure. Take some time every week to evaluate your businesses expenses and incomings and see if it is possible to make cut backs or introduce a price hike for some of your products or services.


Problems with Existing Business

If you’re not a new business then losing money is unacceptable. It may be time to completely re-evaluate the way in which you’re currently operating and assess whether or not the prices you are charging and paying need to be changed. Try to find out where all your money is escaping from and try to plug the hole before it sinks your company.

 

Understand Your Cash Flow

 

Hundreds of businesses have gone under as the result of poor cash flow. This problem occurs most often when you’re operating on a credit system and your clients are either slow to pay or they don’t pay at all. You can find fresh cash flow by using invoice factoring to provide you with the finance you need during the time in lieu of payment.

A huge benefit of invoice factoring is that the factoring company will often chase up the payments for you – ensuring you get the payment, while providing you with the vital funds you need to continue operating. These payments can also be scheduled for more regular times, allowing you to plan your finances.

 Separate Personal and Business Money

 

If you’re a family business or sole proprietor then it can be tempting to simply keep all your money in one place – especially if this is your only income. This is a very bad idea for a number of reasons but primarily for tax purposes and figuring out exactly how much cash your business has in it.

You need to calculate your profit after you’ve paid your staff (even if that’s just you) as it should be considered an overhead just like the rent/ mortgage rates. This will give you a much clearer picture of how much money your company is making, as well as making tax returns a lot easier!

 

Keep Accurate Records

 

If you don’t maintain organised records of all your companies then it will be very difficult to keep track of your finances. Make sure that you’re refreshing your records at least once a week and have an evaluation of your expenses at least once a month – by doing this you can stop wasting money and are able to pinpoint which clients are the worst at paying, allowing you to make the necessary changes.

5 Important Rules for Investing Successfully

While there are quite a few people who realize that investing is one of the best ways to get away from living from paycheck to paycheck, most don’t have a clue where to start. That leaves many people watching share prices rather than investing, believing that shares in stocks are the realm of the rich. While there certainly is a bit of risk involved with investing, there are definitely ways to get started without high risk. Today’s blog has 5 Important Rules that will help you to Invest Successfully. Enjoy.

Rule 1: Make sure your stock portfolio is Diversified.

Having a diversified portfolio with 30 different kinds of shares is what you should shoot for. This diversification protects you from any single stock, share or company that “goes under” and, even if a few of them do at the same time, it’s almost an impossibility that all will. It your portfolio is built this way it will, in most cases, outperform any earnings that you might make from a bank.

Rule 2: Never purchase more than $1000 worth of any share until you own at least 30 different shares.

While we’re talking about keeping your risk low, the simple fact is that risking too much money on any one stock investment is never a good idea. Keeping these individual investments small keeps your capital “pot” secure and also can actually lower the unpleasant stress that investing can sometimes cause. Once you’ve reached 30 stocks, and you have some experience under your belt, you can grow the scale of a single investment, but until that happens stick to smaller investments per share type.

Rule 3: Use all of the modern investing tools available online.

There are so many venues today that will give you investing information that not using them is simply unwise. They are free stock market tools that were unavailable even to professional fund managers just a few short years ago, including portfolio tracking, real-time share prices, opinions, news and so forth. Keep in mind that you don’t have to actually use this information (or take anyone’s advice) but learn from it and let it help you to make your own personal financial/investing decisions. Yes, it’s a little bit of work, but who said that making money wouldn’t be work?

Rule 4: If one investment strategy isn’t working, find another.

Simply put, there will always be newer and better ways to pick stocks and shares and old ones will become obsolete or stop working. That’s the way the market works and, to be successful, you should always be on the lookout for the newest methods as the old ones get used up by an efficient market.

Rule 5: Invest for the long term, not the short term.

Many people trade so often that rather than make themselves rich, they simply make their broker rich. The fact is, Warren Buffett, one of the most successful investors in the world, claims sloth as his most profitable investing trait. What he means is that he holds onto his investments for a much longer time than almost anyone else and is slow to sell. The old adage about “slow and steady winning the race” works well for stock market investing.

If you’re looking to use the stock market to purchase a new Ferrari, the fact is that you’ll probably be too old to want one once you make enough money from it to afford one. A better way is to simply look at the stock market as a way to build wealth over the long run and not worry about getting “rich quick”. If you look at the stock market as a part-time job that you’ll have until you retire, chances are that you’ll do quite well.

The Advantages and Disadvantages of Ride Sharing

Car sharing services have taken off exponentially the world over in the past few years, with options ranging from ZipCar to RelayRides. These operate in slightly different ways. Some, like Uber or Lyft, work by allowing motorists to drive other passengers around the city for an informal taxi ride. Others, like RelayRides, allow car owners to rent out their car to other motorists. Finally, services like ZipCar allow motorists in cities to gain access to a private car when and where they need it, such as running errands. With the cost of car ownership so high, services like these can be quite appealing as alternatives to making a purchase. Yet there are advantages and disadvantages to consider first.

Advantages

One of the primary benefits of using ride sharing services is that you save the cost of car ownership. You don’t have to worry about your car being stolen or broken into, or pay the cost of car insurance and fuel each month. For those who don’t drive too often, it makes sense to only pay for a car when they need it. Ride sharing services are also popular among people who are interested in reducing their impact on the environment. Carpooling leads to fewer cars on the road, which equals fewer carbon emissions.

Families may be drawn to ride sharing services to avoid the cost of a second car. Saving that second car payment leaves families with more money to put towards retirement or a down payment for a house. At the same time, if someone wants to run errands and the primary family car is in use, they can simply hire a ride share vehicle for that big grocery trip or to attend a meeting on time.

Disadvantages

While there are many benefits associated with ride sharing services, there are also a few issues to consider. For those interested in renting out their vehicle using RelayRides or a similar service, liability can be an issue. If there’s an accident in your car, you may be held liable for it. You may need to take out additional insurance to cover this possibility. Another disadvantage is that there’s no guarantee you will be able to find a car when you need one. It can be hard to find available ride share vehicles on rainy days or during rush hour, for example. It’s harder to make spontaneous trips using ride share services like ZipCar. Instead, you need to plan ahead a little bit to make use of this type of service. If no cars are available, you may be stuck with a high taxi fee.

Overall, there are numerous advantages to ride sharing as well as a few drawbacks. If you’re dedicated to a greener lifestyle but still want to have instant access to a car for regular use, you could look at electric options like this Holden Volt at Carsales. On the other hand, if you’re only an occasional driver and live in an urban area, a ride sharing service may be the perfect solution.

In 2013 we saw moderate economic growth while the Federal Reserve maintained their quantitative easing program.  This was something that kept short-term interest rates low but still the Fed’s general attitude was something that made most investors a bit nervous and inevitably hurt many bond portfolios due to the rise in long-term rates.

What this showed many investors is that forecasting the market is as much about investor sentiment as it is about data analysis. Indeed, as they continued to be active with their QE program last year it became clear that what the Fed was saying was nearly as important as what they were doing, a theme that will more than likely be quite significant in 2014

Which leads to the question of what’s likely going to happen with the bond market in 2014. In all likelihood we’ll see the same slow growth as the markets continue to be policy driven. 5+ year bonds will more than likely see their rates go higher as the federal government’s bond buying program is tapered down. Most experts are predicting that the Funds rate will remain zero in 2014, something that should help anchor short-term fixed income yields. Volatility will more than likely be a theme again in 2014 and, in most likelihood, inflation should maintain its historically low course.

All of which leads to three strategies for bond investors in the next 12 months.

  1. Shorten the duration of your fixed income portfolio. In 2013 one of the best strategies was duration rotation, whereby investors who anticipated a rise in rates shortened the duration of their portfolios in response. The fact is that Treasury rates, based on current growth levels and inflation, are rapidly approaching their fair value. Unless either inflation or growth have a large spike in the coming year the rate increase in 2014 will be a bit more modest than it was last year.
  2. Invest in short duration bonds rather than cash. Right now investors are getting a negative real return on their cash investments (after they factor in inflation) because of near zero short-term interest rates. Even though cash is definitely the safest investment, bonds of short duration are relatively low risk but offer the opportunity of a much higher yield overall than cash. You can expect that short duration ETF’s will be used by many investors this year as they continue to get their feet wet in the market again.
  3. Consider investing (with caution) in municipal bonds. On a tax adjusted basis municipal bonds are still very attractive, especially in a market where finding yield is becoming more and more difficult. Keep in mind however that they are highly rate sensitive.

Of course before you choose any type of fixed income strategy you should always consider the exact role that bonds will be playing in your portfolio. Consider whether you are seeking yield, stability or diversification and keep those objectives in mind with all of your bond investments. If you do that, 2014 should prove to be a very good year.

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