Tag Archives: money

5 good reasons for business to borrow money

Money

Small and medium-sized businesses drive the economy across Europe. According to the data of the European Investment Bank (EIB), small and medium-sized businesses account for 99% of businesses in European Union and employ two thirds of the labor force. Thus, small business financing has always been a priority for various financial institutions or at least it should have been.

Many entrepreneurs in the Baltic States still face deep-rooted fear of borrowing and the idea that borrowing reduces the credibility of the business. However, contemporary entrepreneurs challenge the status quo and understand that debt is essential in order to grow a company. Therefore, today we will share 5 key reasons why businesses (should) borrow additional capital.

     Seed capital (to start a new business)

Ingenious idea is rarely enough to establish a successful business. A company can grow when there is a developed concept to show, whether it is a product or a service. However, it is often difficult to get to such point as it might require specific tools, technology, office or manufacturing premises, website, communication devices and other things for which a significant starting capital is needed.

     Additional working capital

In order to earn profit, you need to invest working capital first. When company is growing quickly, there is a need for more employees, tools, office or manufacturing space, therefore, more capital. Usually businesses have three main ways to get additional capital – more equity capital from shareholders, profit from operations, and debt. Quite often shareholders pour most of their money into business to kick it off in the beginning and do not have additional capital for further funding. Lots of companies are not even profitable for the first couple of years. Therefore, company should consider taking on debt to grow the company as long as this debt is healthy.

     Purchase of long-term assets

Long-term assets like buildings, land plots, machinery are usualy important to successful growth and expansion of ther company. Businesses often purchase such assets using leverage from lending companies in order to save working capital for operations.

     Delayed payments 

Businesses constantly juggle between accounting credit and debit. Working capital is like blood that keeps the company going. Nowadays, there is tendency that once products are are delivered to the buyer, payment might be delayed for up to three months. Expanding businesses cannot wait so long without additional capital injection to move forward. Therefore, invoice financing solutions are getting more and more popular among small growing businesses.

     Refinancing 

Terms and condition for loans today are not like they used to be 5 years ago. Sometimes interest rate or other conditions might worsen, however, if they become more attractive, it might be wise to refinance existing loan and get better terms. This solution helps businesses save a lot of money that can be used elsewhere.

Businesses should not be afraid of debt. On the contrary, when company borrows responsibly it can achieve sustainable growth and expand to new markets which would be unreachable otherwise.

 

Source: Lenddy.com

Please follow and like us:
error

Why smart people do stupid things with money?

Smart people

It’s a pretty good question, is not it? How do intelligent people manage to do things with money and after a while become totally disappointed with their “successes”?

I suggest you think a little bit!

And here I do not mean people without financial education or any other kind of education.

Let’s think of intelligent people who have completed a faculty or a master and who have obtained a job because of their competencies or who have developed a start-up that has become a “small profitable money machine”. How do they become totally disappointed with their own financial situations, even though they have earned a lot of money over the years?

Here are three of the most common reasons:

  • They have a disastrous financial behavior. Although there are people who have extraordinary professional, social or family behavior when it comes to financial behavior, they completely ignore it!

          They are implusive consumers, meaning “perfect” for traders. Buy anything at any price. If they like something, they put in a basket without considering how much money they have available until the next salary. “I even withdraw money from my credit card if I do not have any money left in my salary account”. You’ve heard of such people, right?

         The first step in changing financial behavior is definitely analyzing your own behavior. If it’s not one you can be proud of, you can change it. Instead, if you go like a ostrich – just put your head in the ground and deny your own financial situation – it takes only a short while until the frustrations and shortcomings will arise.

  • They omit the financial planning activity. They do not have financial goals, they have no clearly defined plans to follow, and this is why they do not take into account the financial planning activity. Surprisingly, all people know that without a plan whatever it is financial or any other type, the chances of success tend towards zero.
    To increase your chances of succeeding in what you propose, take a pen and a sheet, write down your short, medium, and long-term financial goals, make plans for action, and set up tight financial targets.

          If you want a house, set the amount of money you need, the detailed plan to get that amount, the intermediate targets delimited by clear terms and get to work. Without action, the results are always zero!

  • They do not have information, skills or financial skills. The result of not very profitable investments is often the lack of understanding of financial products and services and business investment in areas that they do not know.

          I’m sure you’ve heard questions like “I have 10,000 euros and I do not know what to invest in.” Or “What are the most profitable businesses?” Often, those who ask for such questions are people who lose money because of their lack of skills and entrepreneurial experience.

         Lack of understanding of financial products and services such as savings accounts, deposits, investment funds, shares or the Forex market can also cause a small amount of trouble if you do not understand how they work.

       Developing a “healthy” thinking, how the most important financial products and services work, and developing entrepreneurial skills can help you increase your personal income.

Please follow and like us:
error

Do the money come to you at the speed of the turtle and go with the speed of the rabbit?

money-coins

If you feel the money are coming to you very rarely or hard and going very fast, you should do something different than what you have done so far, that’s clear!

What can you do differently?

Here are some suggestions:

1. Manage your finances. This would be the first step to see where the money comes from and where they go. It is also the oldest advice you have received from grandparents, right?

Perhaps too simple, but once you start managing your money you will become more aware of the decisions you have to take and act smarter.

2. Change your mentality. If you grew up in a family where money is not being discussed, or if you feel that you are not earning the money you deserve, you probably have a poor man mentality.

You may think that everyone is “busy”, that you can not develop a lucrative “honest business” or that “you are not ready enough to get a good job”. If you think so, I advise you to talk to people who are business owners or friends who have financially worthwhile financial situations.

3. Change your financial behavior. It can not change overnight, but right now you can change the way you spend your money.

4. Answer the question: “Why do money come to me with the speed of the turtle and go with the speed of the rabbit?” Try to answer this question, I’m sure you know the Solution! … and with perseverance I am convinced that you can improve your financial situation.

Please follow and like us:
error

Update 3 on Eurocent loans on Mintos peer-to-peer lending marketplace

Mintos logo

Due to Eurocent’s complex property and legal situation, and its inability to obtain an investor, as of March 20, 2018, Eurocent has ceased its operations. According to the compulsory administrator of Eurocent, continued operating activity is economically unjustified and there are no real prospects for the implementation of the arrangement and restructuring of the company.

Mintos says it is their priority to protect the interest of  the investors and they are currently doing everything possible to ensure this.  Their lawyers are now reaching out to the administrator and the board of Eurocent to see how they can recover the money owed to Mintos investors as soon as possible.

You can read the previous update on Eurocent here.

Please follow and like us:
error

When does it worth to have money in bank deposits?

Balance inflation

Is it worth having bank deposits? Can you live of the interest you gain?

To these questions, there is no standard answer. The answer is influenced by the size of economies, inflation rate and bank interest.

There were times when interest rates were well above the inflation rate and all people who had savings were directing them into bank deposits. When the bank offers you an interest rate of 18-20% and the inflation rate is 5-8%, the real-positive interest rate is 12-15% and it deserves the investment, right?

Instead, it is not worth having bank deposits when banks offer net interest rates below the inflation rate (banks do NOT need money).
Normally, bank interest rates cover inflation or are slightly below inflation.

In conclusion, it is worth having bank deposits only if interest rates are over inflation rate, otherwise you will only get a reduction in the purchasing power of your own savings!

Please follow and like us:
error

Personal finances and other aspects of life

All people want MONEY – as much money as they can!!! Taking this into account, the theme “PERSONAL FINANCES” is one of the most important aspects of people’s lives!

Along with FINANCES, other important aspects of life are: Health, Relationships / Friends, Family / Love, Personal Growth, Free Time / Fun, Career / Business!

To achieve or maintain a balance in life, anyone should be concerned about all these areas!

If you care for your own health (you have a healthy diet, you do 30 minutes of sports daily, consume 2 liters of water a day), you will avoid throwing money on medicines and treatments!

If you have quality relationships (participate in networking meetings, maintain your existing relationships and friendships), it will be much easier for you to find a friend or specialist to help you solve a problem!

If you are well on the family / sentimental level (you have a beautiful and united family, the desired couple relationship) you will always find the necessary motivation and the support to succeed in everything you propose!

If you are focused on growth, personal education (go to classes and seminars, read books, listen to audiobooks) you will be motivated and you will acquire specialized knowledge that will broaden your horizons!

If you have free time and do what you like (traveling, practicing a sport, volunteering), you will reduce your risk of suffering the most common illness, simply called stress!

If you are developing a successful business / career (planning your career, attending seminars or business schools, consulting consultants), you increase your chances to generate more value and, implicitly, “higher income”.

If you take the time to educate yourself financially (financial management, concepts, financial products), you will increase your financial intelligence!

Conversely, if you DO NOT focus on all of these possible areas:

… to have a successful career but to be disastrous about love / family!

… to have money but not to have health!

… to have a profitable business but not to have free time!

Please follow and like us:
error

4 useful strategies to teach children about money

Many parents do not know the right age to start teaching children about money.
Financial education may seem an abstract concept, which surpasses the children if they are very young, especially when they have to learn so much more practical things.
In addition, once they reach a certain age, anything you try to tell them comes into one ear and comes out to the other.
Is there a perfect age at which children are able to understand financial concepts and are receptive to what family members have to say?
Or do you just have to leave the kids on their on and wait for them to make the same financial mistakes?
In fact, it is possible to start financial education for children at a surprisingly young age, and they are able to be receptive to what you are learning indefinitely, as long as everyone attending sees these lessons as fun.

Pink piggy bank

Here are 4 helpful strategies to teach children about money and personal finances:

1. Teach them by the power of the example

Parents have the power to invoke parental authority when it comes to money, but even children can figure out whether you are credible or not. If it is clear to you that you are not making proper decisions about your own money, how can you expect to teach them how to spend their money correctly?
In essence, transparency and sincerity are the best solutions: call the children to look at when you pay your bills, when making other bank payments or directing some money to your investments.
This works especially for younger children who still have the impression that everything their parents do is very interesting.

2. Give them an age-appropriate allowance

No matter how smart some children are, until they do not have money in hand and will not use them to buy things, money will remain for them an abstract notion.
That’s why it’s important to start giving your children a small allowance, age-appropriate, as soon as you’re sure they can learn the money concept.
You can even make the allowance in a shared account with your child. As cash is being used less and less, young people will have to learn the concept of debit card and virtual wallets anyway.
You can also condition the receipt of the entire allowance to perform certain tasks in the house.

3. Eliminate the wrong spending decisions

It is useful to let the children make their own financial mistakes, but to a certain point.
If you start to feel that they really do not know what they are doing or do they make misleading purchases just to defy you, stop them by invoking the abovementioned parental authority.
Explain this by understanding why it is very important to reasonably think about every financial decision you make.
You can help them by providing them with an age-appropriate educational game, such as Monopoly, for example.

4. If in doubt, let them work

Sure, this is not an option for those children who are small or very small. For teenagers, however, a part-time summer job can have a very positive influence and can significantly increase their financial intelligence.
Moving from zero income (or a modest allowance) to a real salary, even if small, earned at a job in the local supermarket, for example, is extremely important.
Just make sure you provide them with the necessary job search support. They will thank you later.

Please follow and like us:
error

What is Cash Flow? Find out how you can use it to your advantage

Cash, and more so the lack of it, can be a determining factor in whether you will achieve your goal of financial freedom. In short, cash flow is the net amount of cash that is flowing in and out of your accounts each month. Traditionally, this has been an important measure for business owners as they can keep track of how much money they are generating from customers that they offer their services to. It’s also important for them to know how much they are paying out each month for things like business loans, office rental and many other expenses.

However, the same cash flow measures can be used by individuals like you and me. Let’s say that each month you earn €2,000 net per month from your employment, €500 from your side hustle and €200 from your investments. But you need to live, so you can deduct your mortgage payments, car costs and any other expenses you have. The result of this will be either a positive or negative cash flow.

cash flow money

Cash Flow from P2P, Real Estate and Income vs Accumulation Funds

One of the most popular asset classes today is Peer-to-Peer (P2P) lending, notably for the opportunities it gives investors to become the bank and receive a monthly cash flow. Let’s say you invested €10,000 across thousands of loans from a range of risk ratings, loan durations and countries. Every month, the borrowers will make their loan repayments which consists of principal and interest, you then have the option to withdraw this cash flow or reinvest your profits to compound your interest and maximize your overall returns.

Quite similarly, real estate investments work in a comparable fashion. If you buy a rental property for €100,000, each month you will receive a payment from the tenants (e.g. €600 per month). You might use some of that to pay the remaining mortgage on the property or add it to a growth account to save a deposit for another property. An important difference between this and P2P is risk, as previously mentioned you can spread your risks across thousands of loans where as you rely on the payment from a tenant in a single property – if they default then there is no other cash flow. Protect your cash flow by diversifying within your chosen asset class.

If you are familiar with investing in equity funds, it’s likely you have come across the accumulation vs income conundrum. Simply put, an accumulation class fund will reinvest any cash generated from the investments within back in to the fund, over time this can significantly increase the size of your total pot. On the other hand, an income class fund will pay any cash generated from the investments back to you to use as you wish. This is for those who are looking to increase their total monthly cash flow amount and are not necessarily focused on the long-term growth of their investments. Almost always, the accumulation fund will be the most profitable in the long run.

Take a look at the graph below:

income vs accumulation-en

The same principle can be applied to your investments with Bondora, as the only difference is the underlying asset (consumer loans rather than equities). In the graph above, we have compared the growth of a portfolio with the same interest rate, starting capital and duration, the only difference being reinvesting your monthly cash flow compared to withdrawing it each month. Using our Portfolio Manager, starting with €10,000, an outlook of 5 years and a respectable interest rate of 10% per annum, there’s a stark differential in performance.

In fact, by simply allowing the Portfolio Manager to reinvest your monthly cash flow, your account value at the end of the 5 year duration would be 33.9%, or €4,462 larger (€17,623.42) than if you did not (€13,161.42). This is literally how you can “Make your money work for you” with minimal effort.

Cash for thought

Cash Flow Quadrant

Do you recognize the quadrant above? If you do then you are most likely well accustomed to the benefits of having a positive cash flow, congrats! For those who are still puzzled, this peculiar yet simple diagram is the brainchild of Robert Kiyosaki, the king of cash flow. As the creator of the Cash Flow Quadrant, Kiyosaki divides the general population and their mindset in to 4 separate categories:

  1. E: Employee – This person values job safety and security over everything.
  2. S: Small business owner/Self-employed – An independent person who wants to do everything related to their business by themselves.
  3. B: Big business owners – People who create a large business run by intelligent people.
  4. I: Investor – Those who make money work for them.

His main theory is that people should learn how to become big business owners and learn how to become investors, as the people on the left side of the quadrant only have active income compared to those on the right earning passive income. Creating a viable and sustainable source of passive income is seen as a core principle of achieving financial freedom.

Source: www.bondora.com

Please follow and like us:
error

Savings can help you in the world full of risks we live in

We all live in a world full of uncertainties. Everything that surrounds us – nature, people, things – is in constant transformation, and the result is beyond the limits of our knowledge.
But our economies could be a solution (at least partial) to this problem.
Why? The answer is simple: in situations where we are confronted with many unknowns, over which we have no control, a good idea would be to act in the directions in which we can really do something.
For example, in terms of personal finances. Because money is a mean by which we have been taught that we can interact with the world around us.
So many of the things we need, or the problems we face daily, can be attained or even partially resolved with a certain amount of money, so we might be tempted to believe that ALL our problems would instantly disappear if we had enough money.
A totally wrong perception, for the most important aspects of life really have nothing to do with the notion of money.
But many other things really are related, which is why we are in danger of generalizing …

How can we increase our savings?

By definition, savings are the difference between what we get and what we spend. So, first of all, we could try to act on revenues. We all know that it’s not easy to increase our income, but at least we have the certainty that we know it. I mean, to a certain extent, we can rely on it.
Then, secondly, we can act on spendings. Of course it is not easy, but at least here it depends on us to a greater extent. And if we correctly correlate earnings and revenues, we’ll start to see how savings are gathered.

How can our savings help?

First of all, savings will bring a sense of control into our lives.
Beyond the countless things we CAN NOT influence in any way, the fact that we can act on our personal finances is a positive thing. And when this money control even produces results and we see savings as it accumulates, then we make clear progress towards increasing our safety.
But not only that, our economies influence our lives more directly.
A study made in the US showed that in the years of the last economic recession, 46% of those actively saving said that they were comfortable with their financial situation. Unlike them, 37% of those who did not save said they had to reduce much of their spendings to make it. Clearly, some people manage their money more efficiently than others.
The fact that you have some money set aside and, in fact, in order to live, you need a lower income than you have, it gives you the opportunity to keep your lifestyle even in unfavorable economic conditions. Due to the fact that the option not to put money aside for a certain period (or even to spend from existing economies) does not exist for those who are not accustomed to constantly saving, they will be more affected by any negative changes may occur at some point.
Those who make savings will be less concerned about unforeseen events and will have the ability to make it easier. What is even more important is that they know this, and that gives them a sense of security that no matter what may appear, they can do it.
Also, those who make savings set goals that they want to achieve. They know it’s more financially advantageous to raise money to go on vacation, for example, than to make a loan for that.
For them, savings are an integral part of their life, and the moment they reach their goal is a positive stimulus.
Unlike them, those who are not preoccupied with their economies, even if they get to put something apart, will do so because the fear of unpredictability, not because they are accustomed to do so.
Especially during recessions, economies help foreseeable people to be better prepared and less affected than others. And due to the fact that there will probably be other recessions in the future, maybe it would be a good time to think about your savings.

Also, as inflation is already becoming more and more clearly felt, maybe it would be a good idea to inform yourself about ways to invest your savings so that in the long run you can get profits that go beyond at least the rate at which your purchasing power decreases.

Please follow and like us:
error

5 criteria to identify the best investment for you

We are all interested in identifying a good investment, that’s for sure.
But some of us are not content with just that.
There are enough people who are looking for the absolute superlative and want to find out what is the “best” investment.
So, as far as investments are concerned, the notion of “best investment” – in general terms – simply does not exist!
Because in this area everything is relative and depends very much on the preferences and peculiarities of each of us.

In other words, it’s like going to a restaurant and asking the waiter to recommend you their best meal …
Obviously, he does not know your tastes and preferences, so he would not know if you like meals based on meat (and what kind meat) or vegetarian, if you want something more consistent or a salad would be enough. In the end, the decision is largely subjective because it depends only on your particularities.
Exactly the same is true of investment.

No one can tell you from the start what is “the best investment” for the simple reason that it depends exclusively on YOU.
However, there are some criteria that you can determine if a particular investment is or is not right for you.

Here are 5 criteria according to which you can determine which is the best investment for YOU:

1. The degree of risk of the investment

The first thing we think about a certain investment is its degree of risk.
Therefore, in order to know what kind of investment we are going to (and of what kind of investment to keep away) it is very useful to know our own risk profile.
For example, if we reject the idea of risk from the start, it is best to focus on the guaranteed investments, such as bank deposits and government securities. But if we are willing to accept a certain risk, but a small one, we have low-risk investment funds.
On the other hand, if we can accept capital markets fluctuations in hopes of achieving greater long-term profits, we can opt for investment in stock exchanges or different kinds of commodities.

2. The investment profit level

We must always keep in mind the reasonable profit level that a certain type of investment can realistically bring, in order to match the degree of risk of that investment.
Only in this way can we determine the risk / reward ratio for a particular investment and thus compare different types of investments.

3. Duration of the investment

It is very important to establish from the beginning what is the minimum time interval that we are willing to stay with that amount in a certain investment.
In this way we can match the duration of an investment with its degree of risk, so we will not to get into the situation where we have to withdraw that money at a time that is less favorable.
For example, for a short or medium term, usually the most useful financial instruments are those that are guaranteed or low risk. Because the particularities of capital markets or real estate are acceptable only if we are considering a long or very long term.

4. The amount invested

However attractive it may be at one time to invest in building a block of flats or a mall, this would probably exceed our financial availability.
So finding an investment that fits both in size and flexibility with our budget is more important than just considering the profit it can bring us.

5. Location of the investment

There may be enough types of investments that seem interesting to us, at least at first glance, but some may not be accessible to everyone.
For example, if we were interested – let’s say – investing in government securities issued by India (with an annual yield of nearly 7%), we will find it hard to find a broker that have them available in its offer.
So the physical location for a particular investment as well as its availability are important elements to consider when trying to find the best investment for us.

Please follow and like us:
error
error

Enjoy this blog? Please spread the word :)