Category: Finance

Importance of Financial Literacy in Effectively Managing Financial Resources

Posted on by Mezan Semhar

In coming of age in an economy where there is much uncertainty on the security of your main source of income, having financial literacy is of utmost importance. The pandemic has taught us lessons about the lack of preparedness for unexpected distress of not having enough money saved for contingencies.

Yet what is financial literacy and how can it help us prepare for the unexpected?

Financial Literacy Defined

Financial literacy is that state of mind where a person is knowledgeable about basic financial matters in ways that will enable him or her to effectively manage financial resources. In being financially literate, you will be able to understand and develop basic skills in budgeting, in keeping your cash position illiquid, in negotiating for the best deals, as well as in choosing the right investment product on which to grow your money.

The more financially literate you are, the better equipped you become in saving up for the future and whatever that future brings.

Studies Revealed Low Levels of Financial Literacy Among American Millennials and Gen Zs

A study conducted by the National Endowment for Financial Education revealed that only 24 percent of American millennials indicated basic financial literacy. The Teachers Insurance and Annuity Association of America (TIAA) fielded a 2020 survey that revealed the members of Generation Z as the demographic with the lowest level of financial literacy; as only 41% were able to answer the index questions accurately.

https://youtu.be/ZH1uEhiaVXs

Such revelations were supported by the results of a study performed by the Urban Institute, which revealed that as many as 77 million Americans in all demographics have outstanding credit card debts. A separate study by the Financial Industry Regulatory Authority (FINRA) indicated that one-third of American with credit card debts pay only the minimum amount due on their credit card bill/s each month.

Importance of Being Financially Literate

According to financial expert and founder of Edelmar Financial Engine, persons who are not financially literate tend to pay for purchases that could have cost them less and at the same time tend to miss out on investment opportunities. The most common case examples provided by financial experts in relation to lack of financial literacy is the practice of using credit cards for nearly all purchases, without understanding the impact of compounded interests.

Why Financial Literacy Matters in the Use of Credit Cards

While the main benefit of credit cards is in having the power to defer payment on purchases, one should have full understanding of the Annual Percentage Rate (APR) of interest being applied by credit card companies on outstanding debts.Since this article mainly focuses on the importance of financial literacy, we will not go into long discussions about APR.

We will simply point out that the interest increases the amount of your obligation on a daily basis and has a compounding effect. When an interest becomes part of your outstanding balance, the minimum payments you make monthly will first apply as payment of the interest due. In the meantime, the unpaid balance of your credit purchase remains outstanding and still subject to monthly interest charges. As a result, your credit score will be affected because your credit card history will reflect slowness in the payment of obligations when they fall due.

Financial literacy is more than just looking for the best offers, let’s say for a car insurance coverage. Even if websites like carinsurancenearme.com furnish the most comprehensive data with which to make comparisons, being financially literate will enable you to analyze which insurance policy can effectively provide you the best coverage for car-related contingencies.

Leverage, capital structure rules and financing principles

Posted on by Meaza Brhane

Viewed historically, the financing policy of German companies can be characterized by a continuous process of substituting equity for debt. As part of this increasing debt, the more expensive but flexible equity factor is partially replaced by the cheaper but inflexible debt capital factor. Check kiss918 site while learning classic financing rules.

Classic financing rules

In the context of the classic financing rules in business administration, a distinction must be made between the horizontal and vertical capital structure rule.

Horizontal capital structure rule

The horizontal capital structure rule requires a congruence of the maturity of the capital provision with the commitment period of the assets so that the fixed assets are to be financed with equity capital and possibly with long-term debt capital and the current assets with short-term debt capital.

Vertical capital structure rule

The vertical capital structure rule requires the equity capital to correspond to the creditor capital and thus a debt ratio of one. These balance sheet structure standards are primarily intended to ensure the company’s liquidity and are in this respect oriented towards the interests of the creditors with regard to securing interest and principal payments.

It should be noted that strict adherence to these financing rules from a liquidity point of view is normally not necessary and often insufficient in the event of a crisis, since there is income between the accounting categories of assets and capital, to which the rules refer, and the financial categories that determine liquidity and spending only have a very indirect relationship. In this respect, the accounting categories can only inadequately reflect the financial status of a company, since the following differences exist between assets/capital on the one hand and income/expenditure on the other:

In principle, there is no correspondence in the temporal distribution of the two categories, since the capital structure rules assume that the revenue process does not generate cash in the event of a crisis. Particularly in crises, parts of the current assets that are supposedly tied up for a short time turn out to be partly unsaleable, while isolated parts of the fixed assets may be available as liquidity reserves that are available at relatively short notice.

Financial Management And Planning For Businesses

Posted on by Saipudi Vizirov

“It takes money to make money.”

Businesses, regardless of the scale, need to take into account their finances for various reasons such as for business expansion or for survival during bad times. The way you fund your business could affect your capacity to implement certain plans like obtaining permits and licenses, hiring employees, purchasing inventory, marketing initiatives, and for business growth and expansion. Although it isn’t essentially as vital as the vision of the business as well as the product/service it offer, finances are vital to make possible the good and great stuff.

Singapore SME Loan, for instance, provides loan assistance to small-medium enterprises (SMEs) in order for them to implement or carry out the plans they have for the business to grow and expand. Some of the loan brokering service they offer include Working Capital and Business Term Loans, Equipment Financing and Hire Purchase, Commodity Trade Line and Financing, Temporary Bridging Loan, and Invoice Factoring.

Business Financial Management And Planning

Finance is necessary and essential for any business to help in carrying out and realizing the objectives and goals of the business. Since finance is very much important, businesses should be responsible and careful in managing its finances, which is a crucial aspect to any business. With financial management and planning, this will help in the decision-making processes, such as what to spend on, when is the right time to spend, as well as how much to spend, all of which depends on the availability of the funds.

Let’s have a look at other reasons as to why finance and financial management is imperative in any business.

Financial Management Helps the Business to Continue to Exist

A good and successful business generates revenue. This is where a business gets its finances to fund operational costs, such as payment for utility bills, procurement of inventory, and payment of the employees’ salaries. The more a business earns by selling quality products and/or services, the more the role of financial management and planning is crucial in a business as you ensure your earnings are put to good use for your business to continue to grow and exist. Mismanagement of funds could be the collapse of a business.

Availability of Sufficient Funds

Adequate available funds are essential for short-term and long-term business goals to be achieved. Having adequate available funds also ensures that there is enough available money for any unexpected circumstances. Moreover, the business should also know where to get the funds should the need arise to handle the financial crisis.

Management System for Cash Flow

While a surplus of cash flow seems to be a good thing, managing it could be difficult. Having a surplus of funds and not making use of it in such a way that is useful and beneficial to the business is a big waste of available financial resource. Hence, you should have a plan on how and where to use these funds wherein it would build up your business and yield you more earnings.

The Value Of Creating A Budget

Posted on by Saipudi Vizirov

good money lenderPeople have various impressions, perceptions and principles about borrowing money and debt. Although it may be alright for some to borrow money for whatever purpose, others may be strongly against it, or have strict rules when it comes to borrowing money. Regardless, there will be certain circumstances in our life that leave us no option or alternative but to borrow money by taking a loan from a good money lender.

Looking for a reliable good money lender to take a loan is imperative to ensure you are transacting with a licensed firm or individual and that they are operating with the standards and requirements of the law. Moreover, knowing that a good money lender is accredited by a professional accrediting team in the financial market and industry would increase your confidence and trust that you are transacting with reputable, trusted and professional money lending firm.

If you believe and think that you need to get a loan, make sure that you could manage to pay for any new regular repayments apart from your present monthly expenses. Hence, it is imperative to know precisely where you get your monthly income and where it goes to see whether or not you could pay for additional credit.

The Value of Creating a Budget

Creating a budget is fundamental and extremely important to efficiently manage your funds. Many may seem unwilling and unenthusiastic about creating a budget plan as they feel it is tedious work and very much restricts them from using their funds. Although it may be tedious and restricting, having a budget plan has its many short-term and long-term benefits as it helps you maximize your funds as well as save and accumulate wealth rather than overspending and being wasteful of your finances. Below are good reasons why it is essential to have a budget plan:

Prevents and Stops You from Overspending

Recklessly and irresponsibly spending your money once you receive your income or salary could easily lead to overspending. When you overspend, you restrict your spending capacity in the future as you have you have to pay off more debts. Make use of your budget to know when you have reached your limit and to stop spending.

Helps You Achieve Your Objectives

Having a budget aids in determining your spending priorities and objectives, and could help you focus your finances on things that are most essential and important, such as saving for a car or house, to be debt free, or for a start-up business. With a budget plan, you monitor your spending and make sure you are on track in realizing your goals.  

Encourages and Helps in Saving Money

Individuals without a budget are most likely to save less or have no savings at all. When you create a budget plan, you allot money for certain things and expenses. With technology today, you could now automatically transfer funds every month to your investment or savings account. Moreover, a budget plan would help you avoid and stop spending money intended for your savings or investment.

Creating an efficient and effective budget plan and sticking it will surely help you achieve the abovementioned and more. Most importantly, you can begin to build up wealth and achieve real wealth financial freedom.

Rapid Changes in Oil Prices Spur Spike in Oil Futures Derivatives

Posted on by Mezan Semhar

A spike in oil future derivatives is likely to transpire now that oil-producing countries finally took action to arrest the continuing decline in oil prices.

What Caused the Collapse in Global Oil Prices?

The collapse of global oil prices went as low as $2. per barrel, only to slump further at 25 cents per barrel. Price drops were driven by the excessive supply of oil amidst the coronavirus crisis. Inasmuch as the economies of countries across the globe halted, the demand for oil rapidly vanished and caused a reverse trend on how oil prices go in the global oil markets.

As prices continued to drop, member countries of the Organization of Petroleum Exporting Countries (OPEC) finally came to an agreement to cut their supply of oil. That way, a semblance of balance will be achieved if less will be available until such time that supply, becomes more or less, proportionate to current demand.

A more significant step that was taken, was the suspension of oil production. Since nearly all storage tanks remain full, none will be available if oil fields and drilling sites continue to pump out oil. Currently, the price of oil is coursing at an upward trend, as the demand for oil and petrol products is likewise increasing in countries that are gradually reopening their economies.

Still, rapid changes in oil price are  taking place, as countries in Asia where Russia’s oil are being delivered, are currently experiencing a second wave of the COVID-19 pandemic. In the U.S., several states are also experiencing a second wave; although it is widely suspected that the additional cases are mere extensions of the first wave.

Nonetheless, stock market investors have little confidence in buying shares of oil companies despite their ridiculously low prices. The general consensus is that it will take time before oil companies can recover from the losses caused by the oil-price collapse. That being the case, not a few, but many financial traders are turning their attention to oil futures and their related derivatives.

https://youtu.be/85zBz9aGjAQ

 

Newbies are Advised to Practice First Before Participating in Derivatives for Oil Futures

Although derivatives for oil futures may have the appeal of being a straightforward yet lucrative transaction, it would be best for newbies not to quickly jump in. The matter of making decisions on whether to agree (Yes) or disagree (No) to a proposition requires careful thinking and assessments of global conditions. A wrong decision over a proposition could spell substantial losses that one might find hard to recover.

Newbies should first take time to practice by using a demo or practice trading platform like the one that they will find at https://ipoption.com/

The platform is offered free of charge by leading CFD broker IQ Option Europe Limited, which comes with a 10,000 demo money value. This broker is licensed and regulated by the Cyprus Securities and Exchange Commission, which requires licensed brokers to offer a demo trading platform that has the same and exact features as the platform used for real money. The only difference is that the demo software runs only on demo-money.

Another great thing about using the IQ Option demo trading platform is that for a minimum deposit of $10, new members can practice all they want and for as along as they want.

Missed Credit Card Payments Soar High Due To Corona Pandemic

Posted on by Meaza Brhane

While the stock market (visit stocktrades) is becoming unstable, many credit card payments have been skipped because millions of Americans have become unemployed as a result of the coronavirus epidemic. Banks and other lenders (who have relied on high consumer spending to make huge profits for years) are preparing to deal with customers.

Credit Card Payments Delayed Due to Coronavirus Outbreak

Credit card payments are one of the fastest places to find financial (short term) security. When a person runs out of funds, this is usually the first loan that goes unpaid. In general, security is not maintained, so if the credit card holder stops paying, the lender is rarely reimbursed.

Many major card issuers, including Capital One, Discover Financial Services, and Synchrony Financial, allow credit cardholders to suspend credit card payments for more than a month. Some have reduced or abandoned arrears and interest expenses, and assigned some customer credit.

With this pause, some borrowers can only float temporarily. Companies and analysts expect payment delays and amortization to increase later this year. Banks and other lenders can only pay unpaid loans until they face payment.

By this year, Discover and Synchrony’s stock market value has evaporated to more than half. This is much less than about a 12% drop in the market, while areas less affected by unemployment (e.g. technology, health care, and consumer necessities) are much worse.

Discover and Synchrony announced this week that payments to thousands of lenders, including many credit card customers, have been delayed. According to Nilson’s report, Capital One, which has about 120 million credit card accounts in the United States, registered 1% of valid card accounts in the extension. These three banks can measure the financial condition of some US consumers. Discover and Synchrony are generally not sold to high-yielding customers, Capital One has many customers and credit scores are below the perfect level.

Banks hope that delayed payments will take time to recover the economy and bring consumers back. However, for those who do not know when to resume work, this may not be enough. Even before the epidemic, many Americans were overwhelmed and used to record credit cards and other debt to keep pace with the increasing costs of college, healthcare, housing, and other costs.

Discover, Capital One, American Express Co., JP Morgan Chase & Co. And other card issuers have raised billions of dollars in additional funds to prepare for potentially large credit losses. “We’re clearly getting worse,” said Roger Hochschild, CEO of Discover Discovery. “It’s very fast and miserable.” Some lenders have reduced creditworthiness for new applicants or existing customers.

Banks like Citigroup Inc., Discover, and Synchrony have closed credit cards that haven’t been used for a while or have reduced spending limits. The company said it has taken steps to reduce risk before pandemics. However, due to these measures, some borrowers can only get loans when they need it most. However, for card issuers, loss of payment is not the only problem.

Card spending for travel and other categories is decreasing. This means that many of the fees charged by banks when making payments by card do not generate much income. And since people at home do not shop, many people cut their credit card costs. This is a problem for publishers specializing in business cards (including sync and affiliate data systems).

Brian Riley, Chief Credit Consultant of the Mercator Advisory Group, said: “Until everything is settled, the credit card’s profitability and risk will be greatly reduced.”