Tag Archives: finance

Investment, frugality and other ways to retire right

coinsEveryone wants to create a life of success and stability. In this world, the only way to do that is to have enough wealth accumulated to live off. Naturally, you can continue to work and earn an income, but the majority of people will not have such an opportunity. To that end, it’s worth considering what kind of steps will aid you in achieving a better financial future. It will not be easy, but it will be harder still if you don’t act now. Let’s consider some ways you can begin taking steps to help retire right.

Savings

The most obvious way to obtain wealth is to accumulate it slowly. This allows you to put away a small amount each month, leading to a large outcome benefiting you at the end of your working life. Savings accounts rely on compound interest. As The Calculator Site summarises:

“Basically, you’re getting paid to do nothing more than keep your money in one place (a savings account). You don’t need to juggle finances. You don’t need to try and calculate monthly or annual returns – it’s all done for you. At its simplest, the investment vehicle you put your money into will give you interest on the interest they’ve already paid you. Money for nothing – seems like a good deal. And the banks just keep on giving. As long as you leave your money in an account, it will continue to accrue interest.”

By simply leaving money alone, you can benefit enormously. But this means having the money in the first place. To get this money requires its own thinking and interventions.

Be frugal

A common issue is that people struggle to think long term. As Forbes’ Gregg S. Fisher points out, this is known as self-control bias.

“[this is] the common condition where people fail to act in pursuit of long-term goals due to a lack of self-discipline. Workers know logically that they need to save more for retirement, but they struggle to forgo present consumption, owing to lack of self-control, an emotional bias. Consider Warren Buffett’s simple definition of investment: ‘Investing is forgoing consumption now in order to have the ability to consume more at a later date.’”

Before tackling the topic of investing, it’s worth thinking about how you can be frugal. There are large and small changes you can make to your life that will lead to more savings. In their comprehensive list of ways to be frugal, Money Crashers points out how avoiding speeding tickets is one easy way to reduce unnecessary expenses.

“The next time you have somewhere to be at a specific time, set your alarm for 15 minutes earlier than you would ordinarily. Not only do you stand to save money by driving the speed limit, you might also save your life – or someone else’s.”

Furthermore, you can get flagged by insurance companies as reckless, if there are tickets linked to you. This could mean paying more for your premiums years into the future.

Also, if you don’t need a specific item right now, consider waiting for a sale. Items that are luxuries should be considered thoroughly before buying. Remember that the money that goes into an expensive luxury item could end up benefitting you far more if it’s put away in a savings account, to let compound interest take effect. It’s more valuable in this way, than for any one single item. Another way to think about it is like this: the money saved can end up buying two luxury items in the long term, rather than just one now in the short.

Investments

Naturally, the other common option is focusing on investments. There obviously exists specific investment plans focused on retirement, but you should consult with brokers to look wider. If possible, investigate as many as possible, including tax free options.

Unlike savings, investments are more risky, but ideally you will have diversified where you put your money. This means both savings and investments. In this volatile economic climate, it can be difficult and people might opt for the safer option. But investments are significantly better for acquiring wealth, since they have larger returns and tend to overcome inflation.

Summary

As Fin24 noted, it is possible to think of alternative uses of your money for retirement:

“If you decide to save for retirement on your own, you can choose to receive your full salary (which attracts tax) and then save a portion of this money towards retirement. A more efficient strategy would be to utilise a company pension fund and contribute the maximum amount possible to achieve the tax deductions available in terms of pension savings.”

New tax laws are also allowing for better, smarter responses to savings and tax deductions. As Business Tech highlights:  “It is envisaged that workers will be encouraged to save (more) through retirement funds, to curb old-age poverty and excessive dependency on relatives.”

By thinking broadly about your money, you can find an optimal solution. Your life can eventually lead to a smooth retirement but it won’t be easy. The time to start is now.

 

 

What to look for in investments

One of the most important ways that we attempt to secure our finances, whether as individuals or business owners, is with proper investments. Knowing what makes for good investment then is crucial to everyone, in terms of financial decisions.  Let’s consider what a good investment looks like.

What is an investment?

Broadly speaking, investment refers to something that will ideally generate income, profit or will appreciate in the future. As Investopedia highlights: “In finance, an investment is a monetary asset purchased with the idea that the asset will provide income in the future or will be sold at a higher price for a profit.”

Examples of investments that most people know and use are stocks, businesses and real estate. Each of these can be invested in, ideally leading to an increase in an investment’s value – which means, should we wish to cash out or sell, we will have more at the end of the day.

Naturally, this means there will be better and worse qualities defining what constitutes good investments.

What makes for a good investment

The first thing to consider is what the total value is of the company versus the stock. This means knowing market capitalisation. The Economic Times defines it as: “The aggregate valuation of the company based on its current share price and the total number of outstanding stocks.” We should speak to financial experts so that we aren’t overpaying for a company’s stocks. Bad investments are often a result of paying too much for stock, for companies that are in fact worth less in terms of market capitalisation calculations.

Second, we should know about a company’s overall growth and per stock growth. As one investment expert noted:

“Most investors focus on a company’s share price. They should spend more time looking at a related question – how many shares the company has, and whether that number is growing or shrinking.”

This has an enormous impact in terms of the financial decisions we make, since it could mean we get swindled easier.

Third, we must remove emotions from business investment. No matter how much we might love a business, relate to its staff and so on, these shouldn’t be sufficient reasons for our investment. While feelings and emotions can drive a business toward profits, that’s no guarantee.

All of this is incredibly important when considering what constitutes best investments in South Africa and around the world.  

Tips when considering equipment finance

Every business needs equipment to function. Data today is digitised, with information from clients stored in servers and hard drives, not folders or papers. We also use equipment just to complete our tasks: whether we’re farmworkers or cutting edge designers. Regardless of what we do or who we are, we do require equipment – but that can be hard to come by, especially given how expensive everything is these days. One solution is to attempt equipment finance, letting us receive the necessary funds while paying back in installments.

What is equipment finance?

As the Business Dictionary defines it, equipment finance is: “Any method of extending capital to businesses for the purpose of acquiring equipment.” The options vary between finance houses and the relationship with the business.

Why choose equipment finance?

We can see the advantages here. Indeed, some experts point out that even if we have the necessary cash to pay for costly equipment, it’s still wise to consider equipment finance. For example, while we might be able to pay for an expensive piece of equipment right now, this means an immediate, massive hit to our cashflow.

This also doesn’t take into account maintenance or emergency issues, further requiring dipping into our cash reserves. In fact, we might not have enough after purchasing to sort out emergencies, so we might need a loan anyway.

Instead, going for financing options means we aren’t hit by massive deductions and can manage repayments in a way that doesn’t jeopardise our cashflow.

But, like all forms of financing, we should be considerate about precisely what is meant by this transaction. Let’s consider two pertinent aspects when it comes to equipment finance.

Calculation

One of the first questions we must ask is precisely what the financing will be for. All lenders will want to know this, too, of course – since they don’t just want to give the money to just anyone. Obviously, we want equipment that can aid us in obtaining profits. We must therefore carefully calculate the expenses for the equipment against how much it will return. We don’t want to get equipment that ends up costing more and making us less profit, after all. This immediately would disqualify us from consideration.

Communication

We must find a lender who can maintain an open line of communication, so both sides know precisely the details of the transaction. No one wants to be misinformed when it comes to money. This also means we must thoroughly understand the terms of any agreement reached.

By thoroughly engaging with calculation and communication, we will have a better basis to engage any transaction about financing for equipment. Ideally, this will lead to profitable business and a healthy relationship with a competent lender.

(Picture credit: PublicDomainPictures / Pixabay

3 ways to boost a firm’s value

One of the most important aspects to controlling and managing any company is improving its value. We want it to grow in as many ways as possible, especially in terms of returning investment for shareholders, including ourselves. But how we go about achieving this goal remains difficult. There is no clear cut path, as every business is different and all are competing, finding new angles constantly.

However, there are broad approaches we can consider in our efforts to put our business in better standing.

Focus on leadership

Often, the fact a business is functioning is proof enough it has good leadership. However, too often leaders do not acquire their positions by virtue of their leadership skills but rather because of internal politics and sometimes being charmed by individuals. Neither aspect is a guarantee of excellent leadership.

Robert Hogan, president of personality test provider Hogan Assessment Systems, has done plenty of research on what does make a good leader. Speaking to the Society of Industrial and Organizational Psychology, he counts four properties we should interrogate when thinking of leaders.

  1. Integrity: Can we trust this person and are they honest? Company information can be used to benefit themselves personally, but harm us as a business. We must be certain they are loyal, by virtue of being decent, open and honest.
  2. Judgement: Are they able to make smart decisions, informed by evidence and willing to reflect on their mistakes? This is the only way to grow.
  3. Competence: Staff need to know they can trust this person to deliver. They need confidence in their leaders.
  4. Vision: The direction a business or project takes must be central to a leader. We must know they can articulate and develop what this vision means for everyone.

Cut costs

Another way to improve is focus on cutting costs. How we value a business is a difficult assessment, but one way businesses improve is when they’re spending less than they’re earning. In other words, improving profits. Every business should aim for this, of course, since it shows a business can continue. This is exactly what shareholders want to see in their investment.

Removing bad investments

This could be considered cost cutting, but we should also focus on getting rid of bad investments. For example, we should get rid of working with subpar people and companies, since we’re putting in time and effort and getting little in return.

Basically, the overarching importance is managing corporate finance. Once we do this properly, we can present a more valuable business to our shareholders.

(Image source: Pixabay)

Best finance secrets from finance experts

Most of us feel overwhelmed when it comes to finances. We have little to no knowledge about markets or complicated terms, all of which seem dependent on equations we don’t understand. Yet, there are those who not only understand but work with these parameters everyday.

Let’s consider some of the advice it takes years of studying to learn yourself.

Investment doesn’t have to be a chore

One of the most notorious areas of concern is investments. Most of us know that some of the richest people in the world made their money from working the markets. Yet, what that means and how they did that is precisely what’s confusing. After all, if everyone could do it, we’d all be rich.

Most of us are not looking to become billionaires, however. We simply want to have a comfortable life, where we can afford to feed ourselves and pay the bills. Investments can be ideal for this, because the ideal setup is where our money works for us. Deciding what to invest in, when and how much can be daunting. But an option exists that is secure and guarantees returns.

Financial fitness coach, Paul Roelofse, says a unit trust investment is ideal. We can pay in even a small amount, but the whole thing is managed by knowledgeable fund manager. He says:

“They are carefully regulated. The fund is held in a trust and is not owned by the fund manager or service provider. This offers protection for your investment.

Unit Trusts are used in most investments such as pension funds, endowment policies and retirement annuities in varying combinations.”

This means, with its variety and security, a unit trust investment makes for an ideal gateway into understanding and investing. While it’s obviously not the most lucrative option, it is one way often overlooked. It’s not intimidating and provides security.

Saving matters more than you realise

We all know that saving is important. As one finance expert notes: “The best secret I can provide is to save more than you make.” This might sound simple but truly is the bedrock of the best financial planning. It doesn’t get more simple or more important than this.

We must begin cutting out expenses which aren’t necessary. Though it’s hard to do away with luxuries, we must prioritise necessity. Indeed, many would probably rather opt to studying finance than do away with casual luxuries!

Start early

The earlier we begin properly planning our financial future, the more we’ll reap. This can’t be emphasised enough. Ideally, we should start putting away well before our 30s. If not, we need to realise we can’t be living hand-to-mouth when we’re in our fourth decade of life. Already there should be money put aside or working for us, when we enter forties. This guarantees a smoother path to retirement and comfort after working.