What Can Bring an Economic Boom to India?

How bad is bad? Or for that matter how much sugar is there in sweetness, really? Perhaps we rarely stop to think. Bad or good are more or less absolute to us, and we often refrain from probing further into their causes. Personal health is one area however, which we do not leave to chance.…

How bad is bad? Or for that matter how much sugar is there in sweetness, really? Perhaps we rarely stop to think. Bad or good are more or less absolute to us, and we often refrain from probing further into their causes. Personal health is one area however, which we do not leave to chance. So why should we not do the same about our financial and economic health?

When I speak about 'our' financial and economic health, it is all encompassing, from personal finance to the economy of the country at the macro level. Let us allow ourselves a glance around the current economic events.

· The economy of the country is taking a beating. The economic fundamentals are in a deplorable condition.

· The rupee is in a state of unhindered free-fall and inflation is moving up faster than a shooting star.

· GDP growth is experiencing turmoil and corporate performance is at best average.

· The stock market is uncertain and sluggish and is experiencing tremors every now and then.

· The employment situation is not at all encouraging as there has been across the board job cuts all around.

· EMIs' are moving in tandem with inflation and fuel costs like a luxury item.

So what does one do about the economy? Despair? Delve into the depths of absolute pessimism?

Or should we diligently explore the silver linings around the ominous clouds of gloom. Newton's third law of motion “every action has an equal and opposite reaction” is something which can inspire us to look for the good evolving after the bad. Let us look at some potential developments which can bring back the days of “Shining” to our economy.

I. Good Monsoon: A good monsoon is a prelude to the prospect of a good harvest. A bountiful crop basket will ease the pressure on food prices and help food inflation to find its feet. This will ostensibly lead to a fillip in economic growth.

II. Global Economy: US economy is slowly trudging back to normalcy and the European economy has also turned around after keeping people around the globe on tenterhooks. This is reflected in the smiles appearing across the IT sector and the exporters are sharing the smile too, thanks to better prospects for exports.

III. China's Slowdown: China has been the frontrunner in investment-fueled growth. Slowly the law of benefits has begun to catch up with this global giant and there is a marked slowdown in its growth pattern. This has cleared the stage for the launch of a growth potential which is more consumer driven and the direct fallout of this phenomenon is the softening of the prices of consumer products. This will no doubt bring smiles on the faces of the great Indian consumer too.

IV. Petroleum Prices: Petroleum prices have been the single most disconcerting element in the overall economic crisis. Policy makers anyway would give anything to make this aberration vanish. Perhaps their wishes have been granted. Improvements in the extraction methods of shale gas have led to the reduction in the dependence on petroleum by the US. The natural consequence of such an event is the correction of the global oil prices, thus easing the pressure on the government's subsidy bill leasing more money for other developmental work.

V. Leadership Change: One of the major concerns expressed by the economists and the industrialists is on the inept handling of the economic situation by the government leading to this tightrope situation. A new era could possibly bring in fresh ideas and initiatives to make the economy turn around and become a robust entity among the global economies. A concerted effort from all quarters will certainly bring in gains for the economy and with the elections drawing near people have enough reason to be optimistic about the future of the Indian economy.

There is no lock without a key. There is no problem without a solution. Let us defeat this economic problem with great confidence.

Equity Financing: The Accountants’ Perspective

Growing up it has always been said that one can raise capital or finance business with either its personal savings, gifts or loans from family and friends and this idea continue to persist in modern business but probably in different forms or terminologies. It is a known fact that, for businesses to expand, it's prudent…

Growing up it has always been said that one can raise capital or finance business with either its personal savings, gifts or loans from family and friends and this idea continue to persist in modern business but probably in different forms or terminologies.

It is a known fact that, for businesses to expand, it's prudent that business owners tap financial resources and a variety of financial resources can be utilized, generally broken into two categories, debt and equity.

Equity financing, simply put is raising capital through the sale of shares in an enterprise ie the sale of an ownership interest to raise funds for business purposes with the purchasers of the shares being referred as shareholders. In addition to voting rights, shareholders benefit from share ownership in the form of dividends and (hopefully) ever selling the shares at a profit.

Debt financing on the other hand occurs when a firm raises money for working capital or capital expenditures by selling bonds, bills or notes to individuals and / or institutional investors. In return for lending the money, the individuals or institutions become creditors and receive a promise the principal and interest on the debt will be repaid, later.

Most companies use a combination of debt and equity financing, but the Accountant shares a perspective which can be considered as distinct advantages of equity financing over debt financing. Principal among them are the fact that equity financing carries no repayment obligation and that it provides extra working capital that can be used to grow a company's business.

Why opt for equity financing?
• Interest is considered a fixed cost which has the potential to raise a company's break-even point and as such high interest during difficult financial periods that can increase the risk of insolvency. Too highly leveraged (that have large amounts of debt as compared to equity) entities for instance often find it difficult to grow because of the high cost of servicing the debt.
• Equity financing does not place any additional financial burden on the company as there are no required monthly payments associated with it, since a company is likely to have more capital available to invest in growing the business.
• Periodic cash flow is required for both principal and interest payments and this may be difficult for companies with insufficient working capital or liquidity challenges.
• Debt instruments are likely to come with clauses which contains restrictions on the company's activities, preventing management from pursuing alternative financing options and non-core business opportunities
• A lender is entitled only to repayment of the agreed upon principal of the loan plus interest, and has to a large extent no direct claim on future profits of the business. If the company is successful, the owners reap a greater portion of the rewards than they would if they had sold debt in the company to investors in order to finance the growth.
• The larger a company's debt-to-equity ratio, the riskier the company is considered by lenders and investors. Accordingly, a business is limited as to the amount of debt it can carry.
• The company is usually required to pledge assets of the company to the lenders as collateral, and owners of the company are in some cases required to personally guarantee repayment of loan.
• Based on company performance or cash flow, dividends to shareholders could be postpone, however, same is not possible with debt instruments which requires payment as and when they fall due.

Adverse Implications
After these merits, it will be so misleading to think that equity financing is 100% safe. Consider these
• Profit sharing ie investors expect and deserve a portion of profit gained after any given financial year just like the tax man. Business managers who do not have the appetite to share profits will see this option as a bad decision. It could also be a worthwhile trade-off if value of their financing is balanced with the right acumen and experience, however, this is not always the case.
• There is a potential dilution of shareholding or loss of control, which is generally the price to pay for equity financing. A major financing threat to start-ups.
• There is also the potential for conflict because sometimes sharing ownership and having to work with others could lead to some tension and even conflict if there are differences in vision, management style and ways of running the business.
• There are several industry and regulatory procedures that will need to be adhered to in raising equity finance which makes the process cumbersome and time consuming.
• Unlike debt instruments holders, equity holders suffer more tax ie on both dividends and capital gains (in case of disposal of shares)

Decision Cards – Some Possible decision factors for equity financing
• If your creditworthiness is an issue, this could be a better option.
• If you're more of an independent solo operator, you might be better off with a loan and do not have to share decision-making and control.
• Would you rather share ownership / equity than have to repay a bank loan?
• Are you comfortable sharing decision making with equity partners?
• If you are confident that the business could generate a healthy profit, you might opt ​​for a loan, rather than have to share profits.

It is always prudent to consider the effects of financing choice on overall business strategy.

The Importance Of Financial Means

They say money can not buy happiness. That is not entirely true. In today's world in America and all around the globe, money is the predominate means to attain the necessities of life. Whether to buy food, pay for shelter, or just about everything associated with existing in today's world all depends on the availability…

They say money can not buy happiness. That is not entirely true. In today's world in America and all around the globe, money is the predominate means to attain the necessities of life. Whether to buy food, pay for shelter, or just about everything associated with existing in today's world all depends on the availability of having enough money to do so. In many instances the lack of financial means puts individuals in very stressful situations. We can conclude having the financial means could very well equate to a person being something happy. This is because when one has financial support behind them the stress level should dissipate. Were not saying that this is true for all individuals but, having money puts a person in a capacity to be able to use that resource to reduce stress associated with not having enough money to pay for such essentials as housing, food, or medicine.

In our fast-paced world where the basic necessities of life are becoming more expensive than ever, one would think that all the technological and scientific marvels at our disposal would have reduced many of those costs. That is not the case today. In fact, in Flint Michigan for example, access to fresh, clean, safe potable water is actually money driven. But it is not only those in Flint, Michigan that are having water woes; all across the country water rates continue to spike. And, like everything else, it is the poor that continue to suffer just because they lack financial support.

It is a very sad commentary for our times when so much wealth is hoarded by so few. Much of the world's anguish would have avoided if there was a lot more balance in communities everywhere. Someone once asked what money can not buy. When we say it can not buy happiness or health, think again. Just look at the mortality and obesity rates of the poor compared to those few at the top of the income ladder. Also, look at the emergency room where millions of people flock to just for minor health issues. They are there because they can not afford health insurance. Money, or lack of, plays a vital role in every one of these issues.

Without access to living wages society especially in the United States today breeds a whole slew of problems. It was Dr. Martin Luther King that stated giving people the financial means like establishing a universal income for all would reduce poverty, reduce crime, and pretty much ease the burden of parenthood. In fact, the greatest economic boost for any society comes from that society being able to achieve the “Williams Theory of Economic Evolution.” That being having more people with enough disposable income to spend, pay down debt, and to save at least 10 percent of that income.

We have to always remember that money is basically a tool not just for the wealthy but for everyone. Used wisely, it can be an invaluable asset and if used carelessly will cause more problems. But when our society, where the majority of the population does not have enough financial resources at their disposal, we see the results. And they are not good either. In every major city across the country, the layout of the poor, the impoverished, and the destruction are painful reminders of how out of balance our whole society is today.

The health of any nation depends on the health, vitality, and overall well-being of its citizens. When the majority does not have anyone of these attributes, that nation experiences a decline. In the United States today, we are in decline just because of the awful imbalance of our society. The wealthy are already getting wealthier while the majority of Americans are getting poorer. If this trend continues, the fate of the United States is in grave danger.

Now the question is how to achieve that balance in our society where millions of Americans will have the financial means to live a healthier and productive life. It starts with what Dr. King said many years ago about establishing a Universal Income. That along with the much needed governmental reforms that are detailed in National Economic Reform's Ten Articles of Confederation. Only by implementing these reforms will the people of the United States be able to live healthier and and more productive lives. In doing so will secure this nation's future.

How Long Is ‘Long Term’ in Equity?

'Being Dead' as an Investment Strategy Fidelity Investments recently conducted a study in the US to find out what kind of investments provided the best returns. The results were starting for anyone who feels is a smart investor. The study revealed that the highest returns were from investors who had completely forgotten about their investment…

'Being Dead' as an Investment Strategy

Fidelity Investments recently conducted a study in the US to find out what kind of investments provided the best returns.

The results were starting for anyone who feels is a smart investor. The study revealed that the highest returns were from investors who had completely forgotten about their investment for years, or even decades.

A good proportion of these investors who were enjoying amazing returns, had actually died a long time ago. The study, therefore, concluded that the most profitable strategy may be to do exactly what a dead person would do – which is nothing.

Why should we define 'Long Term'?

A long term investment is often associated with less risk. We just understood from the above study that the longer the term, the less the risk – since volatility is averaged out over a period of time.

To augment our statement, just have a look at the last 5 year returns of BSE Sensex:

9%, 42%, -9%, 16% and 10%

The overall annual returns stand at 13%

Now, 13% is a fabulous annual return on your investment – but the variation (volatility) is high. During any short period, you could face poor returns – or even losses (as in Year 3). These poor returns are (over) compensated by a great occasional phase (as in Year 2). As you increase the term, risk will keep reducing. But how long should we keep increasing the Term of investment? For sure, we do not want to die just trying to get good returns. We want to get the returns and use them too – in this life span. Is not the purpose of an investment to get the returns and use the money as well as the returns arising from it? What use is the money if it just keeps growing and you die of old age? The end purpose of money and investments was always to spend it optimally, so as to facilitate happiness in our life.

Therefore, to strike a balance, we must define a Long Term investment tenure where we have a fairly reduced risk and we can also use the investment and the returns for the purpose it was intended to. Thus, we should be able to reasonably answer the question, “How long is long term in Equity?”

How does our Law define 'Long Term'?

Tax Laws are often quite strange, to say the least. IT Act in some countries define Long Term on equity investments after a period of 1 year (12 months). So, does that mean that any equity investment done for more than a year is really long term and therefore, reliably quite safe?

Not really!

Ironically, on the other hand, any investment made in debt based funds are considered as long term from a tax perspective only if you stay invested for at least 3 years. So, are we saying that debt investments are more risky as compared to equity investments – and therefore need a longer duration to average out the risk?

It is actually the reverse. Debt based investments are less volatile and therefore less risky as compared to Equity investments.

So, we can not go by the definition of tax laws to define the right tenure of any Long Term Investments .

Defining 'Long Term' logically

If you analyze the data for a typical mutual fund with a multi decade history over all the possible 1 year periods , you will find that:

a) Maximum returns are 160% (best 1 year return ever)

b) Minimum returns are -57% (worst 1 year return ever)

If you analyze the data for a typical fund with a multi decade history over all the possible 2 year periods , you will find that:

a) Maximum returns are 82% (Annualised best return ever – over 2 years period)

b) Minimum returns are -34% (Annualised worst return ever – over 2 years period)

If you analyze the data for a typical fund with a multi decade history over all the possible 3 year periods , you will find that:

a) Maximum returns are 63% (Annualized best return ever – over 3 years period)

b) Minimum returns are -18% (Annualized worst return ever – over 3 years period)

If you analyze the data for a typical fund with a multi decade history over all the possible 4 year periods , you will find that:

a) Maximum returns are 59% (Annualized best return ever – over 4 years period)

b) Minimum returns are -8% (Annualised worst return ever – over 4 years period)

If you analyze the data for a typical fund with a multi decade history over all the possible 5 year periods , you will find that:

a) Maximum returns are 54% (Annualized best return ever – over 5 years period)

b) Minimum returns are 4% (Annualized worst return ever – over 5 years period)

This means that the minimum annualised returns you could have made annually if you would have invested in the worst possible fund would have been 4%.

Do not go by the dwarf-ness of 4% CAGR. Try and understand the significance of this statement.

Here is the crux. There was no feasible way that you could have made any loss in equity market if you would have stayed invested for 5 years – since your returns were going to be between 4% and 54%.

Let us just go one step ahead.

If you analyze the data for a typical fund with a multi decade history over all the possible 10 year periods , you will find that:

a) Maximum returns are 30% (Annualized best return ever – over 10 years period)

b) Minimum returns are 13% (Annualised worst return ever – over 10 years period)

Wow !! A worst case annual returns of 13% !!

What else you want equity investments to deliver to you? Of course, that is if you stay invested for 10 years.

The above statistics clearly puts the minimum term of investment to be 5 years and the optimum term of investment in equity to be somewhere between 5 and 10 years ie 7 years and above.

7+ years is an investment term wherein you get good enough returns with significantly less risk.

Therefore, in equity investments – long term is not a vague term.

It is 7 years + investment horizon – also validated by 7 year equity cycles.

How To Earn a Pretty Profit With Diamond Investing

People who are looking to invest and make money often do so by heading to the stock market. There is a definite risk in going that route, especially in recent years when the markets have been so volatile. If it's a safer way to profits that you are looking for, investing in diamonds is the…

People who are looking to invest and make money often do so by heading to the stock market. There is a definite risk in going that route, especially in recent years when the markets have been so volatile. If it's a safer way to profits that you are looking for, investing in diamonds is the way to go. Investing in diamond is an excellent way to recover market losses, while also creating profits that are then available for other investing opportunities.When investing, you are essentially using your money to try and gain profits without any undue influence from the people or companies in which you are investing. There are definite terms and conditions in place in each transaction, which may differ in each investment. It is the type of work called for in the investment that plays a role in the agreement or contract set forth by the individual or company.

Let's now take a moment to talk about how your investments are affected when a company starts to suffer losses. Companies seeking money from investors usually do so when they are in a tight financial spot that requires them to seek financial help. They turn to the general public when looking for that financial assistance. In these types of situations, the investments made are often in the form of shares, investment bonds, or debts, with the investor receiving a share of profits if the financial tide turns for the company. These investments are a loan of sorts, with the advantage to the company being that they do not need to pay interest. Each investor, or shareholder, receives dividends and profit share that is dependent on the type of contract signed at the time of the investment. In the case of diamond investing, the investor receives a diamond in return for giving money to the company. They do not receive any interest or profits from the company after that transaction, but they are free to sell the diamond for a profit when the value of diamonds on the open market is on the rise.

One of the great benefits of owning a diamond, besides the status and luxury of the gem, is that it will never see its value decrease, even in cases where the demand for diamonds decreases during a particular period. The supply and demand elements that so often drive the stock market are simply not in play with diamonds, making this investment one where you simply can not lose. Given the status and luxury of diamonds, which are very often held by kings and queens of many different countries, your investment will be one that is very wise indeed.

The diamond market never experiences a decrease in value. One thing to be aware of is that there are two kinds of diamonds out there: miners across the world dig for natural diamonds, but there are also some synthetic varieties that are hand-made in a laboratory, with the synthetic diamonds often on the market alongside the natural stones, which can help drive inflation. Diamond companies fall under the category of either a public or private limited company, with that distinction usually dependent upon the part of the world where the company resides. Some companies also fall into the semi-government category, which is where the company is owned in part by the government and in part by the residents of the country.

How To Find The Right Financial Advisor For You

Finding the right Financial Advisor for you can be a difficult task. After all how on earth do you know who to trust? And just because someone might be trustworthy do they really have all the answers to the questions that you need help with? What level of experience do they have? And more importantly…

Finding the right Financial Advisor for you can be a difficult task. After all how on earth do you know who to trust? And just because someone might be trustworthy do they really have all the answers to the questions that you need help with? What level of experience do they have? And more importantly are they really operating in your best interest or are they just looking out for themselves? As if these were not enough concerns you also have to worry about how ethical your advisor is. You do not want to find yourself working with the next Bernie Madoff who runs off with all of your money or is using your valuable assets to fund his or her next big Ponzi scheme. So how do you sort through all of the options and find the right Advisor for you?

Let's look at 3 things to pay attention to when selecting the right Financial Advisor for you and your family. First how do you know they are legitimate, second how do you know they have your best interest at heart, and third how do you know they will be a good fit for you? Let's explore all three of these questions in some detail to help you get the help you need.

So how do you do your due diligence and make sure an advisor you are thinking of working with is actually a legitimate Financial Advisors with verifiable experience and up to date licenses? The first place you might want to check is a web site called Broker Check. You can just search Broker Check to find the official website. This website has a tool to research the background and experience of financial brokers, advisors and firms. Broker check can tell you immediately whether a person is registered as required by law to sell securities offer investment advice or both. Broker check also gives you a snapshot of an Advisor's employment history, licensing information and regulatory actions, arbitrations and complaints. Would not this be good information to have before entering into a relationship with an Advisor?

Next it's important to discern whether or not an Advisor has your best interest at heart or not. One way to help you figure this out is to ask your advisor if he or she is acting as a Fiduciary? I know that's a three dollar word but all it means is that they are legally obliged to put your interest ahead of their own and distinguish any conflicts of interest that might interfere with that goal in advance. For example, if a Fiduciary is going to get paid a commission on a product that he / she is recommending to you they are obliged to distribute that to you before you purchase. Another helpful thing to look out for is to look for an Advisor that asks to see more than your financial statements. Before they start to work with you they should be asking to see your tax returns, your legal documents, and your insurance contracts. If the only thing they want to see or talk about are your investment statements then how can they really take your whole situation into account when making recommendations?

Finally, you should never feel any sales pressure to move forward or make a hasty decision. A professional Advisor will not use old school sales tactics to gain you as a client. You may need to meet with more than one Advisor and just see how you feel at each meeting. If you are feeling pressured or uncomfortable in any way than that is likely not the right Advisor for you. You should get a sense that the Advisor in question is asking good questions with the goal of helping you to make an educated decision about your money that feels right to you. If you are getting any kind of feedback that he / she is more interested in making a sale than doing the right thing than you should probably move on to someone else.

Certainly there are other other factors that you could consider such as the Advisors specialty and even the abundance to your home town. However if you start off with the basics of doing your due diligence, making sure they are concerned with putting your interests first, and deciding if you have a good feeling about him / her than you are off to a great start to finding the right Financial Advisor for you. Happy Hunting!

How To Save Money? Heres’ 25 Money Saving Tips To Work On

How to save money? Probably searched by lots of people on Google, no matter what's his / her financial stature is. Earnings and utility differ from man to man, but there is hardly any person, who's not interested in knowing the ways to save money. Interestingly, it's the human ingenuity that lets him find out…

How to save money? Probably searched by lots of people on Google, no matter what's his / her financial stature is. Earnings and utility differ from man to man, but there is hardly any person, who's not interested in knowing the ways to save money. Interestingly, it's the human ingenuity that lets him find out the best way to save money out of his own financial position.

How to Save Money?

If I ask you how to save money? Either you would be confused or overflowed with hundreds of money saving ideas. There are some common ways to save money applicable to the masses and there are some exclusive money-saving ideas reviewed and applied to you only. Things are good and effective so far as you apply your tips and tricks properly. Here I am enlisting 25 realistic and simple money saving tips for the readers. Please note that all these money saving tips may not have the fullest implications in one's life, but a few out of the money saving ideas listed below have a qualitative impact on your pocket.

25 Realistic Money Saving Tips

1. Accept payments by cheque or online:

This is one of the best ways to save money. It's a human tendency to spend more with cash rather than bank account. Research shows that a person finds it more inconvenient to withdraw money from the bank or buying goods with cards than by using hard cash. So, this is the best way to save money for them who have an irresistible tendency of spending cash money.

2. Go for exchange programs:

Before buying a new durable or capital goods like electronic gadgets, appliances, go for selling the used one. There are many sites that assist you in selling your old products through advertisements like OLX, Quikr etc. Now the product sellers are too offering exchange programs. Online shopping sites like Amazon, Flipkart etc. are giving opportunities to their buyers to exchange their old ones with the new product. Selling or replacing the old products absolutely reduces the cost price of the new one.

3. Considering buying cars at the end of the month:

If you are planning to buy a car, this is the best way to save money. How? See, in most of the cases in the last week of the months, the sales representatives and car dealers are under pressure to achieve their targets. They go desperate in selling cars to customers offering good discounts or selling car accessories free of cost or at a much-discounted price. This way you get your car at the most advantageous costs.

4. Do not jump the gun:

If you see a product billboard or lucrative offers, do not go for the buy immediately. Hold your mind and think whenever you need it? If it's your requirement, what's your budget? By holding your buy for a day or more you may be able to do the product's cost-benefit analysis. This way you can save your money on unneeded purchases.

5. Go by the list while shopping:

Whenever you go shopping, prepare a list beforehand about your requirements. You may wonder how to save money by going with a list? If you do shopping by list, it is possible to stick to the budget. Moreover, the list helps you to do the shopping more quickly than without a list. A study shows, if you shop quickly, the chances are high that you will not go for unnecessary buying.

6. Avoid outing with friends, invite them:

Many of us face this problem. When you go for an out with friends, it's unsocial for you to abstain yourself from contributing. Moreover, taking foods and drinks at restaurants and bars are no way cheaper than you have it at home. So, instead of going to the restaurants and pubs, invite your friends to your home. This is the best way to save money who are interested in maintaining social networks as well as concerned about how to save money.

7. Use LEDs:

I'll keep this within top money-saving tips. Rather than using incandescent lights, you should go for CFLs, LEDs. They are high power efficiency and reduce power bills considerably. These new technology lights even have a longer life than the traditional ones. By using LEDs and CFLs, you can save both from maintenance and durability.

8. Do periodical maintenance:

If you are using multiple electronic appliances like ACs, Washing Machines, Water Purifiers etc. it's better to render periodical maintenance. The same should be with your car too. By conducting regular maintenance, you have to incur maintenance charges which are much smaller than any major repairing or overhauling charges. At the same time, if your appliances or cars are under periodic supervision, their longevity and efficiency level also improves.

9. Sell your old books:

This money saving tips is especially for the students and the parents who children have passed out and have a pile of books covering a significant space in their room and want to evacuate them. There are a number of sites that buy used or old books from us and pay accordingly. One of such sites is BookScouter. This searches the best match buyer for our old books.

10. Rent out your extra space:

If you have a big house and leaving a part unutilized, it's advisable to rent the same out and earn some extra money to meet household expenses. There are some companies that take your property on agreed terms for a specific period and convert into a homestay. Some of these companies are Airbnb, Oyo Rooms etc.

11. Take tiffin from home:

If you want to learn the ways to save money , this is one of the effective ways to save money. First of all, your saving starts when you take tiffin to your place of work or education and avoiding canteen or outside foods which are definitely costlier than your homemade foods. Next, savings is in terms of your health. By abstaining from outside foods, you are indirectly reducing your medical bills.

12. Use public transportation or carpool:

If your circumstances permit, it's a good move to go through public transport. Using a public transport is way cheaper than using private cars. Moreover, if you and your neighbor or your college have a common route to the place of work, carpool is a good option. Things can be done on a rotational basis. This saves money as well as the climate.

13. Pay your debts on time:

Try to pay your debts on or before time. Be it credit card bill or loan interest, paying on time not only saves you from additional interests and penalties but gives you a high creditworthiness. You can also make arrangements with the bank for automatic debt payments. This is also a great way to save yourself from a debt-trap.

14. Consume less meat:

What? Yes, you read it right. But, how to save money by consuming less meat? Well, this is simple. If you take less meat in your food or goes vegan, the direct impact is in your pocket. Animal proteins are costlier than vegetables. But a much bigger impact shows on your health. Researchers found that large animal protein take in our foods have an adverse effect on our health. A non-vegetarian is prior to more decrease in comparison to a vegetarian. And nowadays health issues cost us much.

15. Withdraw from same bank's ATM:

This is a simple but effective money saving tips to follow. As you know, if you withdraw from other banks ATM (where you do not have an account), after a certain number of transactions the ATM bank charges extra fees per transaction. So, whenever possible, do ATM transactions with your home bank only.

16.Try to buy air tickets from the company's site:

Whenever we travel by flights we do a comparison over the internet reading freights and services. There are many online traveling sites that give you the freedom to compare flights of different companies on the same platform. But I would suggest that rather than buying the tickets on their sites it is advisable to go the native company's sites. The charges would be certainly lower than the previous one.

17. Save at home:

Make a piggy bank at your home and save whatever possible on a daily basis. Even ask your children to do the same out of their pocket money earnings. It inculcates the saving habit in you and your children and creates a fund with the passage of time, helpful at the time of your emergency.

18. Find a roommate:

If you are living in a rented house and single, then this would be the best way to save money. If you have a roommate you can not only save your room of room rents but other household expenses too. Moreover, you and your partner can share daily household works, so that the life becomes less stressed.

19. Keep your house clean:

This is one of the good money saving ideas, I think works great. When we keep our house clean, it directly affects our health. In addition to that, when the house is clean, it indicates that our staffs within the house are arranged too. This will help us in finding our requisite items at arm's length. Misplacement and unattended staffs left us with no option but to go for a new one, which can be avoided at large.

20. Shop higher or lower than eye-level:

Marketers are intelligent. They place high valued items at our eye level. So try to buy products below or above the eye level. This way you can save a lot of bucks while shopping.

21. Take a health insurance or mediclaim :

Whenever you sit with your financial budgets, you must include health insurance in it. Medical bills are capable enough to tremble your financial stature. It would be really foolish to take chance by not taking health insurance or mediclaim. By paying a small amount of premium, you save yourself and your family from financial jealousy.

22. Do your own beauty treatment:

Beauty Parlours and Salons are becoming costlier day by day. For women, doing basic beauty treatment like manicure, pedicure, facial at parlours are very expensive. Rather they can try things at home. There are many good video instructions available on the internet to assist a person to do her personal care. For men, it is advisable to do saving at home with his own saving kit.

23. Use phone guards:

This is a small but effective money saving tips. As we all use mobile phones, we know how frequently it drops from our hand. By incurring a small expenditure on phone bodyguard and tempered glass, we can save hundreds of bucks.

24. Use low steam to cook:

This is one of the household ways to save money. Rather than using large flame burners, it will be prudent to use small burners. Moreover cooking at low flame and cooking in covered utensil saves a considerable amount of fuel in the long run and so as your money.

25. Do not hunt for brands:

If you have an obsession with brand names, this money saving tips is certainly not for you. Believe it or not, if you go for value for money, there are multiple non-branded products that offer the same quality of service minus cost for brand value. This is quite visible, when a reputed company pays a big amount on TV commercials, Billboards etc., has not it to recover the cost from somewhere?

Conclusion

When you are searching for the ways to save money, you may come up with lots of money-saving tips. But things will be effective when you apply them appropriately in your daily life. Remember, the tip works for others may or may not work for you. You have to choose your best way to save money from the plethora of money-saving tips.

Retirement Plan Needs to Address Financial Costs and Burdens of Aging

By the time you hit age 40 you should have saved some money for your future retirement. The problem is too many people forget to protect those retirement funds from the high costs of Long-Term Care. The US Department of Health and Human Services says if you reach the age of 65 you will have…

By the time you hit age 40 you should have saved some money for your future retirement. The problem is too many people forget to protect those retirement funds from the high costs of Long-Term Care. The US Department of Health and Human Services says if you reach the age of 65 you will have a 70% chance of needing some type extended care service. Health insurance, Medicare and supplements will only pay for a small amount of skilled services and only for 100 days. They will pay nothing towards custodial services (help with activities-of-daily living) which most people will need as they age.

Often this means crisis management. Family members become caregivers. Caregiving is hard but when a family member must be a caregiver it adds more dimensions. This usually means the responsibility falls on the lap of a daughter or daughter-in-law. They generally have their own care and family responsibilities. Not to mention the emotional hardship that ties into a family member being a caregiver.

The financial costs and burdens of aging will impact your savings and your family. Affordable LTC insurance will secure your assets and ease the burden that is placed on family.

There are very few true specialists in long-term care insurance. This means you should seek the help of a true Long-Term Care Specialist. This person should have at least three years' experience in Long-Term Care Insurance, represent the major insurance companies and have at least 150 clients with Long-Term Care Insurance.

Most financial advisors and general insurance agents do not have the skills required to design an affordable plan based on your specific needs. Plus, they usually do not understand underwriting requirements which each insurance company uses to determine if they will even offer a policy to you. They generally have never experienced a claim, so they do not have a full understanding of how these policies actually get used at the time of claim.

This is why I assist consumers nationwide using my unique process where a client views my computer screen while we speak on the phone. A number of other top specialists will do the same thing. The key here is asking many detailed questions about your health, family history, retirement plans and concerns. Most financial advisors and general insurance agents may ask only a few questions. This means the recommendations that they may give you are not appropriate and may even cost you more money than it should.

Since they do not deal exclusively in Long-Term Care planning they usually do not understand the products and the positive impacts they can have on your loved ones. They also tend to over-insure. A true Long-Term Care Specialist will make the appropriate recommendations and consumers discover that LTC insurance is very affordable and adds a tremendous amount of peace-of-mind as you plan for your future retirements.

If you are speaking to someone about Long-Term Care Insurance be sure to ask a few questions:

How long have you been working with Long-Term Care Insurance?

According to the American Association for Long-Term Care Insurance (AALTCI) no less than three years is acceptable.

How many clients do you have with LTC insurance?

No less than 100 is acceptable says the AALTCI.

How many companies do you represent?

The AALTCI says no less than three.

How many claims have you been involved with?

The more the better, keep in mind a person working three years may not have had any claims yet despite having more than 150 clients. Ideally you want a person who has experience 15+ claims.

What is your general philosophy when you design a Long-Term Care Insurance plan?

Listen to how they answer the question and make a judgment if it sounds like it is well thought out.

Here are a few warning signs you should be aware of:

1. The agent or advisor sends you quotes without asking many questions. A true Long-Term Care Specialist will spend a lot of time asking detailed questions and family history, in addition to asking about your future (or current) retirement plans. If they only take five minutes or less you should run away.

2. The agent or advisor immediately starts talking about asset based or hybrid plans without asking you many questions. These are life insurance or annuities with riders for Long-Term Care. They can be an outstanding way to plan for some people but anyone who brings this type of solution to you without asking many questions should be avoided.

3. The agent or advisor does not explain the Long-Term Care Partnership Program. Not all states have active partnership plans in place but most do. If they do not mention it be sure to ask. If they can not explain it move on.

4. The agent or advisor does not have a website, or their website has very little information available, it is usually not a good sign. True LTC specialists will usually have a comprehensive website with many resources available for education.

5. The agent or advisor recommends you self-insure and put money in investments. For most people this places your money in too much risk, does not provide tax benefits and does not reduce the burden placed on family since most LTC policies have case management. It may make the advisor money but you should be more concerned how it will protect your money and reduce family burden. If they make this kind of recommendation ask them to put it in writing. Then ask how their plan would really benefit you and your family from the financial costs and burdens of aging.

Long-Term Care Insurance has become a key part of retirement planning. Seek out a specialist to help you add peace-of-mind to your plan. It is an easy and affordable way to help you have a successful future retirement.

Working with a Long-Term Care specialist will allow you to get the accurate information you seek. There are several reference websites for research:

LTC News offers articles and resources: http://www.ltcnews.com

US Department of Health and Human Services : https://longtermcare.acl.gov/

Long-Term Care will impact you, your family, your savings and your lifestyle. Long-Term Care Insurance is Easy and Affordable Asset Protection. These plans not only protect your savings but reduce the burdens placed on family members. Act before you retire to take advantage of lower premiums and your overall better health.

6 Financial Investments to Take This New Year

Every New Year usher new hopes, aims, and aspirations which are unique for everyone. When it comes to achieving financial goals, it is never too late to start because it is advised to start as early as possible to get better returns. In the pursuit of achieving your financial goals, you need to first understand…

Every New Year usher new hopes, aims, and aspirations which are unique for everyone. When it comes to achieving financial goals, it is never too late to start because it is advised to start as early as possible to get better returns. In the pursuit of achieving your financial goals, you need to first understand the potential investment options in order to make the right decision that will not only ensure financial stability and freedom for yourself but for your loved ones as well in the years to come.

The idea is to start small; you do not need pots of money to invest. Here is a list of possible areas where you can venture into understand smart investing. These financial investments should be at your New Year's resolution list as they are a combination of risk-taking, investment amount and return of investment (ROI). These investment ideas will allow you to balance your short-term and long term financial interests.

Real Estate : This investment option carries medium risk and investors need to select the right property to get the highest return.

Unit Trust : This is a collective investment plan that permits small and medium investors with similar investment ideas to pool in their funds and invest in a portfolio of securities. The pooled funds include cash, bonds, shares, properties etc. These are long-term, safe, and adopt a steady approach towards investing. By investing in unit trusts, investors with limited time can gain higher returns from capital markets. This investment option carries low to medium risk and suits the common man who is interested in equities but does not have the funds to expand independently.

Fixed Deposits : Fixed Deposits (also known as Time Deposits) offer a guaranteed rate of return on your investment. Almost all Malaysian banks offer fixed deposit accounts as they ensure hassle-free management and has government insurance. Moreover, fixed deposits offer a higher rate of interest than savings accounts and can be open with a relatively low minimum investment amount.

Invest in gold : Investing in gold is always considered good as it is an identifiable asset across cultures and geographical boundaries. Gold investment can either be made in physical form (like buying gold jewelery, gold coins, or bars) or by means of 'paper gold' (via Gold Investment Accounts of banks).

Insurance : Investment linked insurance policies or ILPs provide extensive coverage and a good return upon maturity. These investments do not require large investment capital.

Amanah Saham Bumiputera : This is a low-risk investment option that you can consider if you are planning for long-term investment. This is tailor specifically for Malaysian Bumiputera and is managed by Amanah Saham Nasional Berhad which is a fully-owned subsidiary of Permodalan Nasional Berhad.

Now that you have a list of financial investment ideas, it is better to start now without further procrastination to get great returns.

Equating Profitability With Cashflows: A Myth in Corporate Financial Performance

The issue of profit and cashflow and their relative importance in business has become an unending discussion in recent boardroom discussions. As some analyst are looking at profit history of business to assess performance, others are looking at the cash movements (ie cashflows). People even get more confuse when a profitable business on one hand…

The issue of profit and cashflow and their relative importance in business has become an unending discussion in recent boardroom discussions. As some analyst are looking at profit history of business to assess performance, others are looking at the cash movements (ie cashflows). People even get more confuse when a profitable business on one hand is not able to pay its suppliers or expand whiles a non-profitable business (ie loss) continues to stay in business. The income statement and the cashflow statement of every business has the clue to this issue of profitability and cashflow.

Cash flow is the difference between the amount of cash a company receives and pays whereas profitability is the difference between revenues and expenses and every company report on both their cash holdings and profitability as part of its financial reporting. Certain cash flows can not be recorded as revenues or expenses at the time of the transactions, while other cash flows may not be part of the operating activities, and that are not profit related.

Concept of Profitability in Business

The success of a small business depends on its ability to continuously earn profits. Profit basically equals a company's revenues minus expenses and is critical for businesses because it determines whether a company can secure external financing, attract more investors or grow its operations. A business owner must understand the importance of profitability in business management and develop strategies that give his company the best chance at remaining profitable as that is its main goal for existence among other goals.

Relevance of Profitability in Business

Profits stimulate investment and innovation and as a business undertakes more investment, it leads to generation of more employment. With generation of employment income, more demand for goods in the market will be created.

Profit is considered necessary for business survival and growth and a business that does not make enough profit is not likely to survive in a growing competitive environment because it enables the business to grow, motivate employee, partnerships investors etc.

Profit is a return on investment and every firm invest money with the expectation of higher returns on their investment. Just likeholders expect higher returns in the form of dispute so do financial institutions expect better rate of interest on the loan given to the business enterprise.

Profit is used to test the efficiency of a business and the success or otherwise of the business can be justified by the amount of profit earning capacity.

Profit serves as buffer to meet unexpected expenses and as a business is exposed to many risk and uncertainties including changing market demands and conditions etc., profit is used to meet such unfavorable business changes.

Retained profit serves as a form of internal financing and can be used for increasing the volume of business through expansion and diversification. Any further surge is re-invested in the business for further development.

The Concept of Cashflow

The old-age saying, “cash is king” which is usually used to explain the failure of both businesses and consumer households remains relevant in modern business because without proper amount of cash on hand, entities can run into major trouble, and even be forced into bankruptcy. Cash inflow is the lifeblood of every business and businesses need cash for various reasons including investing in new infrastructure and dealing with unexpected expenses. Moreover, a key factor in a business's potential for long-term success is cashflow and as such a company may have all the revenue in the world, but without the ability to generate cash, it can easily fail. Without cash a business will not run, resulting in employees becoming cranky and suppliers ceasing to supply materials even though the business may be very profitable. Sources of cashflow include receipts from customers, additions to capital, payments to suppliers, etc.

Relevance of Cashflow in Business

For a company to grow, it will often need to make capital expenditure investments in areas such as factories, machinery, or technology etc which are usually one-time cost and require significant funds, but without cash on hand, a business may not be able to make these necessary investments and, as a result, may never be able to experience company growth. Even where loans are used, the loan agreement will require a significant down payment or periodic interest payment which will in turn require that the company have access to cash.

Businesses can undertake mergers or acquisition as an expansion strategy either within their niche or to branch out into new areas but without the necessary cash, it would never be able to take that opportunity to buy a valuable company at a reasonable price. Acquisitions like these offer growth potential for many businesses.

Two key benefits of holding shares is dividends and share repurchases. Dividends puts cash in the pocket of shareholders whiles share repurchase is a management way of expressing confidence in the business growth potential via share valuation. However, without cash though disputes nor share repurchases would be possible for a public company.

Every company experiences economic downturns at some period in operation which could affect its sales and with cash, the company will be more flexible and able to survive the downturn but without readily available cash, it may be forced to wind up, downsize its staff or even be declared bankrupt.

Businesses like individuals also face vacancies for expenses that require immediate payment like legal fees and unexpected costs associated with natural occurrences and as most of these are not budgeted for, it means businesses must have access to the necessary cash to prepare for such emergencies, and without cash, the business may fall flat.

Businesses are expected to minimize cost and one way to do this is to reduce a lot of online transactions processing which comes with a lot of excessive fees and to use cash instead where appropriate. By paying cash, a business can reduce its online fees and extremely cut transaction costs to the minimum with surplus cash for other productive activities.

Readily available cash helps businesses expand in the absence of loans. Many businesses have difficulty accessing loans for expansion but if it has cash available, it can position itself to take advantage of opportunities to expand and make relevant decisions.

Cash is essential for paying bills faster to avoid unnecessary penalties because paying creditors with forms other than cash can take longer to process, leading to unnecessary late fees and it makes more sense that paying in cash is the preferred method.

Are there any differences between Profitability and Cashflow? YES!

The differences between these business concepts is in recording of Non-Cash Revenue, Non-Cash Expense, Financing & Investing transactions. Companies may see increased profitability from non-cash revenues, but such an increase in profitability will have no impact on company cash holdings because companies record revenues when earned using the accrual method of accounting, despite no cash received and when cash is later collected for previously recorded revenues, increases company cash holdings but will have no impact on the profitabilityability again. Non-cash revenue incudes accrued income, credit sales, gains and profit on disposals etc. Also, companies may see reduced profitability because of non-cash expenses, which will have no impact on company cash holdings. Companies record expenses when incurred using the accrual method of accounting, despite no cash paid and when cash payments are made later for previously recorded expenses, it decreases the company cash holdings without affecting profitability.

Other differences are:

  • Money invested in a business, or borrowed by a business, increases cash BUT does not increase profit
  • Capital expenditures, such as buying a new machine, decreases cash BUT does not decrease profit
  • Profit accounts for overheads on accrual and prepayment basis whiles cashflows accounts for overheads when cash is paid
  • Cashflows reflect the details of incoming and outgoing flows of cash without using estimates of allocations and provisions like depreciation, bad debts etc. BUT profit is associated with a lot of such allocations and provisions

Conclusion

When you imagine a new business, you think of what it would cost to make the product, what you could sell it for, and what the profits per unit might be because we are trained to think of business as sales minus costs and expenses, which is profit but cash is equally critical yet people always think in profits instead of cash and interestingly we do not spend the profits in a business, we spend cash instead.

Desist from thinking that making profit increases cash the same amount because a business's cash flow can be significantly higher than bottom-line profit, or consider lower and know that cash flow can be negative when you earn a loss or positive when you have a loss because there's no natural correlation between profit and cash flow. It's that prudent for businesses to remember that cash pays the day-to-day expenses, not profit and is important for the business always. Profit becomes more important for the long-term success of the business.