Author: CFI.co

Banking

Banking Tips :7 Reasons to Open a Bank Account For Your Small Business

Author ByCFI.co

Did you know that over 20% of small businesses in the U.K. don’t make it past the first year? One of the biggest contributors to this is using the same account for their business and personal finances.

When you’re just starting as an entrepreneur, it can be tough to figure out the best way to manage your finances. Do you keep everything separate? Do you combine your personal and business money?

While there’s no one right answer, most small business owners find it best to open a bank account specifically for their business. This is one of the most essential business banking tips to consider.

Here are seven reasons why you should consider doing the same:

1. Makes Tax Preparation Easier HMRC

Separating your business and personal accounting makes tax preparation easier because it helps you differentiate what is and isn’t taxable income. This can save you a lot of time and money when it comes time to file your taxes.

It also helps you automate your tax preparation process. With separate finances, it’s easier for your accountant to link all business-related transactions on your account to your tax preparation software.

With a separate account, you don’t have to spend countless hours sorting through different expenses, trying to figure out which are personal and business-related. This makes it easier to determine deductions come tax season.

And a bonus benefit is that it minimizes your risk of being audited. The HMRC is more likely to audit business owners who mix their personal and business finances.

2. Automates Your Bookkeeping

Keeping track of your business finances can be a daunting task. But when everything is in one place, and all transactions are automatically recorded, it makes the process of bookkeeping much simpler.

Bookkeeping automation also means you have a more accurate record of your business finances. This information can help you make informed business decisions to improve your financial health.

3. It’s Easier to Get Business Loans

When you have a business bank account, lenders know that you’re serious about your business. It also shows that you’re taking the necessary steps to protect your finances. This makes it easier to get a business loan to expand or grow your business.

Having a business bank account also shows that you’re able to handle money responsibly. This is an important trait for any business owner looking for additional financing. The last thing a lender wants is to risk their money on a business that may not be able to repay the loan.

4. Helps You Manage Your Expenses

When you have a business account, all your business transactions will be organized in one place. This makes it simpler to keep track of your spending. It can also help you stay on budget and make informed business decisions.

When you have a business bank account, you’re also able to receive payments from customers. This makes it easy for them to pay and reduces the chances of them forgetting. It’s also a great way to build customer loyalty.

When you’re looking for a business bank account, it’s important to find one that fits your needs. Make sure to compare interest rates, fees and other features. Don’t forget to ask about the bank’s lending capabilities.

5. Protect Yourself from Business Debt Liability

When running a company, it’s important to protect yourself from business debt liability. By opening a business bank account, you can help ensure that your personal finances are not liable for any business debts.

Business debt liability is the legal responsibility of a business owner for the debts of their company. This can include personal credit cards, lines of credit, and loans taken out in the name of the business.

If the business goes bankrupt or defaults on its payments, the creditors can go after the business owner’s personal assets to cover the debt.

A business bank account helps to protect your personal assets by keeping your business and personal finances separate. This way, if the business goes bankrupt, the creditors can only go after the assets of the company, not your personal belongings.

6. Show the HMRC That Your Business Is Not a Hobby

A business bank account provides a clear separation between your personal and business finances, making it easier to track your business expenses and income. When you file your taxes, having a business bank account can help prove that your company is a legitimate business and not just a hobby.

If you are self-employed, it’s important to have a business bank account to track your business income and expenses. A business bank account can also help you save money on taxes.

By deducting your business expenses from your business income, you can lower your taxable income.

7. Helps You Establish Business Credibility

When you’re starting a small business, it’s important to establish credibility with your customers and vendors. One way to do that is by having a business bank account. A commercial bank will take you more seriously when you’re doing transactions and may be more likely to give you a loan if you need one.

Having a business banking relationship also shows that you’re a professional and are serious about your business. Additionally, a business bank account helps you look more professional.

It looks much more professional to have all of your transactions taking place through a dedicated business bank account instead of mixing your personal and professional finances together.

Follow the Above Banking Tips

When launching your first business, it can be tempting to mix your personal and business finances. After all, starting a business is a lot of work and opening a business account isn’t a priority for many.

Unfortunately, this mistake could cost you dearly down the road. By opening a business bank account, you can protect yourself from business debt liability, show the HMRC that your business is legitimate, and establish credibility with your customers and vendors.

For more business finance and banking tips, subscribe to our CFI.co Print Magazine.

Finance

Financial Tips : Are Banks Still Relevant in This Cryptocurrency Era?

Author ByCFI.co

Did you know that experts expect Bitcoin’s value could multiply to twenty-five times its current value within the next decade?

Cryptocurrencies are growing in popularity around the world every day. This is making many people want to know how valuable they will be in the future. When making investment decisions you shouldn’t act on impulse and should instead make decisions that are based on logic and strategy.

This is why it’s important to know whether banks are going to matter in the future. To make you make sense of the future of money, we’ve created a guide of the top financial tips about banking and cryptocurrencies.

Why Banks Are Important Today

Banks are able to store currencies and provide consumers with security. When you open a bank account and deposit money, you can rest assured that your money is safe. This is because banks are FDIC-insured.

They’re also able to keep records of your transactions. This oftentimes includes things like processing activity from credit and debit cards.

If you’re traveling internationally, you’ll never have a problem taking money from your account in different currencies. All you need to do is withdraw cash from an ATM.

Those who want to buy a house usually need help from banks so that they can get mortgages. New business owners also need banks if they want to get lines of credit to get financing for making investments.

Where Traditional Banks Fall Short

The financial crisis of two thousand and eight showed consumers that the world’s banking system has weaknesses. This inspired many people to develop new ways to work with finances such as Satoshi Nakamoto, who invented Bitcoin.

One of the reasons Bitcoin has soared in popularity is that it didn’t need to incorporate traditional banking into its process. Here are other ways that banking falls short.

Lack of Accessibility

You’re out of luck if you want to visit your local bank teller during the weekend because they’re only open on weekdays. Banks also make it difficult for those who need to make big transactions. Instead of doing this online, you have to go in person to visit a branch.

Inclusion

Traditional banking systems are set up to reward those who certain groups and people. These people receive incentives such as soft loans, longer payment durations, and better interest rates. This unfair system is exclusive and ineffective.

Problems with Security

Skilled con artists can easily hack banking websites and mobile apps. This is why so many people get money stolen from their bank accounts. Traditional banking systems are also vulnerable to fraud and embezzlement.

Not only is this a problem for consumers but it’s also an issue for insurance companies that offer fraud protection.

Higher Feed and Slower Transaction Speeds

Traditional banks have many unnecessary fees and taxes on transactions. Most banks charge their customers for withdrawing cash from ATMs that are out of their networks. It’s also common for banks to charge high fees on international transactions and wire transfers.

Banking systems also run on ineffective digital systems. This means that they have slow protocols, which means it can take a long time to send and receive money.

How Cryptocurrencies Are Better Than Traditional Banking

There are many ways that cryptocurrencies function more effectively than traditional banking systems.

Many people choose to use cryptocurrencies to make transactions because they are more efficient and have lower transaction fees. Here are more top ways that cryptocurrencies can make traditional banking obsolete.

They Are Decentralized

There is no third party that controls cryptocurrencies. This means that there are fewer human interactions involved in making transactions, which means that they are less biased.

Since anonymous identification numbers are all that are used for making transactions, it’s safer and more reliable to do business with cryptocurrencies than with banking.

Fewer Concerns About Security

Those who understand the importance of financial planning are probably concerned by traditional banking’s lack of security. Cryptocurrencies, on the other hand, operate on blockchain technology. This means that their systems are nearly impossible to hack.

The Ability to Make Smart Contracts

One of the greatest benefits of cryptocurrencies is that they let people create smart contracts. These smart contracts don’t need humans to create or process them because computers do all of the work. This means that they are reliable and easy to create.

Fast Transaction Speeds

It’s possible to process many more transactions by using cryptocurrencies than it is with traditional financial systems. This is because there are many protocols that traditional banks need to use to make transactions. By using cryptocurrencies, it’s possible to make transactions that are almost instantaneous.

Why the World Still Needs Banks

Even though the age of cryptocurrency is changing how people handle their money, there are still many reasons why to believe in the importance of banks.

People still need to use traditional banks to do certain kinds of investment banking. This is because it’s not possible to use cryptocurrencies to do things such as underwriting and overseeing acquisitions. This is a type of work that humans need to do.

It’s also not possible for cryptocurrencies to mimic the vital operations of central banks. This means that there is nobody to set interest rates or control inflation.

Make Use of Top Financial Tips in the Cryptocurrency Era

If you’re worried that banks will become obsolete because of the rise of cryptocurrencies, remember that there are many important things cryptocurrencies can’t do that banks can do. People still need banks to offer things like loans and mortgages. It’s also important to have a central bank to keep control of inflation and set interest rates.

CFI is a great resource for those who want to find out about finance and banking trends. If you have any questions feel free to contact us. And if you’d like to receive financial tips from CFI don’t forget to sign up for our newsletter.

Investment Banking

Investment Banking vs. Retail Banking? What’s the Difference

Author ByCFI.co

Whether you prefer to bank online or at a physical location, there are a few differences between retail and investment banking. The investment banking world deals with high prices and high levels of competition. Retail banks are generally volume-driven.

In fact, the investment banking market is expected to reach just south of $140 billion in the next few years.

Regardless of the amount, both provide necessary financial services for customers big and small. Curious to know more about the differences between the two? Continue reading for an overview of the key differences between them.

Retail Banking

When you picture a physical bank, you’re most likely picturing a retail bank. These retail banks provide a way for the general public to conduct their everyday banking needs onsite. Some of the basic services offered at a retail bank include:

  • Checking accounts
  • Savings accounts
  • Certificates of deposit
  • Personal lines of credit
  • Mortgages
  • Auto loans
  • Credit cards

The main services utilized at a retail bank generally relate to checking and savings accounts to deposit and withdraw funds. Retail banks also allow consumers to build their credit via credit cards or auto loans.

While physical branches do exist, more and more retail banks are moving online.

Investment Banking

Investment banking falls under the corporate banking umbrella. It generally serves a different clientele. They focus on an institutional client base as opposed to individuals.

Investment banks serve institutional needs and provide advisory services related to capital markets. Some of these areas include:

  • Equity markets
  • Bond markets
  • Portfolio management
  • Mergers and acquisitions
  • Equipment lending
  • Syndicated loans

Investment bank services operate on a larger scale in terms of complex transactions.

Main Differences Between Them

In terms of financial services offered, some of the main differences between the two can be broken down as follows. A few differences relating to retail banks include:

  • Catering more toward the general public
  • Managing lesser sums of money
  • Granting access to individual services

A few services for investment banks include:

  • Catering to larger institutions
  • Handling complex sums of money
  • Providing corporate services

These may be overly simplified summations. However, both types of banking handle a variety of finance-related transactions. Some are at the consumer level, and some are at the corporate level.

When to Choose an Investment Bank

For corporate mergers or startup company IPO launch preparation, investment banks and bankers are heavily involved.

Whether it’s a public company or a private one, choosing the best investment bank can make all the difference. This helps to obtain a successful financing deal, valuation, or initial public offering.

Having the right team behind a transaction will help. First and foremost, it helps determine whether a deal gets completed. Investment banking teams exist to help companies navigate through the complex and often unwieldy process of something like an IPO. They are trained to manage complex projects with transparency and efficiency.

The operations of a team of investment bankers could be divided into three functions:

  • Financial advisors
  • Mergers and acquisitions
  • Research

Operations of Investment Banking

A normal bank facilitates transactions at an individual customer level. Investment banks facilitate transactions for businesses and institutions. The transactions themselves are more unique when it comes to investment banking, thus bringing in the need for specific teams to complete said transactions.

Financial advisors provide a strategic outline of short-term and long-term business goals. They also provide a thorough understanding of industry trends and global markets.

Investment banks also facilitate mergers and acquisitions, which involve estimating a company’s valuation. The process ultimately ends in price negotiation and facilitation of the acquisition itself.

The Role of Research

Investment banks also have research divisions that provide investment advice for clients. The research branch is able to advise clients by keeping on top of knowledge in areas such as:

  • Credit research
  • Fixed income research
  • Macroeconomic research
  • Quantitative analysis

Research teams are highly knowledgeable. A good research team is well-sought after by companies during the process of financing a deal.

To Summarize

There are many differences between the operations of retail banking and investment banking. One of the key differences to remember is the type of client to which services are offered.

Retail banking, in general, exists to offer financial services to individuals. Investment banking is geared toward commercial or corporate use.

Investment banks exist to expand products offerings and increase market shares. They work as intermediaries between financial markets and organizations. Responsibilities also include:

  • Helping issue shares of stock
  • Counsel during the pre-underwriting stage
  • Counsel during securities distribution stage
  • Examination of financial statements
  • Organizing prospectus information for potential investors

Retail banks provide customer service and financial advice on a more individualized level. Retail banks also provide underwriting services for products such as home mortgages and auto loans. Retail banks provide a way for the average customer to deposit cash, withdraw funds, and extend credit.

An Investment in Banking

From mergers to everyday cash deposits, banking systems today accommodate a wide range of clients and services. The world of banking saw many changes as a result of the global pandemic. Markets shifted from previous patterns. Previously in-person transactions moved online.

However, both investment banking and retail banking do have one commonality that remains the same. They exist to serve their clients and their clients’ success.

If you found any of the above information helpful, be sure to check out any of the additional articles we have listed in our Banking dropdown. We offer plenty of resources for businesses and individuals alike.

Business

5 Ways Partnering with the Best Bank Will Boost Business Growth

Author ByCFI.co

Did you know that 82% of businesses fail because of cash flow problems? That’s right; not because of management issues or unfair laws, but stalled cash flows. In times of financial turmoil, only a reputable bank can get your business out of the doldrums. It’s unfortunate that most business owners don’t quite understand the importance of having a reputable bank as a partner. In fact, about 26% of small business owners don’t have separate accounts for their business. This begs the question, is partnering with a bank really good for business growth and prosperity?

To answer this question, we’ll be highlighting a few ways teaming up with the right bank can take your business to greater heights.

1. The Right Banks Enhance Your Professional Image

Having the right bank as your partner helps enhance your corporate image. Investors associate specific banks with high-level and successful businesses. Partnering with such banks will automatically put you in the big leagues, or at least give off the perception.

What’s more, a separate business account is a clear indicator that you’re open for business. Failing to separate your business from personal affairs is a huge turn-off for clients and investors. Not only is it unprofessional, but also makes your business look illegitimate or temporary.

Having your business name on checks and financial statements shows that you’re here to stay. Avoid giving off the wrong impression by using your personal account for business transactions.

2. It Offers Commercial Loans

Unexpected financial emergencies or shortfalls are common in all businesses. As mentioned above, this is what brings most businesses to ruin. Thankfully, banks offer business loans that can help businesses fill in financial gaps.

You can use business loans to buy equipment, pay suppliers, or even fulfil payroll. You can even use the loan to buy real estate property and expand your business. Commercial banks will be more than happy to give you a loan provided you meet their qualification criteria.

Small businesses are the biggest winners because of small business loans from the government. The United States Small Business Administration has developed various loan programs for small businesses. They can access these loans through commercial banks and get the funding they need.

The SBA guarantees these loans, meaning that businesses with less than stellar credit scores can apply for these loans. However, the first step is to partner with a commercial bank to get the green light.

3. It Keeps Your Money Safe

The biggest benefit of partnering with a reputable bank for your business is that they offer a safe place to store your business cash. Banks offer both checking and operating accounts for your business.

A checking account will hold money that your business will use for completing payroll and paying payroll taxes. An operating account, on the other hand, holds money that finances the business’s daily operations. This may include paying suppliers, rent, or energy bills.

These different types of accounts help you manage business finances in check. It also keeps your money safe from theft or fraudulent transactions.

4. Banks Offer Lines of Credit

Sometimes your business needs financial help, but taking out a large loan means paying hefty interest and other fees. If you want to sidestep interest, you should consider opening a line of credit. A line of credit allows you to borrow a specific amount and repay it when you get payment from your client.

Let’s say you have a line of credit of 10,000 pounds. The bank allows you to withdraw any amount not exceeding 10,000 pounds. You then pay back the amount when your business receives payments for pending bills.

Lines of credit allow you to borrow only the amount you need, not a large loan that attracts hefty interest fees. Over time, you can save a bundle in interest fees; money that you can use to grow your business.

5. They Provide Debit and Credit Cards

Did you know that commercial banks offer debit and credit cards for businesses? That’s right, businesses can apply for debit and credit cards with their checking or operating accounts. You can use this credit card just like you would your personal one.

A business credit card can help you manage short-term expenses and keep your business running. It also helps you manage costs, spread cash flow, and make timely payments. The best part is that it comes with incredible rewards to help save you money.

However, it’s worth noting that business credit cards are only for business use. Using it for personal reasons violates the terms that the banks stipulate. This could result in dire consequences for your business account.

6. They Offer Priceless Advice

All business owners face the monumental task of managing their business’s finances. However, this is easier said than done, given the unpredictable nature of business. Banks can step in to give business owners valuable advice on how they can maintain cash flow and boost their profits.

The right bank can offer crucial advice on taxes, insurance, payroll management, and even retirement accounts. If you partner with the best bank, you can get insights into business growth strategies to take your business to the next level.

They will also help you set up digital payment methods that are automatically reflected in your business account. This will help streamline payments and ensure consistency between transactions and your bank account.

7. They Offer Workshops and Seminars

Banks frequently hold seminars and workshops where business owners can learn about money management and growth in their industries. They also learn about solid financial strategies and how to expand their networks. These events are a great avenue to learn and grow your business for increased profitability.

Bank Partnerships for Accelerated Business Growth

Partnering with a reputable bank is one sure-fire way to spur business growth and increase profit margins. However, you need to find a trustworthy bank that aligns with your goals and vision. Open a business bank account today and propel your business to greater heights.

Check out our wealth management section to learn how you can make good use of the profits you earn from your business.

Banking

How Does a Mortgage Work? The Ultimate Guide

Author ByCFI.co

Between the different types of mortgages and the seemingly endless amounts of mortgage paperwork, buying a home may seem overwhelming. But how does a mortgage work exactly? We have all the answers to that mystery and more. 

No home or homeowner is the same, which is why it’s so crucial to understand how to get the best mortgage for you. From how the mortgage process works to some qualification tips, we’ve rounded up all the key mortgage basics. Let’s get started and get you one step closer to your new home.

How Does a Mortgage Work?

A mortgage is essentially a loan taken out from a bank or financial institution to give you funding for a home. You can choose to finance almost the entire home or do a combination of financing and money down.

Whatever money you put down on the purchase comes from your own cash reserves. Money down reduces the amount you have left to pay on the home through your mortgage loan. Your mortgage loan is given with interest rates that may vary or be fixed each month

A mortgage is also considered an instalment loan. This means the payments are paid monthly or bi-weekly in instalments. You’ll pay your principal balance as well as the interest, fees associated with the loan, taxes, and insurance. You may have a mortgage for 30-years, 15-years, or less if you choose.

As the years go by, your mortgage is paid down each month. Once your home is paid off, you’ll no longer have a mortgage and you’ll fully own your home. In the event that you sell your home before it’s paid off, you will need to pay off the loan at the time of the sale.

Failure to pay your mortgage could have serious consequences such as foreclosure. This is why the mortgage qualification process is put in place to ensure you’re in a loan and a home you can comfortably afford. This makes your mortgage less risky for you and your lender.

How to Qualify for a Mortgage

While qualifying for a mortgage may seem overwhelming, it doesn’t have to be. There are a few easy things you can do before you apply to help make the process easier. Creating a budget is a great starting point.

Your budget will help you and your lender determine what loan amount you’re most comfortable with. Start by laying out your expenses and income. Take a look at your down payment amount to see how much you’re comfortable putting down as well.

Next, it’s time to look at your credit and try to reduce any other debt you may have. This is where your budget can help you make a plan for paying off credit cards and reducing your spending. Your credit score will affect everything from your loan terms to your interest rate.

The higher your credit score, the better your interest rate will be. A lower interest rate allows you to pay more of your principal balance. This means more money is spent on interest each month.

Key Considerations When Shopping for a Mortgage

Another key consideration when shopping for a mortgage is how much you’re budgeting for a home. The type of home is also a factor.

A condominium, for example, may have an association fee you pay each month for amenities. This will get factored into your qualification, as it’s a fixed expense you’re responsible for.

If you’re purchasing new construction or a fixer-upper, your loan options may differ as well. When you have a home that needs a lot of work, you may choose to put less down on your home. This will allow you more cash for renovations and repairs.

As you’re going through the application process, look over all the loan options you qualify for. Your bank will need to know your budget, down payment, income, and other factors to help you find the best mortgage for you and your family.

Home Buying Tips

Before you apply for a mortgage, it can be helpful to take a look at your local real estate market. This will help you come up with your ideal home and budget.

You may find your budget gets you more than you think. You may also realize you need to prioritize your wish list.

This is a great time to make a list of what is most important to you in a home. For some, it’s the proximity to a certain school. To others, it’s the commute to work or the number of bedrooms. Your wish list will help you come up with a budget and a target price range as you start to house hunt.

As you start to look at homes, it’s also helpful to get a mortgage pre-qualification. This will allow you to make an offer on a home while knowing what you’re approved for. This helps you know where you stand while also making your offer stronger as a potential buyer.

Getting a Mortgage 101

Wondering how does a mortgage work? You’ve come to the right place. We have wealth management, mortgage, investment, and financial resources to help you make an informed decision.

Your home is likely one of your biggest assets. Read up on mortgage rates, the economy, and the housing market in our wealth management section.

Lifestyle

The Best Age to Retire: A Detailed Guide

Author ByCFI.co

When do you want to stop working? The average age UK adults hope to stop working is 60. However, is this the best age to retire?

Have you begun planning for retirement? People either cannot wait for retirement, dread it, or do not give it any thought. You want to enjoy your job while in it if possible, but retirement also offers an exciting new chapter in your life.

People often wonder when to retire. The answer to that question comes down to several factors, including your retirement planning strategy. Read on to learn more about when to retire and retirement tips. 

What Is the Best Age to Retire? 

Although there are national averages for retirement in different countries, they are not necessarily the best retirement ages. People actually retire at various ages, from the early thirties or earlier to not retiring at all. 

The best age to retire comes down to your personal needs and circumstances. You will know when to retire based on several factors. 

When to Retire

Retirement can feel like a distant goal you do give much thought about. However, you can determine when to retire with the right retirement planning. There are several factors to consider when deciding when to retire:

  • Your financial circumstances
  • Your retirement plans 
  • Your lifestyle choices
  • Your health

You want to enjoy your retirement years, so if you do notice your health declining, it may be time to consider retirement planning or at least to reduce your workload. This is not always possible for people, but prioritise your mental and physical well-being if you can.

When you can retire will also be determined by your plans for retirement and your finances, such as what pension you have. Some pensions, such as the state pension, are available at specific ages.

How Much Do You Need to Retire? 

How much money you need for retirement depends on several factors, such as your financial commitments and lifestyle choices. 

An excellent place to start working out your financial needs is to consider the minimum income you need to cover your outgoings. Outgoings include everything from your mortgage or rent payments to your transport and utility bills. Then factor in non-essential items you would like, such as eating out, travel, and gym memberships.

You can then look at your current retirement savings, whether you are entitled to the state pension in your country, and any other pensions you have. You can then work out the age you can retire. Working out your finances also helps you plan to save more to meet your retirement goals or realise you can retire earlier. 

It is best to use a spreadsheet format or consult with a financial advisor to model how much you will need for retirement. They will provide investment advice and check any financial plans you have made. 

Tips for Retirement Planning

So, you have an idea of when you want to retire, but how can you make it happen? It is essential to spend time planning retirement, no matter your age. You will thank yourself at a later date. 

Take Financial Action

Once you have worked out your finances, do not just accept the outcome. You can then consider ways to change your current financial circumstances. For example, there might be a few cost-cutting opportunities so you can retire earlier, such as using a more economical vehicle and stopping subscriptions you do not need. 

You can also consider working for a few more years, taking an extra part-time job, making money from a hobby, or considering other ways of saving and investing. 

Think Outside the Box

If you underestimated how much money you need for retirement or want to retire earlier, take the time to think outside the box. Just because you cannot afford to retire early in Europe or the US does mean you cannot relocate elsewhere.

Many retirees opt to move abroad, often to countries with more affordable lifestyles. You can move to a country with affordable property, great weather, things to do, and friendly locals. Your quality of life will likely be better too, which is what you deserve after working hard for many years. 

Read Retirement Planning Books 

For many people, retirement is the first opportunity to stop and relax. While this sounds appealing, it can be disconcerting for some who do not have retirement plans. In fact, retirement can cause depression and anxiety when people do not plan.

To reduce this risk, spend time reading retirement planning books, so you know what to expect. They will also highlight factors you may not have considered, such as changing locations or downsizing once you retire. 

Try New Hobbies

It is beneficial to try new hobbies no matter what our age. Start trying hobbies now, so you already have established a sense of meaning outside of work when you retire. Hobbies can include joining a club, volunteering, gardening, learning a language, or a musical instrument.

Include Loved Ones

When you are retirement planning, be sure to include loved ones. They may also have retirement savings that can alter when you can retire. But they also should be aware that there may be some lifestyle changes, either before or once you have retired. 

Find the Best Age to Retire

There is no one best age to retire. It differs depending on the individual. Everyone has different opinions about the best age to retire too, as some people cannot imagine stopping working, whereas others cannot wait to start the next chapter of their lives. 

One of the most important retirement tips is to start retirement planning; the earlier, the better. Then you can have more control over when to retire and afford the lifestyle you want.

Find more insightful content on finance, economics, and business from the CFI.co blog. Subscribe to the CFI print magazine to receive a yearly subscription of four quarterly issues at your doorstep.

Business

7 Great Reasons to Start a Business Right Now

Author ByCFI.co

They say if you do what you love, you’ll never work a day in your life. But, a recent study shows that small business owners tend to work longer hours than the average employee and take less frequent holidays.

The same study also tells that, even with these factors, people are 80% happier than before they jump-started their own business. The major benefits of being your own boss are having control over your work/life balance, as well as more time for family. These are the factors that contribute to happiness. 

If you’re looking for reasons to start a business, look no further. From personal growth to financial independence, there are many reasons to start a company. 

Keep reading to learn seven key reasons to start your own business and how you can put the gears into motion. 

1. Focus on What Matters to You 

Starting a business means that you get to choose what industry you want to focus on. The best part is, you can focus on what you really care about. 

You might see a gap in the market for a specific product, or you see services that are lacking in a particular industry. The options are endless but what is important is that you choose what matters to you. 

This is where you can brainstorm some of the dreams you’ve been thinking about. Dig deep within yourself to discover your calling. This way, even when your work feels like work, you will maintain your drive and motivation. 

2. Become Financially Independent 

If you want small business success, there is no doubt that it will take a lot of hard work, perseverance, and setbacks. You might not reap the financial rewards of your work right away, but with time, they will come. 

When you work for someone else, you earn a salary and eventually accumulate a retirement fund. For the most part, you are required to do the work if you want to get paid.

With a business of your own, your wealth can accumulate in a variety of ways, long after you’ve stopped working. You can have a team that ensures that work is done when you’re not there. Or might have property where your business is run that accumulates market value. 

You have a higher chance of becoming financially independent as a business owner than an employee. 

3. Create and Manage Your Own Schedule 

Being your own boss means that you don’t have to sit in rush-hour traffic to get to your office, only to be pestered by someone about your tardiness.

You can schedule your workday to suit your personal needs. You might lack creativity and enjoy working in the evenings. Others thrive in the morning and enjoy an early finish to the day. It will be completely up to you to organize your work. 

That being said, without someone to hold you accountable, you also have to be self-motivated. Create a schedule that works for you and honour it as your own boss. 

4. Build an Office Anywhere 

Working from anywhere is one of the best reasons to start a business. Many businesses are operating with employees working remotely from all over the world. 

When you are running your own business, you can turn any space into an office. This is especially important if you love the freedom of travel. It can also allow you to spend more time with your family. 

All you need is a sturdy laptop and an even sturdier Wi-Fi connection. 

5. Build Your Own Team

Another great reason for starting your own business is having the freedom to create your own team. If you don’t like Bob from the Finance Department, you don’t have to work with him!

You can curate a team of individuals who understand your vision and have the same passion for what you do. They can be old colleagues, previous classmates, or those that you’ve deemed the most qualified. 

If you’re building a team, be sure to get business advice from a financial consultant to help you secure the financial future of your team members.  

6. Take Advantage of Startup Resources 

If you’ve got startup ideas and passion for your work, there are resources that can help you achieve your dream. 

There is a plethora of knowledge available to you to help educate yourself and run a business. Research free courses, webinars, and networking events that pertain to your particular business. 

There are also many funding options to help you get started. Check out how you can apply for a business loan to get you on your entrepreneur’s feet. 

7. Give Back ​​to Your Community

Paying it forward is one of the most rewarding parts of any job. This is especially true if you have your own business and you can support a community or cause that resonates with you.

There are many organizations that lack resources and funding to give back to a specific cause. From education to housing to climate change, there is no shortage of causes that you can put your efforts into. Using the skills that you’ve acquired through building a business, you can organize funding for a special cause. 

This will help you leave your mark on the community and show the values that reflect your personal brand. 

Get Inspired With These Reasons to Start a Business 

Starting a business can seem intimidating. With the right resources and support, you can get your business off the ground and up and running. These seven reasons to start a business can help to inspire and motivate you to do what you have always dreamed of doing. 

Visit our website to open a bank account and start your business off with the right support. 

Investment Banking

How Much Do You Need To Invest in Real Estate?

Author ByCFI.co

In an overwhelming majority of countries, real estate costs continue to rise due to low-interest rates and supply chain disruptions. 

Yet, while housing prices are sky-high, investing in real estate has never been easier. You might think buying real estate is only for the wealthy, but you would be wrong. 

The truth is, you can start buying real estate investments for as little as $1,000. Don’t believe me?

Then keep reading as we explore the question, “How much do you need to invest in real estate?” We guarantee it’s feasible for you. Besides, one of the best investing tips is to diversify your portfolio, which real estate will help you do. 

Real Estate Investment Trust (REIT)

The cheapest way to invest in real estate is through a REIT. They allow you to invest in real estate without the actual real estate. 

What does that mean?

REITs are similar to mutual funds as in they are securities. Investors trade REITs on major exchanges like stocks. REITs own commercial real estate like:

  • Apartments
  • Hotels
  • Office buildings
  • Retail spaces
  • Shopping malls

Most REITs specialise in a particular type of real estate or specific region. 

REITs offer a high dividend and a liquid way to invest in real estate. In addition, it’s easy to reinvest dividends to grow your investment further. 

When investing in REITs, experts say to stick with publicly-traded REITs, which you can buy from brokerage firms. 

As mentioned, you can invest in REITs for $1,000! 

Real Estate Investment Group (REIG)

If you’re an investor who wants to own physical real estate rather than shares of a company, then you may want to consider an REIG. 

An REIG allows you to buy one or more units in an apartment or condo building via an operating company. The operating company manages and markets the units. Then, the operating company takes a percentage of the monthly rent. 

REIGS are a cost-effective way to invest in real estate because you don’t have to succumb to the management work. 

Some partnerships accept investments as low as $5,000 or up to $50,000. So while it’s not enough to purchase a property, when several investors come together, they can co-own property and make a profit. 

If you want to invest in an REIG, you want to look for one that pays a monthly cash return on your investment. 

Crowdfunding

Similar to REIGs, crowdfunding is becoming more popular in real estate investing. It allows you to pool your money with other investors to fund commercial real estate investments. 

For example, a developer wants to buy an apartment complex for $3mn, make $1mn worth of renovations, and resell the complex for $6mn. 

The developer can borrow $2mn from the bank and contribute $500,000 of their own money, but they still need $1.5mn for the project. 

They can raise the rest of the capital via crowdfunding. Those who invest will share the profits. You could be one of those investors. Each crowdfunding project has its own minimum contribution. 

A typical contribution amount is $25,000, far less than outright buying a property. 

Buy Property

Of course, you can also buy property as a way to invest in real estate. In general, this will require more money upfront. However, you can buy a property with as little as 3-5% down, depending on the location and lender. 

If you choose to invest in property by buying directly, know that it is time-consuming but can see considerable returns. You can profit from purchasing property in two main ways: becoming a landlord or flipping. 

Rental Properties

Becoming a landlord can offer long-term income and capital growth. But it’s also a lot of work. You need to find and vet tenants, keep up with property maintenance and continue paying the expenses. 

It’s a good investment if you have the time and money to manage the property. It’s even better if you can afford to hire a property management company so you can focus your time on other investing projects.

Fix and Flip

If HGTV is famous for anything, it’s flipping houses. When flipping, you buy a property, revamp it, then resell it. 

The best way to flip properties is to find the unvalued ones. This means looking for foreclosed homes, short sales, and abandoned properties. This is because you want to pay the least amount possible for a property to maximise your return after remodelling.  

When flipping, you go through a different loan process. It’s best to pay cash, but if you need financing, you’ll want to have some wiggle room. Every property has different funding requirements based on its current condition.

If you have enough money to pay cash or put down a large downpayment comfortably, it’s a good investment option.

Fees When Buying

While purchasing a property with 3-5% down is possible, it’s not always the best financial decision. You could be left with a higher interest rate, and your mortgage payments will be bigger. 

If you’re able to put 15-20% down, it’s a better choice to do so. Going into debt to make money requires balance and strategy. Borrow too much money, and you may fail to pay it all back. 

Additionally, when buying a property, you have to remember you’ll be responsible for paying all the fees, not just the mortgage. This includes:

  • Closing costs
  • Property taxes
  • Homeowners insurance
  • HOA fees
  • Maintenance and repairs

If you rent out the property, these fees will remain your responsibility. However, if you sell the property, you won’t have to continue paying them once you sell.

But, you must factor these costs into your budget because you need to pay them as long as you’re the owner. 

How Much Do You Need To Invest in Real Estate, Explained

To invest in real estate, you don’t need a lot of money. A few thousand dollars can help you generate wealth and move on to bigger and better-investing projects.

Rather than pondering the question, “How much do you need to invest in real estate?” take the money you have and find a viable investment. 

If you’re still unsure about getting started, check out our real estate investing for beginners article to help you. 

Banking

Opening a Savings Account: A Guide for Young Adults

Author ByCFI.co

Did you want to start planning for your financial future? One of the best ways to ensure you’ll stay financially stable is to open a savings account. Savings accounts give you the flexibility to undergo unexpected financial hardships. They also help you plan for major life events, such as buying a house or car. It’s best to start saving as young as possible. As such, young adults should open a savings account as soon as they can.

Below, we’ll get into the basics of opening a savings account. Keep reading to start planning for your financial future today!

Compare Financial Institutions

Before you open your first savings account, you need to compare financial institutions. Many different banks offer savings accounts, but they’re not all created equal. Some savings accounts put you in a much better financial position than others. 

Young adults often get trapped in these poor financial situations because they don’t know which things to look for when they open a savings account. You should compare a few different aspects before you decide on a financial institution.

Interest Rates

First, compare interest rates. When you place your money in a savings account, it will accrue more money over time. As such, you can actually gain more money by leaving your cash in a savings account. 

Yet, not all interest rates are the same. In fact, banks often offer low interest rates. Sometimes, they’re even as low as 0.01%! So, you should look at the interest rate before you decide to open a savings account with a certain bank.

If you want to grow your wealth faster, you should invest and save at the same time. Buying reliable will help your wealth bloom. Still, you need to make sure your stocks don’t have a high level of risk. Investing in the wrong stocks can cause you to lose money as the market fluctuates.

The Minimum Requirement

Some savings accounts require you to have a minimum amount in them. If you don’t keep the minimum amount in the account, you may incur fees and penalties. 

Some savings accounts don’t have a minimum amount. This is ideal since you’ll have the ability to take out as much money as you need.

Don’t worry if your best savings account option will have a minimum amount. But you should make sure it isn’t high.

No Monthly Fee

Even though banks have low interest rates, they might also have monthly fees. 

These might be as low as $5, but they can pile up over time. Usually, you get charged this amount when you don’t have a certain balance in your savings account. 

So, if there is a monthly fee, you should figure out how easy it will be for you to avoid.

The Opening Deposit

When you open a savings account, you might have to pay an opening deposit. 

Sometimes, this is as little as $25. Yet, some people want their first deposit to be smaller. You’ll need to make sure you can afford to put the minimum savings amount in your account. So, take stock of your financial situation first. Then, decide which account allows you to make the first deposit that best meets your needs.

Look for Automated Transfers

Saving money is easy to talk about and much harder to do. If you have to manually put money in your account, you might forget to do it. You might also struggle to want to put your money in a savings account on a regular basis. 

To get around this, many banks offer automated transfers. You’ll get to pick a date and a certain amount of money. Then, the bank will draw money out of your account every month on the specified day. 

When you choose your date, you should think about when you need to pay your monthly expenses. Many people choose a date after their payday. Others pick a day after they pay for other necessities, like rent. 

Once you know how much will go into savings, work it into your monthly budget. Consider it a necessary expense so you ensure you make enough money to keep it up. 

Get Your Required Documents Together

Banks often require people to present a few documents in order to open a bank account. This is to prevent identity theft and fraud.

You’ll need your social security number, your address, and a valid ID. Your ID should be a government-issued one, such as a passport or driver’s license. You may also need a document that proves your address. You will also need to provide your date of birth and contact information.

Make sure you contact the bank before you open the account. Ask them what you will need to give them so you can prepare the documents in advance.

Fill Out the Application

Next, fill out your bank’s application. Make sure you know how to contact your financial institution if you have questions.

At this point, the bank will require you to know whether you want an individual or joint account. An individual account is best for unmarried people or those who don’t want to merge their finances. A joint account allows two people to easily access your finances.

This makes it best for married people or those who want to share the account with another person.

Ready to Open a Savings Account with Young Adults?

Now that you’ve read this guide, you’re ready to open a savings account for young adults. 

To make the most out of your savings, you should talk to a financial adviser. This person will help you plan for your life goals and big expenses. That way, you’ll be able to meet your objectives quicker.

Want more great advice? Check out more of our articles today!

Finance

Collateral Loans: Everything You Need to Know

Author ByCFI.co

Do you need cash for an urgent expense but you don’t want to max out your credit card? Collateral loans may offer you the money you urgently need but under some conditions.

Loans with collateral enable you to secure the borrowed amount at a low-interest rate. It’s, therefore, a lot easier to get a loan when you put up collateral like your car or home. However, you risk losing the valuable asset if you default on the loan.

You’d want the best possible rate when shopping for a collateral loan. Understanding how this type of funding works can help you negotiate an ideal repayment period. Read on to learn how loans with collateral work and how to find one.

What is a Collateral Loan?

It’s also referred to as a secured loan. This is a loan with collateral and is usually guaranteed by a valuable asset you own. The lender has every right to withhold the collateral if you default multiple repayments. In this case, the collateral can be your car, real estate, or piece of jewellery.

Collateral loans offer larger loan amounts and lower interest rates, unlike unsecured loans. They can be your best option if you have an unsteady or short credit history. If your income level doesn’t qualify you for an unsecured loan, you may also take one.

Common Types of Collateral Loans

The common types of loans with collateral include residential mortgages, home equity loans, and auto loans. Others include car title loans and personal loans.

The lender will use your house as collateral when taking a residential mortgage. You risk losing the property in foreclosure if you fail to repay the loan. Like a mortgage, a home equity loan is taken against a house and features a fixed interest rate.

Auto loans have the best interest rates and use the vehicle you intend to buy as collateral. On the other hand, car title loans have a repayment period of 30 days and are borrowed against a car title. If you’d like to use your personal savings account as collateral when you need a loan, taking a fixed personal loan may help.

How Do Collateral Loans Work?

Expect to find more attractive loan terms and conditions when taking a collateral loan. You’ll enjoy a lower interest rate, a longer repayment term, and a large borrowing amount.

The lender will take some time to determine your collateral’s worth. They’ll look at the asset’s fair market value or appraise it in the process.

The rates for this kind of loan depend on the kind of collateral you want to use. Residential mortgages have a typical rate of 3 per cent, while home equity loans vary from 3 to 10 per cent. Car title loans come with rates between 4 to 15 per cent depending on the lender.

Expect to pay an interest rate of up to 25 per cent per month on a car title loan. The rates for a personal loan are between 9 to 22 per cent.

Their Pros and Cons

Taking a loan with collateral is one of the effective ways to borrow money. However, this type of funding carries certain benefits and risks that you should consider.

On the positive side, the likelihood to qualify for the loan is high even with a short credit history. You may also be eligible for a large amount or even borrow more. Loans with collateral offer short-term liquidity on assets you can’t easily convert into cash.

One downside of a collateral loan is that you could lose your valuable asset for failing to repay the loan. The lender will also require you to have a valuable item to use as collateral.

Always review the prepayment penalties before taking any loan with collateral. Since the funding won’t offer a permanent solution to your cash flow problems, develop an exit strategy. Use the amount for a specified goal and pay it off when you can.

Where to Find a Collateral Loan

Though most financial institutions offer loans with collateral, their rates and terms may vary. Consider banks, credit unions, online lenders, and auto dealers in your search for one. You may also visit storefronts like pawn shops for the same, but with very high-interest rates.

A bank can give you this type of loan if you have an existing account with them. If you’d like a car loan, some banks may restrict you on the car’s model, make, year, and mileage.

Credit unions, which boast low rates, can offer you one only if you’re a member. Some online lenders offer collateral loans if you provide proof of ownership to the collateral. You may also get one from an auto dealership to buy a car of your choice, provided you have strong credit.

How to Apply For One

As you apply for a collateral loan, check your credit, choose the collateral and gather relevant documents. Shop around for favourable rates, choose a lender and apply

for the loan.

You may qualify for the loan with a short credit history, so always ensure your credit reflects the lender’s terms. With good credit, it’s easier to get low rates and favourable repayment terms. Choose an asset to use as collateral and avail your personal information to the lender.

When shopping around for the best rates, get multiple quotes and choose one that fits your needs. After applying, you may receive the money within a day or several weeks if it’s a mortgage.

Consequences for Defaulting on a Collateral Loan

Most lenders may consider the loan default after 30 days of missing a payment. They may allow a short grace period and an opportunity for you to adjust the payment plan.

If you fail to pay the loan with all the incentives, you’ll lose the asset. Carefully lead the contract to understand the payment obligations and review your local laws on the same.

Need More Insights on Collateral Loans?

Though they bear some risk, collateral loans can help you solve an urgent financial issue. They boast low-interest rates and are easy to obtain. Understand their terms before applying for them to avoid losing your most valuable assets.

Find more insightful content on finance, economics, and business from the CFI.co blog. We help readers understand the forces that influence and reshape the global economy. To receive a yearly subscription of 4 quarterly issues at your doorstep, subscribe to CFI print magazine.