Category: Finance & Capital

Few things feel worse than not having a secure financial life. But this isn’t an uncommon phenomenon. Only about 30 percent of people in the United States are in a situation that’s considered “financially healthy.” If you’re in the majority, you probably want to have more security in your life. Here are five ways to regain control of your personal finances.

Create Saving and Investing Goals

Chances are, there are some things you know you want to do in your life. Maybe it’s traveling the world, sending your kids to college, or just retiring on time. No matter where you want to go, you won’t be able to get there if you’re finances are a wreck. It’s smart to build saving and investing goals that coincide with your life goals. Creating timelines for all of these will help you stay accountable to yourself.

Create a Budget

Budgeting is one of the most important steps in regaining control of your financial situation. You need to see exactly where your money is going in order to start spending more effectively.

There are a few steps to building a budget. First, add up all your income and expenses. It’s key to note that these aren’t going to look the same each month if you have variable factors. This can be made a lot easier if you designate between fixed and variable income and costs. Once you’ve added up net cashflows, continue tracking your spending and make changes.

It should be noted that modern technology is making budgeting easier than ever before. People can now skip all the paperwork of budgeting, and manage money with an app. This can save you a ton of time, while also potentially improving accuracy. Some apps, such as Clarity Money, will even make suggestions to users based on their activity. If you’re not using your subscriptions, it’ll suggest you cancel them. There’s no reason to not utilize such a helpful free service.

Automate Recurring Payments

You probably have a lot of bills you need to pay every month. And if you’re like most people, you might not remember to pay them every single time. Setting up recurring payments is a great way to avoid late fees associated with late payments.

It’s important to note, however, that you might not want to do this with bills that fluctuate each month. For instance, your rent or mortgage payment is steady. Your heating bill is not. The drawback of automating payments is that it can lead to over-drafting charges if you don’t have enough money in your account.

Negotiate Bills and Don’t Over-Insure

Utility and other service providers want to get paid. If you’re struggling to make your payments each month, there’s a chance they might work with you to set a lower price. Try explaining your financial situation to the companies. They will be even more likely to listen if you do some price comparisons with their competitors beforehand.

You should do this same process with your insurance payments. Shop around to find a better rate. Present this to your current provider, and switch to somewhere else if you can save money. You also want to ensure you’re not paying for too much or too little insurance. Having too much means you’re going to be throwing away money. While have too little exposes you to the risks of a major event wrecking your life.

Sell Things You’re Not Using

One of the best ways to boost your finances is finding ways to generate cash flow. There are few quicker and easier methods than selling some of your things. There are many websites, such as eBay, that let you list your items for sale online. Getting some additional money from these sales can set you up for a much brighter financial future.

Reclaiming your finances can feel like a daunting process. It’s not impossible, however, if you take it seriously and follow though with your intentions. Having a stable, healthy fiscal life can make every other part of your life better.

As this is being written the average loan term for a new car is 65 months — or just over five years. Experts caution buyers to avoid going longer because of the risks extended loan terms entail. One of the most significant of these risks is owing more for the car than its market value — or becoming “upside down” in the loan.

It’s also just one of several ways that can happen.

Fortunately, getting out of an upside-down car loan is doable.

But it will cost you.

How It Usually Happens

If you make a small down payment on a new car, go for dealer add-ons or offer to pay more than the car is worth, you will risk becoming upside down in the loan on that car. You must also be careful to avoid accepting loans with high annual percentage rates of interest, as those can also push your loan amount beyond the value of the car.

Overlooking taxes and fees is another good way to end up owing too much. Additionally, if the car you’re trading in to get your new one has an outstanding loan you could push yourself in a negative equity position in your new car.

Your Best Options for “Righting” the Situation

When it comes to matters of finance, there are very few problems more money can’t resolve. In the case of a negative equity situation, biting the bullet and paying the loan off as scheduled will get you out of the situation eventually — it’s also one of the more costly solutions.

Making extra payments will satisfy the obligation sooner and reduce the amount of interest you’ll pay overall. Another way to do this is to make your car payments on a bi-weekly basis, as opposed to monthly. This will give your lender an extra payment each year with minimal impact on your monthly budget.

If the loan is pretty young, try to refinance into a more favorable one. This can sometimes be done even with credit problems. The interest charged on bad credit car loans varies by lender, so look for one willing to lower your present rate to get your business.

Selling the car to a private party can get you more than any dealer will offer. When you find a buyer, pay the difference between the sale price and the loan amount out of your pocket to satisfy the obligation.

Whatever else you do, the absolute worst method of getting out of an upside-down car loan is rolling the negative equity into the financing of a new car. That’s just kicking the can farther down the road, and it will be way bigger when you need to kick it again.

Choosing the Best Strategy

You must determine how much more you owe than the car is worth to help you decide which of those ideas is best. Value guides at KBB.com and NADA.com will help you find the car’s fair market value.

With that information in hand, contact your lender and ask for the loan payoff amount as of the first day of the upcoming month. Subtract the value of the car from the number they give you to calculate your equity position.

If it’s negative, but the numbers aren’t too far apart, selling the car and paying off the difference might be the best way to go. If you can’t do this comfortably and you have a very high interest rate, refinancing might be the move instead.

Whatever it turns out to be, examine the situation carefully to see how you got into this position and do not make the same mistakes again.

Credit card debt increases every day that the debt is outstanding. Interest is calculated on a daily basis; so the longer you take to repay it the more it’s going to cost you. However, if you put all of your liquid cash toward debts, what happens if something comes up for which you need to make a major withdrawal?

Meanwhile, U.S. credit card debt has reached an all time high, as some 40 percent of Americans say they couldn’t cover an unexpected expense of $400.

So, is it better to have an emergency fund or pay off debt?

Paying Down Debt

The biggest reason to pay off debt first is the one we listed above. With credit card companies calculating interest on your average daily balance, you’ll save a lot of money if you pay off your debt as soon as possible.

Further, the lower your debt, the better your credit score will be. One of the determining factors of your credit score is the amount of money you owe in proportion to the amount of credit to which you have access. The less you owe in proportion to your credit limit, the better the risk you appear to be to lenders.

Further, debt can often get out of hand and consume larger and larger chunks of your take home pay. In situations such as these, it’s a good idea to consult a firm like Freedom Debt Relief and let them help you develop a plan of attack to get your debt back in check.

Creating an Emergency Fund

Life happens and with that, bad things could happen to good people. Jobs are lost. Accidents and illnesses occur. Pets get injured. Appliances break down. Roofs leak. Pipes burst. In short, all sorts of things happen that can saddle you with large unexpected expenses.

Most financial experts recommend having at least three to six months of your monthly expenses set aside in liquid cash (like a savings account or some other financial instrument you can access quickly without penalty) to cover such emergencies.

Furthermore, if you don’t have the cash on hand because you’ve been putting all of your money towards eradicating obligations, you’ll have to go right back into debt to resolve the situation.

So Which Comes First?

Simply said, neither and both come first.

In other words, the best play is to do both simultaneously. You have to hedge your bets. Relying solely upon a credit card to deal with emergency situations can be outrageously expensive as well as detrimental to your credit rating.

What’s more, you’ll be hosed if you’re close to your limits and don’t have enough credit to absorb the situation. Meanwhile, if you’ve been putting cash away for a rainy day, you’ll be in a better position to bargain your way through situations. All things being equal, the best move is to build the emergency fund first. However, you can’t overlook that ever increasing obligation credit card debt represents. Nor can you turn a blind eye to the fact that things often happen when you least expect them to do so.

Take stock of your income and measure it against your expenses. Look for ways to move things around so you can save even as you pay off your debt. As you develop your spending plan, you may find you’ve been spending on a lot of items more properly classified as “wants” rather than “needs”. Dialing back on those will help you do both. If things are really tight, look for a side hustle, a part time job, or scour your home for things of value you can sell that are just languishing in your closets and your garage.

With creative thinking and determination, you can accomplish both.

If it is true that the only two things in life you can depend on are death and taxes, there is one more we can add for small business owners in the UK: VAT. UK consumers pay VAT on just about everything they purchase. As such, VAT is a normal part of doing business here.

The good news is that VAT doesn’t have to be all consuming. There are ways to address it and still maintain your business sanity. There are certain strategies you can pursue as you maintain compliance and keep your cash flow positive at the same time. Actually, it really boils down to the three key strategies explained below.

1. Choose Standard or Flat Rate

The first strategy is to figure out whether standard VAT or flat rate is better for your business. Let’s start by establishing the fact that there is a certain threshold that establishes whether or not a business is required to register for VAT. That threshold currently sits at £85,000.

Next, companies register for VAT under one of two scenarios. The first is a scenario in which the company acknowledges its revenue generated from non-exempt goods and services over the last 12 months has eclipsed the threshold. The second scenario dictates that, although sales have not yet reached the threshold, they probably will within the next 30 days.

That leads us to the question of which scheme to register for. The key difference between the two is how a company deals with its own VAT purchases:

• Standard VAT – Under the standard scheme, businesses charge their customers VAT on all non-exempt purchases according to established rates. Then turn around and pay that money to HMRC. They can also reclaim some of the VAT they have paid as a result of operating their businesses.

• Flat Rate – Under the flat rate scheme, companies pay a fixed rate of VAT determined by the type of business they are involved in. They cannot reclaim VAT on their own purchases except under special circumstances governing capital assets worth more than £2,000.

The primary advantage of flat rate VAT is that the business pays less to HMRC with every tax return. Furthermore, the business gets to keep the difference between what it collects and what it pays. This makes flat rate a better deal for small businesses that do not expect to pay a lot of VAT themselves.

2. Separate VAT Money from General Receipts

This second strategy is one that far too many businesses fail to practice. It is a strategy that dictates all VAT monies be separated from general receipts. In other words, the extra money charged to cover VAT should not be considered revenue. Look at it as tax money you have been given temporary stewardship over. Put it away in a separate account so that it is there when the tax bill comes due.

The highest VAT rate in the UK is 20%. That means for every £1.00 in purchases of qualifying goods or services, the merchant actually collects £1.20. The smart business owner puts £1 in with general receipts and the other £0.20 in a separate account. This strategy guarantees that the money to pay VAT taxes is always available when needed.

If something does go wrong and the money is not there for whatever reason, the business owner should at least think about taking out a Loan To Pay Tax Bill obligations. A VAT loan can be had as a short-term loan with very reasonable rates. Loan charges are offset by the savings in tax penalties.

3. Don’t Wait to Register

Finally, business owners should not wait to register for VAT if they have any expectation of actually having to pay it anyway. You may run a company with annual qualifying revenues of just £60,000. You have not registered for VAT as of yet because you are not required to by law. That’s fine. But because you are not registered, you also cannot reclaim any of your own VAT costs.

Being able to reclaim VAT reduces a company’s overall operating expenses. As such, it increases cash flow, which is critical for small businesses trying to grow. This suggests that if growth is part of your long-term strategy, you will eventually be paying VAT one way or another.

Registering now will allow you to reclaim some of the VAT you pay in pursuit of that growth. Assuming you are investing quite a bit in your company’s future, you might also be paying quite a bit of VAT. Doesn’t it make sense to register now and get some of that money back?

Of course, registering for VAT means your prices will automatically go up. And yes, that may cost you some business. It is not likely to harm your company in the long run, though. UK consumers are so used to paying VAT that it will probably not faze them.

VAT is a fact of life for UK business owners. Hopefully the three strategies you read about here will help you address VAT in such a way that you control it rather than it controlling you. That is the way it should be.

Renting a commercial space makes up the largest of many small businesses’ monthly expenses. The location one chooses for their business significantly impacts the overall success of the organization. Factors such as accessibility from major roadways, the amount of foot traffic the location offers and local zoning codes and ordinances all play a role in determining the best commercial location to grow a business successfully.

Finding the right commercial location takes time and care. No small business owner wants to get trapped in a lease for a space that fails to suit their unique needs or proves too expensive. When determining a location, business owners interact with various types of landlords, and do well to proceed with caution to build a mutually beneficial business relationship for landlord and tenant alike.

Different Types of Landlords

Five primary types of commercial landlords exist, and which one best fits a small business’ needs depends primarily upon the nature of their daily business operations.

The first type of commercial landlord, the mom-and-pop variety, generally own only a few properties in their investment portfolio. They take great pride in their properties, screen prospective tenants carefully and consider the personality of the lessee and the mission of their organization, as well as the potential profits.

One benefit includes having only one person or couple to deal with when negotiating rent, leaving more wiggle room for those on tight budgets. Also, the personal level of the relationship business owners can establish with this kind of landlord leads to opportunities to create a friendlier workplace by allowing employees to occasionally bring pets to work or creating an onsite childcare room.

Family investors make up the next group of landlords. Like mom-and-pops, they know their properties well and take great pride in them, with the difference being the size of their portfolio. Family investors amass a multitude of properties often handed down from generation to generation. While they will work with lessees on things such as improvements, since they’re managing the family fortune, they also possess strong business acumen and may require large down payments to protect their portfolio.

Property management companies, while not technically property owners themselves, manage many property portfolios, meaning they can offer a broader range of options to prospective tenants. However, most management companies operate within strict rules, meaning companies leasing through them must have substantial capital and an above-average credit rating.

Those beautiful high-rises replete with all the bells and whistles generally fall under the purview of real estate developers. These properties feature the most luxurious amenities, but at a price point to match. The high rental price tag of these properties more or less reserves them for the high rollers of the business world.

Finally, real estate investment trusts, or REITs, exist to allow investors to diversify their portfolios by including real estate. With this type of landlord, business owners never deal directly with an individual investor. Since the goal of these entities is maximizing cash flow, like real estate investors, they generally charge high rents.

Tips for Negotiating with Different Landlords

Each type of landlord has unique needs, so when a business owner approaches them to negotiate, different tactics lead to getting accepted as a tenant of that perfect commercial location.

When negotiating with mom-and-pop landlords or family investors, the personal touch means as much as financial records. Business owners should bear in mind these landlords often have a sentimental attachment to the property in addition to a business interest, especially in the case of mom-and-pops, so landlord and tenant must agree to build a friendly relationship in addition to a mutually beneficial business arrangement.

When dealing with property management companies, business owners never deal directly with the property owner, so this type of relationship requires impressing the management company with strong business financials to score that perfect retail or office location. The same goes when dealing with real estate developers and REITs, the difference being that when the business owner works with a real estate developer, they may have more initial opportunities to request personalized options in the build.

Consider Using a Tenant Advisor

Tenant advisors know the commercial properties in their area like the backs of their hands. These experts provide an invaluable resource, not only when it comes to finding the right location, but also in negotiations over rent price and expansion options.

Every small business has different needs, and leasing the correct company location can lead to long-term financial success. By knowing who they’re negotiating with, business owners and tenant advisors can locate properties that truly fit the unique needs of their organization.