ETFs: Investing in Exchange Traded Funds

Exchange Traded Funds
Exchange Traded Funds

Exchange-traded funds (ETFs) have become a lot more popular over the last 25 years. They are considered to be more cost-effective than mutual funds with lower costs of diversification and a wider variety of options for trading and arbitrage. Despite being the subject of criticism for volatility in markets, few can doubt the utility of ETFs in providing investors with greater exposure to a wider range of markets and classes of investments. Continue reading

Business On A Shoestring Budget? Here’s How To Lower Your Overhead Costs

After reviewing your business’ current financial stand, you decided you’re in dire need of cost-cutting. While that’s a normal point for a business, you can’t help but wonder, which of these expenses and investments should I let go? 

Most businesses consult their overhead costs and start their cost-slashing from there. To lower your overhead costs the right way and do your budget a huge favor, here are 6 ways you can try.

What are overhead costs?

Your other investments that are indirectly related to your production process but are still important in your overall business process are called overhead or indirect costs.

Some of the common overhead costs included in running a business are:

  • Rent 
  • Licenses and permits
  • Utilities
  • Insurance
  • Administrative costs
  • Marketing

Overhead costs do not generate profit for your business, but they’re still important to keep your business steady. Most of these costs are actually fixed and recurring, like your office rent.

How to reduce your business’ overhead costs

  • Do a thorough review of your expenses

The best way to see which overhead costs you can reduce or let go is to do a thorough check of all your expenses. List them down, then evaluate the necessity of each expense depending on the current level of your business.

For example, you can cut back on maintenance costs of the vehicles used in your business by buying more fuel-efficient vehicles.

Identify expenses that are unnecessary or too pricey. Check which investments you can opt for a lower or cheaper version without affecting your business quality too.

  • Go online as much as possible

If your business still relies on print and paper for your documents, business cards, and whatnots, you transform your business online instead to cut overhead costs like rent, electricity, and equipment.

Plus, most businesses today can be found online, and this has helped them cut back on expenses and document loss (should accidents happen).

Instead of printing out documents for your business and your clients, why not convert them into PDF files and send them through email or any messaging apps?

You can consider using cloud storage platforms to store your documents and other files. Most cloud storage like Google Drive offers free plans for their storages.

You can even do your marketing on social media and ditch the business cards and printed materials. Social media is free. You can reach a wider audience spectrum and build authority easily here if you play your marketing cards right. 

Even the advertising features of these platforms don’t require huge investments as printing tarpaulins or renting billboards. You can even run Facebook ads for a dollar per day!

  • Don’t be afraid to fire staff

Letting some of your staff go is heartbreaking, but a must. The more you let the low-performing employees stay, the more you’re putting your business at risk financially. 

The next time you evaluate all your staff and you don’t see any potential in some employees anymore, don’t hesitate to fire them. You’ll be doing your other employees and business performance a favor. 

You can also implement a stricter hiring policy. You may hire fewer people with this, but at least you know you’re hiring the compatible ones.

  • Invest in an accountant

We’re talking about cutting costs, yet you’re suggesting another investment?!

Most business owners think that doing their bookkeeping by themselves is cost-efficient. But the thing is, you’re actually doing more damage to your finances.

Because of the lack of accounting experience, you may commit a few errors in your books and miss important deadlines and financial details needed for paying your taxes. If you fail to pay your tax before the deadline, you’ll be charged with a fine, which could add more to your overhead costs. 

Even if you have accounting experience, you’ll still be subject to biases when doing your financial reports. You may end up not including other expenses because you believe they’re not necessary.

Don’t be stubborn and hire an expert accountant to deal with your finances for you. They’re less likely to commit errors on your books, and they can provide you unbiased financial reports for your business. Sure, they may cost more than your DIY bookkeeping, but in the long run, you can actually save more!

  • Take it easy with upgrading your office equipment and software

If your software and equipment are still doing the job perfectly, then there’s no need for an immediate upgrade. 

For instance, graphic design software like Adobe products releases newer versions almost yearly. But there are still graphic design businesses today that still use CS3 or CS6 versions of Photoshop for their businesses.

  • Consider outsourcing for smaller projects instead of hiring new staff

Perhaps you’ve got a project idea that would run for only a short period of time. Or perhaps you need to hire someone to help you with your business tasks on a seasonal basis (for example, only on holidays). In these cases, outsourcing may be more ideal for you than hiring new in-house staff.

There are tons of freelancers today that are willing to work with businesses like yours on a project-only basis. There’s no commitment involved, meaning if the project’s done, you’re not obligated to keep the freelancer with you in your business. 

Outsourcing also saves you from extra office space, equipment, and utility costs. The outsourcing company or the independent contractor handle these themselves.

  • Always invoice after a project or service is completed

If you can’t lessen much of your overhead costs, at least ensure you’re getting compensated for your services at the right price and timeline. 

The best way to do this is to invoice your clients. These are online receipts you send to your clients containing: 

  • The project/s or product/s you’ve delivered
  • How many hours you’ve worked on the project/product (if applicable)
  • The total amount to be paid
  • Details for sending payment 

You won’t also need to worry about creating your invoice from scratch. There are plenty of free invoices you can utilize online. The overall layout is done for you – you just need to customize it with your details.

Don’t encourage late payments. Send an invoice to your clients every time you complete a project or discuss a schedule for sending the invoice that works best for both parties.

7 Quick Tips You Need When Searching for the Best CD Rates

The best place to start saving is a piggy bank. However, at some point, you will have to trade up to a real saving where the money can grow and just not outgrow a ceramic container.

You need to start investing in financial instruments like CDs and plan for the future. Putting your money in cumulative deposit or CDs is safer than investing in stock market or other investment venues.  

In fact, CDs are easier to get access to and within reach when the deposited money is needed. Banks and financial institutions offer a lot of choices when it comes to CDs and bonds. That being said, let us look at a few various tips to find best bank CD rates for your money.  

1. Choosing A Bank

When choosing a bank for your CD, think about what rate would make sense and what is important to you in a financial institution.

Almost all banks have FDIC insurance, which means your deposit up to the amount of $250,000 is safe and guaranteed even in the event that a bank would file for bankruptcy.

And with an online account in one of these banks, you can keep track of how much money you are earning as interest as well.  

2. Credit Unions

Opening a CD account in a conventional bank isn’t the only option available. Like banks, credit unions offer interest on your deposit as well as let you access your money when needed.

However, credit unions tend to be smaller, offer lower interest rate than big banks that offer best bank CD rates and may or may not have FDIC insurance.

If you still insist on choosing credit unions, open an account that pays earnings on your deposit using compound interest.

3. Shopping Online 

Online banks and banks that do business online have better rates for CDs compared to the rest due to low overhead cost and other factors.

The option to check your account balance and interest accrued may be appealing for most due to the ease of access – through desktop, laptop and smartphones. While some people like to have a bank located closest to where they live, fewer people have the time to visit bank branches these days.

 Some online banks also offer incentives for opening a CD on the internet. If you are having a hard time deciding between a brick and mortar bank and online bank, consider one that gives you better rate and has its presence both offline and online.

This will give you peace of mind, a head start for your savings strategy or both.

4. Interest Rate Vs APY 

An interest rate is straightforward. It is the percentage that your CD will earn over the course of a year. APY is annual percentage yield that takes into account the compound interest earned if any.  

Not all CDs pay based on compounding interest. To earn more money, choose one that does. With compound interest, you will not only earn for the principal amount but for any interest earned as well.

The more often this interest is calculated, the more money you will get. Compound interest plays a crucial role in being able to achieve your financial goals. The video below talks about the mathematics behind calculating this interest.

5. Timing The Savings

It is hard to figure out when to start saving with CDs without mapping what your financial future will look like. Like setting out for a long journey, you may not know what you will encounter along the way.  

There could be an unexpected turn of event or the expense will break your bank. Part of planning for your CD is to make sure that you invest in one as early as possible, either for a short term or long term based on when you need to take out that money in the form of principal or loan.

Additionally, you will need to find out the right balance for saving. There are many options available, such as direct CDs (ones that are obtained directly from banks and other financial institutions), fixed rate CDs, brokered CDs( that are sold in secondary market), CD ladders (based on the number of years) and so on.

Most financial experts suggest going through various options available to you and understanding what each one of these means.

6. Diversification

Just like stocks and mutual funds, investment through CDs should be diversified. In other words, don’t put all your money in one single CD. Doing so is not only risky but a bad saving strategy.

With investment spread out in several types of CDs from various banks, you are taking less risk as well as increasing the chance of possibility that your money will be safe even when one bank fails.

7. Getting Advice

Investing in general, may be overwhelming for people who are just starting out. However, it can overwhelm anybody, so remember that any type of savings or investment strategy will take time.

 Some people take advice from financial gurus to make decision about something as simple as CDs. However, these experts don’t work for free.  

Some charge fee based on your portfolio net worth and others earn commission for what they sell. You may want to make sure that your cost in zero or minimal when investing in fixed tools like CDs and bonds.  

Will You Consider Investing in a CD? 

Last but not least, the basic concept of investing in CDs is to have a safe haven for your hard earned money. You can start with as little as $100 to begin with and have the sense of saving for the future.

In essence, a CD will earn you more money than it would if your savings would be sitting in a checking account. Other investments have various degrees of risk and most of them are riskier than CDs.

 Taking greater risk may lead to greater returns. On the flip side, the losses may be greater as well. CDs are a great choice for those who have low risk tolerance.

How to Take Care of Your Employees

Leading a team requires a varied skill set: you will need to work hard under pressure, support individuals in your team, and organize a whole host of projects. But one element of management often gets neglected, although it is one of the principal responsibilities you have if you lead a team of staff members. You need to ensure that your employees are safe at all times. Employee wellbeing is essential to the productivity of your labor force. If your staff are not happy, they will not perform well at work. There are hundreds of different ways that employers take care of their team, and those listed below are some of the most essential.

 Ensure You Pay Them Fairly

 This point should be so obvious that it is irrelevant, but unfortunately, many businesses are so focused on their own profit that they do not prioritize paying their staff the correct amount, or on time. Every boss would agree that this is disrespectful behavior on behalf of the employer, however when it comes to fair pay, this also means paying staff in accordance with their progress and hard work. Another element of pay that employers must consider seriously is the growing cost of living that affects everyone in the company. It is important that you approach matters of pay with transparency and equitable demeanor.

Protect Them From Unfortunate Incidents and Mistakes

Unfortunately, accidents do happen in the workplace. From valuable machine breakages to thefts and even personal injury, it is essential that you invest in an insurance policy that will cover any eventuality. You can get small business insurance at today and protect your business instantly. It is a mistake to think that you are saving money when you bypass purchasing the necessary insurance; it could save your business from potential liquidation if something unfortunate happens to your premises or staff.  

Maintain an Open-Door Policy 

An open-door policy is extremely important for employee wellbeing; it’s also very easy to implement. An open-door policy can be defined by an employer letting his or her staff members know that he or she is always happy to hear comments and issues the employee may be struggling with. This is a proactive approach to solving employee disputes and serious problems that could be permeating your company. If you don’t already encourage employees of every level to come and share their candid thoughts with you – now is the time.

Offer Them Incentives to Work Hard

Rather than punishing your staff for poor performance, it is best to offer incentives for hard work. By implementing team-centered rewards into your company’s policy, you are showing that you are there to support and nurture their personal growth, in addition to their value within the company. Charity days are extremely popular in many workforces, and they allow staff to do something good for the community with their extra time off.

It is your responsibility, as a business owner, to take care of your employees and ensure that they are happy in their workplace – and the tips above will help you do just that, getting more out of your staff as a result.

Can you live your best life and save for the long term?

Does being a better money saver than your parents translate into wealth in the long term?

Recent studies suggest that millennials (aged 18 to 34) are good money savers compared to their elders. Last year, the 2018 Old Mutual Savings and Investment Monitor showed that just under 25% of millennials have unit trust investments versus only 2% of the older generation. It was also noted that 69% have savings in a bank account.

Short-term vs long-term investment

However, when it comes to long-term investment, only 44% were saving for retirement through an employer pension or provident fund. A possible way to help employees in this regard is for employers to choose an umbrella fund(a retirement fund with cost-effective benefits.)

Furthermore, it has been suggested that only 6% of South Africans will be in the financial situation to retire comfortably. Therefore, 94% will have to work beyond retirement age or live off a government pension.

So, while millennials may be better savers on paper, the money doesn’t seem to be aimed at long-term wealth. The problem with not prioritising the creation of wealth over the long term is that it can leave you susceptible to the real risk that inflation may cause your money to lose its buying power.

Furthermore, choosing not to save for the long term means that you’ll miss out on the full benefits of compound interest.

Why aren’t we investing?

 Several factors make saving challenging: low starting salaries and debt, such as student loans, are two of the main obstacles. Factor in the cost of living and salary increases that don’t keep up with inflation and you can see how difficult it can seem to invest – but it’s not impossible.

Thorough planning and making small sacrifices can help you develop a lifestyle that allows you to prioritise saving.

  1. “I don’t have enough money to save.”

It doesn’t matter if you earn R5000 or R50,000 per month. Spending less than you earn is the key to being able to save money. A lot of people adopt the approach of saving money that is left over at the end of the month, but it’s a good idea to save up front. Then, you can ‘live your best life possible’ with the remainder of your disposable income.

  1. “I have too many expenses.” 

A lot of millennials are the first-generation of the middle-class in their family and unlike already established middle-class, have to play asset catch-up, needing to buy assets such as cars, homes and even appliances.

If you can, it’s a good idea to stay with your family a bit longer so that you can gather everything that you need before you move into your own home.

It’s essential to be patient. The last thing that you need is having to rely on credit which due to compound interest can cause increased debt.

  1. “I have to look after my family.”

Research shows that approximately 70% of South Africans who work in major cities are either currently supporting family members or may need to in the future. It is a difficult reality, but with meticulous planning and structuring of your finances according to your needs, it can still be possible to support yourself and family members.

  1. “I don’t have access to a pension or provident fund.”

 If you’re a freelancer or entrepreneur, you can invest in a retirement annuity (RA) – you don’t need to rely on an employer. An RA is held in your name, allows you to invest in your choice of unit trusts, and runs in parallel to your working life: you can usually stop, pause or keep contributing depending on your current circumstances.