Personal Finance Tips

In today’s capitalist society, the temptation to succumb to consumerism is ever-present. Managing your finances can be one of the most difficult, yet most rewarding challenges in your life. Here are 3 personal finance tips to help get you on the right track to financial happiness and freedom.


1. Know where your money is going
It sounds cliché but this tip is probably one of the most underestimated one when it comes to proper personal finance management. It truly does not matter how much money you make; if you do not know how you spend it or what you spend it on, you will never be able to assess your financial situation.

Every household, whether you are single or have a family, should have a budget. How complex and detailed it is is up to you, but by establishing your net income and required expenditures (i.e. mortgage, car payment, insurance, electricity), you will have a better understanding of how much cash flow you have at the end of every month.


2. Limit and control your debt 
Living without debt is not an easy goal to reach. Whether it is student loans, a new car, a house, or that long-desired television, debt accumulates quickly and easily. One of the most dangerous ways people start accumulating insurmountable amounts of debt is by using credit cards. If you are the type of person who has multiple credit cards, limit usage to one or two.

Too many credit cards is seen as a negative factor in calculating your credit score, and it also makes it easy to spend without keeping track of expenses. If you have debt with multiple credit card companies, consolidate them on the card with the lowest interest rate and try to make more than the minimum payment required each month. In planning your budget, keep a certain amount of money to use on paying down other debt such as mortgage and student loans.

Most plans allow for extra payments – over what is required on a monthly basis – which allows you to reduce your debt further and pay it off faster. Use your money on the loan that has the highest interest rate first.

3. Seek the help of a financial planner
Whether you can barely make ends meet or have a comfortable income, getting assistance from a financial planner will allow you to plan for your short and long-term financial needs and goals. Retirement plans and education-savings funds, for example, are complex and it is sometimes difficult to understand which one is better for your situation.

A financial planner will guide you through the various plans and together, you will determine which one suits your needs. Personal finance management should be a priority. With finances often being a point of contention in many households, if yours are well managed and in order, you will have more time to spend energy on other things that matter.

Making sound financial decisions should be part of your lifestyle; while you may have to work hard to achieve your goals at first, establishing some basic ground rules and principles will help you reach financial stability.

Invoice Financing

Available from banks and other financial institutions, invoice financing is a way for businesses to raise cash from their sales invoices the moment that they are raised rather than waiting for the customer to pay.



Sometimes known as invoice discounting or factoring, the business invoices their customers for work completed or products supplied in the usual way and submits a copy of that invoice to their invoice financing company who will pay a cash advance for a percentage of that invoice, generally around 80%. On the face of the invoice, there is usually included what is known as a ‘notice of assignment’ which advises the customer that the invoice had been assigned to the finance company and that payment is due to them rather than the original supplier.



When the invoice has been paid, the finance company will pay the supplier the remaining percentage of the invoice, usually around 20%, less any interest and charged for the service. The interest and the charges usually amount to more than would be charged for a standard overdraft facility or loan.



In essence, the finance company is buying the debt to the supplier at a discounted rate and invoice financing can provide going-concern companies with a boost to working capital. At the outset of the agreement, the finance company will normally purchase the outstanding accounts receivable and then purchase on-going invoices moving forward as well.



Depending on the type of agreement, companies can also benefit from the financing company providing credit control services as well and so removing an administration task from the supplier.



Whilst invoice financing can provide an initial cash boost and an on-going cash flow improvement, there are some drawbacks to this type of agreement. Although not necessarily true, some people view a company which is financing its invoicing as one which is suffering from financial difficulties and this can have a negative effect on sales. Invoice financing is also not the cheapest form of finance open to a company and, in some cases, charges and interest can be extremely high.



It should also be borne in mind that not all types of invoices can always be financed. For example, invoices for services in advance, such as annual support agreements, cannot normally be financed. In addition to this restriction, finance companies may impose a maximum percentage of total debtors that one single invoice represents.



The terms and conditions for different finance companies can vary considerably from the percentage of the initial advance on invoices provided, through interest and charges, to the potential requirement for personal guarantees on the agreement from the directors of the company so any business considering invoice finance as a source of working capital would be advised to obtain quotations from several different sources first.

When to Choose Structured Finance

When it comes to financing, there are tons of options available. You can get various types of loans and leases. But today, we would like to talk about another financing option that many people are not aware of. This method of financing is called structured finance. It is used through a complex service for unique situations to help finance companies.

When there are companies or borrowers in unique situations that need money, structured finance is usually the financial source of choice. This type of financing is not offered by all lenders and is usually given to those in need of a large capital when a simple loan will not do the job.

Some of the most popular financial instruments involved in structured finance are collateralized bond and debt obligations, various types of securities (assets, mortgages), credit derivatives and much more. There is a lot more variety involved, but these options mentioned above are usually the main components.

Risk transfer is one of the central components for this type of financing. There is usually a combination involved in structured finance that contains a mixture of the financial instruments mentioned above. Many people decide to go through this route because it is an alternative source of funding, which can be cheap when compared to other options. Interest rates and liquidity can also be key factors in certain cases.

Credit ratings also play an important role in structured finance! These are ratings that are applied to financial instruments such as derivatives, obligations, mortgages and others. Investors use credit ratings to help make their decisions. When it comes to credit ratings, there are different regulations applied to help keep them efficient and effective. This is done to provide accurate ratings that can be used by investors and the government.

Overall, when it comes to structured finance, it is a complex process for distinctive cases. It involves providing a financing option to those in need through a combination of different financial securities. These securities are arranged depending on what your situation is. For example, certain combinations might be used to increase cash flow while others are used for financing situations.  This should help you decide when it’s best for you to choose this financial option!