8 Money Tips to Live by – Revamping Your Spending Habits

Money spending habits, good ones are important part of our lives and just like any habit, we can learn through practicing control of our spending habits. Below are 8 money tips that we should thrive to live by in order for us to take control of our spending habits:1. Pay attention to Interest RateWhen you have loans, try to pay off the one with the highest interest rate. For savings, look for the one with the best/higher interest rate. Always check your interest rates both for savings and debt – compound interest rate can be your best friend (savings) and your foe (debt). Check out this formula for finding compound interest for savings.2. Have a budgetNet Income is what you budget on! Not money you are expecting somewhere! Not money so-and-so promised you! And definitely, not your credit card! You don’t budget on gross income thus the money your employer or business brings in before all your deductions such as taxes, retirement contributions.Use the 50/20/30 rule to set up your budget – you divide your net income into three; 50% goes to housing, transportation, utility bills and groceries these are known as Essential Expenses; 20% goes to your debt payments, savings contribution, investments and retirement contributions (some employers deduct these contribution from their employees’ gross salaries) these are called your Financial Priorities and finally, 30% of your net income should go to your Lifestyle Choices, these includes personal care, restaurant, internet, entertainment, gym membership fees, shopping and other miscellaneous and discretionary expenses.

3. Treat your money as part of you – set specific financial goals”I want to pay off my credit card loans this year.” This statement is just silence; it doesn’t push you to do anything. Now let’s look at this statement, “By the end of July this year, I want to pay $250 towards my ZXY bank credit card and by September this year, I want to pay off the $100 of my Shop-by-Choix clothes credit card.” The second statement is clear and compiles you to do something. You can divide the $250 by the months left to get to July and set how much you will have to pay on monthly basis in order for you to hit your goal, the same applies for the $100 debt.4. Love yourself and be appreciativeAppreciate the things that you have first and do not set your life based on others not even your friend because we all walk different financial paths. Acquiring more materials will NOT make you happy – the more you get the more you want.5. Avoid Co-signing a LoanIf the bank asks for the borrower to have a co-signer then it means the bank does not trust the borrower to fulfill their payments and so shouldn’t you. Co-signing for your friends or family members can affect your credit score if they fail to pay their installments and the bank can come after you.6. Rethink what your money can do for you – Invest in stock market One of the reasons why people don’t invest is because they believe that they cannot afford to invest in stocks with little money and that it is just waste of time but when you start with the little that you have, you in fact taking a big step towards building your wealth. Nearly anyone afford to start investing in stock – when they learn to be disciplined with their money. The risk of failing to invest now is loss of time and loss of time means losing out on wealth growth!

7. Your income raise should sponsor your savings and investmentsGetting a raise does not mean bigger spending habit automation – rather than spending more, use your raise to grow your investments and savings.8. Apply for your local supermarket reward cardIf your local supermarket offers loyalty program then sign up as this can help you in saving on groceries through rewards they offer for your purchase or even buying at cheaper price than the non-card shopper. Just make sure that they prices that they sell the products at either equal or lower than other local shops otherwise the loyalty card will not be worth it – the whole point to get the card to work for you.

Alternative Sources of Business Growth Finance: There Is More Than One Way to Fund Growth

Talk to any business owner or read the business section of any newspaper and you’re likely to come across stories of struggles to access sufficient finance to grow or maintain their business. But we are beginning to witness a change in how business owners access finance with many now actively seeking out alternative sources.

A survey carried out by the UK’s Forum of Private Business found that 26% of businesses were hunting out alternative financial products, with 21% seeking them outside of the traditional main High Street lenders. In fact, in another survey undertaken by the Federation of Small Businesses, it was discovered that only 35% of respondents used a traditional overdraft facility in 2011.

So, if banks are continually reluctant to lend to all but the lowest risk businesses, how can the remainder of the UK’s business population finance growth? Here are some of the increasingly popular alternative sources of finance to investigate.

Better Management of Working Capital

This may appear to be an odd source of finance but very often businesses are sitting on undiscovered cash reserves which can be used to finance growth. A report issued by Deloitte in 2011 revealed that the UK’s largest businesses were sitting on £60 billion of unproductive working capital. Inefficiencies in how working capital (debtors, stock and creditors) is handled can unnecessarily tie up your cash. Cash can be unlocked and released back in to the system thereby allowing self-financed growth plans by taking a close look at credit procedures, how credit terms are granted and how outstanding payments are chased.

Ensuring that stock is kept at an optimum level via better inventory management is another area where cash can be released to support and finance growth. Take a good look at your inventory management process and identify areas where cash is trapped.

Good management of working capital is not just about better control of debtors and stock, it is also about maximising the terms given by creditors. Are you too eager to maintain a first class relationship with your suppliers by paying well before the due date? You can positively impact your cash position by taking full advantage of terms offered by your suppliers. Have you fully leveraged your position by seeking an extensive of terms from say 30 days to 45 days?

Being more efficient in how working capital is managed can release sufficient funds to self-finance growth plans.

Personal Resources

With traditional avenues of funding being more difficult to access business owners are now looking to their personal resources to fund growth. Whether it be drawing on cash savings, using personal credit cards or taking additional mortgages on residential properties, such sources are an instant solution. A survey by the Federation of Small Businesses found that 33% of respondents had utilised their savings to fund growth. As well as being more immediately accessible using personal resources is often a cheaper source of finance.

Family and Friends

Sometimes referred to as the three F’s – family, friends and fools – this can appear to be a less stressful way of raising finance. In some ways it can but it can also be a journey fraught with danger. Tapping into their personal network business owners source finance by either seeking a loan and offering to pay an interest rate higher than that on offer on a High Street savings account, or offering a slice of equity in the business in return for investment.

Raising finance in this way can be relatively easy because the request and fulfilment is very much based on personal trust. Typically a Business Plan would be presented highlighting both the investment opportunity and the risks but at the end of the day success is down to the depth of the relationship and level of trust.

The danger in raising funds this way is that the nature of the relationship will change from that of a personal nature to a business transaction. Failure to regularly pay as per agreed terms, or even total failure to pay, can irreparably damage the relationship so tread with care.

Asset Finance

The Asset Finance industry is based on the concept of either preserving cash or speeding up access to it. Asset finance, which consists of invoice discounting, factoring and funding of asset purchases, has been available as a source of finance for many years, yet it’s only now gaining more recognition. Figures released by the Asset Based Finance Association, a trade association representing the industry, show that to the third quarter of 2011 the amount financed by the Association’s members increased by 9% compared to the same period in the previous year. Whilst the increase may not seem significant it is against the backdrop of a fall in traditional bank lending.

In a world where ‘cash is king’ asset financiers help preserve cash by financing the purchase of assets such as vehicles, machinery and equipment. Because the financier is looking to the underlying asset as security there is usually no requirement for additional collateral. According to the Asset Finance and Leasing Association one in three UK businesses that have external finance now utilise asset finance.

Asset financiers can help speed up the flow of cash within a business by allowing quicker access to cash tied up in the debtor book. An invoice discounting and factoring facility gives businesses the ability to immediately access up to 80% of an invoice instead of waiting for the agreed credit terms to run their course. Such finance facilities will speed up the velocity of cash within the business thereby allowing the business to fund a high rate of growth.

New players such as Market Invoice are entering the market to allow businesses to raise finance against selected invoices. Tapping into high net worth individuals and funds Market Invoice acts as an auction house with funders ‘bidding’ to advance against certain invoices.

Crowfunding and Peer-to-Peer

A relatively new phenomenon is the concept of raising finance by tapping into the power of the crowd. The historically low rates of interest payable on savings have led to depositors seeking out new ways to increase their returns. With business owners struggling to raise the funding they need it’s only natural that a market would be created to bring these two parties together.

CrowdCube entered the market in 2010 to match private investors seeking to be Dragons with those businesses looking to raise capital. Once a business passes the initial review stage their proposal is posted on the site and potential investors indicate the level of investment they wish to make with the minimum amount being as low as £10.

Businesses looking for a more traditional loan should consider Funding Circle. Established in 2010 Funding Circle also matches individual investors looking for a better return with those businesses seeking additional finance. Businesses can apply for funding between £5,000 and £250,000 for a period of 1, 3 or 5 years. As a minimum the business has to have submitted two years Accounts with Companies House and be assessed in order to arrive at a risk rating which guides potential investors.

As the crowd sourcing concept matures we are likely to see more players enter this market to capitalise on the need for better investor returns and easier access to business finance.

There is More Than One Way to Fund Growth

Accessing finance to fund growth plans does not have to be difficult if you are prepared to seek out alternative providers. Funding growth is now no longer the exclusive preserve of the traditional High Street bank and it’s now down to business owners to seek out the alternative routes.