Finance Archives - Page 6 of 17

2021 saw an inflation rate of 7%, making it the highest rate in decades.

Inflation is a constant factor and affects all investors. It can result in losses for individuals and businesses, and the best way to avoid these losses is to hedge against inflation.

So what does it mean to hedge against inflation? Keep reading to find out.

What Does Inflation Hedge Mean?

Inflation is one of the most important economic forces for investors to understand. It’s the reduction in the value of financial assets along with the returns that those assets produce. While some assets naturally lose value with time, this refers to a loss in terms of purchasing power and relates to all assets.

Investors work to increase their wealth with time, and to do this they need to hedge against inflation. An inflation hedge is an asset that produces returns that match or exceed the inflation rate. This means that with time, the value will either stay the same or increase.

Investors aim to incorporate these kinds of assets into their portfolios while removing any that don’t protect against inflation.

Best Investments to Hedge Against Inflation

Inflation rates change each year, meaning past solutions don’t always work. No assets are guaranteed to hedge against inflation, but some are far more reliable than others.

Gold

People often settle on buying gold to protect against inflation. Despite its popularity, there have been some periods where inflation has been very high and it has not quite stood up.

Gold has a correlation of 0.16 to inflation, which isn’t particularly high. It’s worth noting that gold also generates no dividends or interest, which some other assets do. This means that to hedge against inflation its value has to increase at the same rate.

Real Estate

Real estate has long been one of the best assets for hedging against inflation. The value of property tends to increase at a higher rate than inflation does. On top of that, property can generate a lot of income through renting/leasing.

REITs (real estate investment trusts) are companies that own or finance real estate that generates income and covers a range of sectors. Of the different REITs available, equity REITs have the best correlation with inflation. Mortgage REITs are another option, but can sometimes underperform when inflation is high.

Commodities

Commodities generally perform well against inflation and include a range of assets such as:

Oil and gas
Precious metals
Grains and foods
Timber
Building materials

You can invest in these through stocks, which will increase in value as the commodities do.

ETFs (exchange-traded funds) track price movements of different commodities, generally holding derivatives or futures instead of the actual commodities themselves. These are ideal for investors who don’t want to invest in a commodity directly.

TIPS and Floating Rate Bonds

TIPS (Treasury Inflation-Protected Securities) are government bonds. They are pegged to inflation, meaning they will increase at the same rate. The coupon payment is reset every year to match the CPI (Consumer Price Index).

Other floating rate bonds work similarly but are pegged to interest rates rather than the CPI.

Stocks

Stocks are another very well-known investment choice. The thing that’s noteworthy with stocks is that they do best when inflation is modest – ideally between 1% and 4%.

When inflation is below 1% most stocks will have negative returns. Above 1% will give positive returns, but when inflation is over 4% it generally exceeds the returns from stocks.

The return rates can vary a lot depending on the type of company a stock is. Companies that deal with sustainable resources tend to have a better correlation with inflation.

Some companies can change their prices without much change in costs, meaning they can adjust to meet inflation. Companies that use many raw materials can’t generally do this as they have much less flexibility.

Value stocks can be a good choice as they don’t tend to be too sensitive to price increases. Dividend stocks are also good as they raise dividends with time.

Worst Investments to Hedge Against Inflation

The above assets are generally good options for hedging against inflation. There are, however, some places you can put your money that aren’t nearly as good.

Most people keep their funds in cash, but it tends to always experience value erosion. Short-term fixed-yield instruments are similar, so not the best choice.

Long-dated US Treasuries and corporate bonds have fixed yields and almost always underperform. Inflation is often higher than the coupon, which will result in a negative inflation-adjusted return.

High-end luxury goods stocks and discretionary goods may seem like a good idea, but when prices rise people tend to opt for cheaper alternatives, which makes these stocks underperform.

What About Crypto?

Bitcoin and other cryptocurrencies are very recent assets, and there is still a lot of debate regarding them. Many people claim they’re an effective hedge against inflation, but due to how new the technology is, there currently isn’t enough data to say for a certainty.

Hedging Limitations

Even with this knowledge about the different options for hedging against inflation, some limitations make it difficult.

Inflation projections aren’t set in stone, so they won’t always be accurate. Even someone with years of experience in investing won’t always make the right purchases.

While it’s fairly clear that some investments are better than others, no assets are perfect for hedging against inflation. You should do as much research as you can into the options you have, and make a choice based on what you think is best.

Be aware that there’s always a risk with any investment. Determine the risk before investing so you know what the losses will be if things don’t go how you want them to.

Making the Right Choices

Making decisions when it comes to investing is never easy. No one ever knows for certain how their investments will pan out, and there’s always a chance of losing money. The best thing you can do to hedge against inflation is to diversify your investment portfolio – that way, if one of your assets doesn’t do well, you have less chance of making significant losses.

Staying informed with the latest financial news will help you make the best decisions. Click here to head over to CFI.co and sign up for our newsletter so we can keep you up to date.

Business

What to Expect from the Real Property Market in Dayton in 2022

ByCFI.co Blogger

2021 truly turned out to be a great catch for Dayton realtors. The real estate market saw a record-shattering year, quadrupling the 2011 sales. Single-family houses are trending here, the market itself proves to be client-friendly, offering relatively low prices.

Real Estate

This very inexpensiveness draws buyers like bees to a honey pot. But what surprises the most is how, despite all this, Dayton still succeeds to stay in the focus of many hunters on real estate and attract investors. Indeed, everyone in the field (both investors and buyers) has increasingly been aiming at small markets with lower prices over the past few years.

There are not so many smaller markets that have experienced high increases in rent, but Dayton is definitely one of those which enjoy the rise in numbers. Even though we are said to observe the continuation of this trend, and sales prices may face some sort of a decrease, this year still has a great possibility of becoming another bunch of records.

Dayton is a city in Ohio, actually located in the southwest of the state, in the Miami Valley (or Greater Dayton metro area). The city, despite its sizes, which are relevantly small, has a complex economy fueled by such industries as manufacturing, aeromechanics, agriculture, logistics, government, military, automotive, etc. Many projects in economic development are constantly being implemented here, and a vast number of big companies have their headquarters located in the city.

It is 14% cheaper to live in Dayton as compared to the national average; due to the interstate major roads permeating the fabric of the city, more than half of all the Americans may reach it in only one day; there are a lot of places to visit, views to see and things to do. So if choosing where to establish a realty company in Ohio, the city of Dayton wouldn’t be a mistake.

The city is one of the largest in the state, housing approximately 137,000 people at the moment. Even though the amounts of population haven`t increased a lot, and the pace in Dayton itself has slowed down compared to previous results from 2021, its suburban areas do have experienced the largest rates of growth over the decade, setting a new record mark.

Joblessness is becoming less and less of a problem in Dayton, while the number of people with higher education is growing steadily. Now almost 32% of those living in the area hold at least bachelor’s degrees, many of which are in the fields of exact sciences. This further enhances the region’s reputation as one of the centres of the exact sciences. After all, there are many universities, colleges and other educational institutions to guard this image (at least five universities appear in mind immediately). The GDP here is over 41 billion dollars. This means that over the last decade it has grown by more than 16%.

The Dayton real property market has many advantages and interesting features, but 2021 became a success first of all for the investors in rental property. Now more households belong to tenants than to anyone else in the city.

Over the last few years, house prices in Dayton have been steadily rising. In general, the average values are now: $129,900 for a home (1 family) and $97 per square foot. But in the end, houses are usually sold at a slightly higher price – $140 000. If you want to settle in the region, the best option would be to buy a house in the Westwood area. The average listing price there is more than twice as cheap ($52,000).

In fact, one of the secrets of the market attractiveness for tenants is that housing prices are relatively low, while the proportion of price to rent keeps rising. And, to put it mildly, there are not that many cities where a social security check can easily cover your rent. But Dayton can rightly boast of offering such an opportunity, even though there was a slight leap in rents over the last few years. That makes it special. On average, for living a month in a home with three bedrooms you would pay $983 here. That’s the median rent in the city. The cheapest offers in the neighborhood are even less than $750 per month, while the highest reach $1,650 per month.

The affordability of housing and the dynamics of changes in prices are the main components that investors should take into account when they decide whether to enter the market or not. This analysis over the long run can suggest what to expect in the possible future, as well as present a broader picture of prospects. The housing affordability index (median family income compared to the median price of a house) may also give you a useful hint. But keep in mind that affordability does not always entail the purchase of real estate. We have already said about some special features of the market in Dayton, and one of them is that more people here would rather rent than own, so most households now belong to renters. Therefore, all factors must always be carefully considered. According to the latest data, the average family in Dayton can easily afford to pay for housing without any significant difficulties.

Dayton, the historic land and the birthplace of Orville Wright (world-famous inventor) is increasingly becoming not only an interesting place for tourists to visit but also one of the most comfortable cities in the United States to live in. Prices here are relatively low, the life is inexpensive, and the city is one of the most favorable for business and career growth. There are more than 300 miles of different biking trails in the area, dozens of cozy parks, and thanks to Dayton Art Institute the city became an outstanding art destination.

That’s all about the real property market in the city of Dayton, which certainly still has much to offer in 2022.

Business

What is the connection between tokenization and your PCI compliance?

ByCFI.co Blogger

The payment system has been one of those that has been developing steadily and progressively for decades. Each era has brought some changes in its development from cash registers to online shopping, from coupons to credit cards. Currently, the priority issues are the security of data and confidential information of buyers and customers. The following article is chiefly related to this issue.

What is the connection between tokenization and your PCI compliance

PCI DSS is the international attempt to solve this problem and to create a standardised and appropriate system. There are many different ways to make your organization meet PCI DSS requirements such as tokenization, encryption, network segmentation and many others. Each has its advantages and disadvantages, but while some remain a well-known method, others are a mystery.

Tokenization is usually the way that raises the most questions and doubts, including what token compliance meaning is, how it affects PCI compliance and one of the most common questions about how it works. In fact, this method is one of the most effective, as it minimizes risks, allows you to be flexible and, moreover, in some way may even be called a PCI assessment solution.

The best idea is to start with the definition. So, what is tokenization? To cut a long story short, it is a process in which confidential data is replaced with a non-sensitive element called a token. In case when someone wants to get to the confidential data token is preventing him from doing so. In other words, the token is a barrier between your private data and cyber-scammers.

The token is the replacement of data with random symbols and signs, as it is forbidden to store such data as identification numbers or bank accounts in their original form in the network. It is the token that guarantees the inviolability and security of data. This is especially noticeable during online transactions in which the card is not physically used. Due to tokenization, information about the cardholder and other personal data does not appear and is not used in transactions as well. With the use of a token, information is not stored in online databases, because it does not even have contact with it. The token guarantees security both inside the system and during the transition from one system to another.

The token does not store any confidential information that has been replaced by other random characters. Imagine a situation where cyber-scammers managed to seize the token. Even if it happens, he will not be able to seize any confidential data about either card or its holder.

It is very convenient, easy, fast and flexible to use the token. It can be simply created with a credit card. The transaction process is as well quite easy and very fast. In fact, the original information is stored in special repositories, which are under a strong system of protection. Such repositories are called vaults.

There are several types of tokenization in payment systems. Most common are Acquiring Token, Issuer Token, and Payment Token. According to the PCI DSS, only card numbers can be tokenized, passwords and CVV2 are not subject to tokenization. In addition, PCI DSS requires that tokens should be generated at least one in a million. Rainbow Table is one of the most popular and well-known methods of token data capturing.

But safety is not just an unpredictability. At least this whole protection system is much more complicated than it might seem. to be considered safe enough, token-based PAN must be nearly impossible to predict (with the probability of success being incredibly low, more than one in a million actually). And there is no instrument to capture such data (and to hack the cryptographic hash functions) that enjoys more popularity than Rainbow Table.

There is also an official set of recommendations on how to determine the value of the tokenization product. The first thing that is mentioned is, again, the extremely high importance of confidentiality. If an outsider had access to the PANs, it could be considered a disaster because it would seriously threaten the whole affair. There is a clearly defined data environment of the cardholder, and its “borders” must always be adhered to. The entire structure of the system must be in the internal network, protected from suspicious elements and the traffic which has not been verified. Anything unwanted should be discarded to keep the system isolated. This raises the question of trust: only complete confidence in the message can be considered a condition for his omission. Anything that raises doubts should be strictly prohibited from reaching the system. If you have a need or desire to store the information in one place (or if you would need to transmit it), care must be taken to ensure that it is encrypted. The most reliable way to do this is through the AES-256 algorithm. It has already stood the test of time, so to speak. Care must be also taken with means of access and identification. Monitoring safety and compliance with all conditions (clearly defined in PCI DSS Requirements 7 and 8) are extremely important. Everyone who needs to have access should have a unique identifier. This will weed out those who shouldn’t have access and strengthen protection. It is necessary to protect the system from cyber-attacks and harmful influences. Data should be deleted periodically, but this process should be determined by the special preservation of the necessary data policy. It is important to take into account everything that passes through the network. It would be good to have a defined procedure for emergency notification of experts on suspicious actions (traffic) to prevent unpleasant consequences, or just to check what is in doubt.

Finance

3 Best Crypto Exchanges for 2022

ByCFI.co Blogger

The cryptocurrency space has grown significantly over the past year, and new traders enter this space every week. As a new trader, it is easy to get overwhelmed by the sheer size of the over $1 trillion market. However, with a proper guide, you are assured of having an easy time cruising the market and investing in different cryptocurrencies.

stock-exchange-profits-boom-businessman

The first step toward crypto investing is identifying where you will buy and sell cryptocurrencies. The best place to do this is on a cryptocurrency exchange. There are many cryptocurrency exchanges globally, below I have sourced a list of the 3 best crypto exchanges for 2022 from the Best Bitcoin Exchange website.

1. Coinbase – Best for beginners

If you have been researching where to trade cryptocurrencies, you have come across Coinbase. Coinbase is one of the largest exchanges, and it is ranked as the most suitable for beginner traders.

Coinbase boasts of the best user-friendly crypto apps on the market, and it gives traders access to a wide range of learning materials. As a new crypto trader, it is advisable to use the resources provided on the platform because they will teach you about best practices in the market. The best thing about this is that Coinbase gives you free crypto for every successful course taken.

Coinbase also makes it easy for new users to enter the space. The interface will give new users a seamless experience navigating the platform and managing their cryptocurrencies. Expert traders also have an easy time on the platform because they can access advanced trading features on Coinbase Pro.

Most importantly, Coinbase provides a high level of security. The exchange uses two-factor authentication to prevent unauthorized access to user accounts. The exchange also claims to store 98% of users’ crypto offline. Further safety is guaranteed by an insurance policy that covers deposits of up to $250,000.

2. Binance – Best for low fees

When trading cryptocurrencies, you might want assurances that you will not be spending most of your money paying trading fees. Looking for a good exchange platform best for trading with the lowest fees is especially important for day traders.

Binance is the world’s largest exchange by trading volumes. The exchange has one of the friendliest fee structures in the crypto space. Moreover, the exchange is available in most countries.

Binance charges a maximum of 0.1% in maker or taker fees. The fee drops even lower as a user increases their trading volume. Binance US is highly recommended to US residents because they can buy cryptocurrencies directly via USD.

The exchange also offers a wide range of features that are very convenient to traders. These features include a comprehensive market dashboard, margin trading and a wide range of order types, making it easy for traders to buy and sell on the platform.

3. Gemini – Best for security

The Gemini exchange was created in 2014, during the early years of Bitcoin. The founders of this exchange have been keen on security and regulatory compliance. When signing up on Gemini, a new user must complete a verification process that reduces the possibility of fraud.

Users on this exchange also fulfil a two-factor authentication process to secure their trading accounts. Another outstanding security feature is the insurance policy imposed on hot wallets holding user funds on the exchange.

The other unique security feature of this exchange is SOC 2 certification. This certification shows that the exchange’s regulatory and security frameworks have been verified by third-party auditors.

Gemini is the ideal platform for users keen on security or those trading a large amount of funds that pose an increased risk. However, Gemini charges relatively high fees as a trade-off for these security features.

Conclusion

Choosing the best cryptocurrency exchange is just as good as choosing the best trading strategies. With many exchanges in the market, it is important to select one that will best suit your needs as an expert or beginner trader.

Finance

Getting A Loan Simplified With A Private Money Lender

ByCFI.co Blogger

Private money lending is a great way to get funding for your investment projects without going through a bank. Private lenders are individuals or companies willing to lend money to people for a specific purpose, usually investment-related.

Loan by Nick Youngson CC BY-SA 3.0 Pix4free.org

The benefits of private money lending are that it is usually a faster and easier process than going through a bank, and the requirements are often less strict. Private lenders like Bugis Credit are also typically more flexible regarding repayment terms.

If you’re considering applying for a loan through private money lending, you should consider a few things.

1. A Simplified Loan Process

A simplified loan process is a transaction with fewer requirements for both the borrower and the lender. It can mean a faster, more effortless transaction for all parties involved.

In the simplified loan process, borrowers need to furnish fewer requirements. The entire process is faster and more accessible for all parties involved. It is because there’s consent between two parties – the lender and the borrower. As long as the property is available to be used as collateral, nothing delays the issuance of the loan money. So borrowers can enjoy better facilities and conventional loan benefits with this type of transaction.

If you’re considering a private loan, be sure to:

Research different lenders
Compare interest rates
Consider the repayment terms
Read the fine print

When you’re ready to start the loan procedures, the simplified process offered by private lenders may be the best option for you.

2. Determine If You Qualify

It is essential to determine if you qualify. To qualify for a private loan, you’ll need to have:

A good credit score
A steady income
Equity in your property

If you have a history of bad credit, there is no need to be concerned – there are still options available to you. Some private lenders work with borrowers with less-than-perfect credit as long as they have equity in their property.

Keep in mind that lenders can have different requirements, so it’s essential to do your research and find one that’s a good fit for you.

Once you’ve found a trustworthy and reliable lender like Bugis Credit, the next step is to fill out an application. The application process is generally straightforward, and you can usually do it all online.

Once you’ve submitted the paperwork, the lender will review it and decide. If you’re approved for a loan, the money will be deposited into your account, and you can start using it right away.

3. Time Required To Have The Money Credited

Private lenders typically deposit the money into your account within a few days, so you can start using it right away.

The great thing about private money lending is that it’s a fast and easy process. There are fewer requirements, and the entire process is easier for all parties involved.

4. How You Use The Money

Now that you have the money, it’s time to put it to good use. Remember, private lenders are typically more flexible regarding repayment terms. So, if you need, you can usually negotiate a longer repayment period.

Things to consider:

What is your exit strategy?
How will you make payments?
What are the risks involved?

To repay your loan, you need to have a solid plan. It will help you avoid any complications down the road. Having a plan can also make financial planning in the long-term easier for you, as you don’t constantly have to be wondering how much money should be used for your loan and other requirements.

5. The Process Of Repaying Your Loan

Once you’ve used the cash from your loan, it’s time to repay it. Private lenders typically have more flexible repayment terms, so you can usually negotiate a more extended repayment period.

Remember to have a solid financial plan before you start making payments. It will help you avoid any complications down the road. Private lenders are typically more flexible when you’re ready to repay your loan. It means you can usually negotiate a longer repayment period. If you are facing issues paying back your loan, it is crucial to contact your private lender to let them know when you can pay.

If you’re thinking of borrowing money from a private money lender, research different options, compare interest rates, and consider the repayment terms. Once you’re ready, the simplified process offered by private lenders may be the best option for you.

You can get the capital you require in no time and easily, with fewer requirements and a shorter timeline. So, if you’re looking around for the ideal loan, be sure to consider a private lender like Bugis Credit. You may be shocked at how fast and straightforward the process can be.

Finance

How to Start Building Wealth as a Young Adult

ByCFI.co

Are you struggling with your finances?

A study shows that 6 out of 10 young people lack financial education. This leads many youths to make poor financial choices, credit, and investment decisions. This is why it’s crucial to learn basic financial knowledge early in your life.

Doing so allows you to make better financial decisions and apply effective management. Moreover, it can guarantee a stable, stress-free, and better future. Read on to discover some budgeting tips and start building wealth at a young age.

1. Set Your Financial Goals

Setting financial goals is essential when you plan to build wealth. It allows you to create a plan, track your progress, and stay motivated. Moreover, you make effective management that can boost financial health.

Keep note of your monthly income, expenditures, and other monetary activities. It must show that your finances can reach the target goal.

First, set a definite amount and time frame for reaching your goal. For example, you must save $15,000 by the end of the year. With this, you can determine the amount you to save from your monthly income until the year ends.

Next, assess the effectiveness of the saving system you follow. Then, adjust if you find it hard to stick with it. Consider categorizing your goals into short-term and long-term for easy tracking.

2. Budget Your Finances

Create a budget for your finances when building wealth. It ensures you earn more, spend less, and make wise investments. Budgeting allows you to track expenses and follow a plan that results in financial order.

Create a budget plan based on your income and expenditure. It determines the distribution of your finances in categories. You must identify and rank expenses depending on your priorities, too.

The budgeting techniques you can try are the cash system and the 50/30/20 rule. Each method offers ways to distribute and spend your money.

The cash system makes use of cash and disallows credit cards. It allows easy financial tracking. Moreover, the cash system makes you spend less.

Distribute your finances into 3 categories for the 50/30/20 rule. Allot 50% of your income to needs, 30% to wants, and 20% to savings.

3. Start Saving Now

Growing old does not mean you’ll eventually build wealth over time. You need to be proactive in saving to see substantial results.

First, identify the things that need funding. Ensure to categorize them into short-term and long-term goals. Then, estimate the amount of money you need and the time to reach your goal.

What are things you need to save for as a young adult?

Saving for retirement is vital to guarantee a comfortable life in the future. With this, open an Individual Savings Account or contribute to a retirement plan. You can ask your company if they offer company-sponsored plans.

Unforeseen events, such as unemployment, can exhaust your finances. Thus, consider opening an emergency fund to cover the expenses. Many experts recommend saving up at least 3 months or 6 months’ worth of living expenses.

4. Take Risks

A survey shows that only 23% of respondents consider investing in the stock market. Many hesitate to invest because of fluctuating stocks. With this, they lose opportunities that can boost financial worth.

Note that a declining market provides benefits, too. It’s the best time to invest and buy more shares because of their low value. You can expect a high return and portfolio growth once the market recovers.

Don’t be afraid to consider investing in the stock market. Keep note that you can earn more if you invest earlier. You can ask for financial advice from a Registered Investment Advisor, too.

5. Pay and Avoid Debts

Unpaid debt can build up and exhaust all your available funds. Most of them demand monthly instalment payments and carry high-interest rates. You must pay your debts to prevent using all your money as payment and save more.

Moreover, financial responsibilities increase as you grow older. It makes it hard to manage your finances. Borrowing small amounts when you need it is okay, but try not to fall into a pit of debt.

Stick to your budget, prioritize your needs, and only pay using cash. Being debt-free gives you financial freedom and security.

6. Keep Expenses Low

You can categorize expenses into fixed and variable costs. Fixed costs refer to predictable expenses incurred, such as rent, subscriptions, and insurance. In contrast, groceries and repair fees are variable expenses that can change.

Reduce costs to allot more into your savings and investments. First, categorize expenses and rank them based on their relevance. Then, decide on the items to remove.

For example, you pay a fixed rate for your internet connection and music subscription. The internet connection is a necessity while the latter is a want.

7. Note Your Expenses

Noting every expense is one practice that helps in building wealth. It reflects spending habits that you can use to develop effective financial management. Moreover, it can determine your progress.

You can create a system using a spreadsheet or use a logbook to note expenses. Ask and keep receipts for every transaction. Spare at least 10 minutes of your time at night to input everything.

Check your list every week to assess your spending habits. You must determine if there are changes in prices, too. Adjust your budget, if necessary, based on your notes.

8. Explore More

Never rely on one source of income if you plan to build wealth. Try exploring other streams to generate more finances. Turn your interest or hobby into another source of livelihood.

You can find freelancing jobs on the web that fit your skills. Try opening a small business in your local community, too. Venturing into another job protects you from losses and boosts your financial health.

Building Wealth at a Young Age

Building wealth can seem like a daunting task, but it’s not impossible. The number of expenses increases as you grow older. Create a plan to manage your finances early to enjoy a stress-free and better life in the future.

Be smart with your money and invest in your future. You can contact us here for queries on finance, wealth management, and investments.

Finance

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

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.

Accounting

Why Should You Automate Invoice Processing?

ByCFI.co Blogger

Businesses and organizations process more than a billion invoices annually, and studies show that this number could increase four times by 2035. Fortunately, the growing adoption of procurement technology can help chief procurement officers, suppliers, and accounts payable teams handle this number. Currently, 89% of U.S businesses have adopted digital-first strategies, which include automated invoice processing.

Electronic invoicing is part of AP automation that has proved to be a viable solution to the many challenges associated with invoicing. Outlined below are a few reasons why businesses should take advantage of artificial intelligence in their invoicing processes.

1. Time-saving

Before the inception of accounts payable automation, the typical invoicing procedure was as follows:

The supplier starts by generating the invoice
The supplier then sends the invoice to the buyer
The buyer prints the invoice
Buyer enters and reviews invoice data
The buyer approves the supplier’s invoice and writes a check
The buyer mails the check to the supplier

Along this process, expect some back and forth between the supplier and buyer if the invoice has discrepancies. That said, the entire accounts payable process may take between 30 and 90 days, including room for errors in the cycle.

Contrastingly, with automated invoicing solutions, approval takes minutes without human intervention. Automated invoices eliminate the lengthy process, reduce errors, and thus eliminate the possibility of late payments. A study by Atradius shows that 87.6% of Western European businesses and 90% of U.S businesses report regular late payments due to past-due invoices.

2. Saves on cost

The Institute of Finance and Management estimates that businesses spend between $1 and $21 for invoice processing. These estimations were done by dividing the cost of maintaining accounts payable staff by the number of invoices processed within a given period.

Similarly, an Ardent Partner study estimated the average cost of automated invoice processing to be $11.57. This includes overheads, labor costs, and technology. Switching to automated processes reduces printing costs, labor expenditures, mailing overhead, and possibly late fees.

3. Improve efficiency

Human error in business processes cannot be avoided. Interestingly, more than 16% and 15% of late payments in the U.S and Western Europe respectively stem from inaccurate invoices. Fortunately, automating invoice processing can improve invoice accuracy, consistency, reporting, transparency, and general accountability.

Improving efficiencies of your finance department frees your accounts payable teams to focus on other important tasks. The business also grows safely, with surety that the digitized system can handle the increasing amount of invoices accurately.

4. Improved compliance

Invoice is among the key documents used as evidence of tax compliance. It also helps validate tax audits, which may be conducted years after a business transaction. Initially, businesses relied on paper documentation, which is most likely to be misplaced. Businesses also had to hire storage facilities and warehouse boxes to store their paid invoices.

On the other hand, copies of invoices are submitted online with automated AP. Original documents can also be submitted to tax authorities with ease. Purchase orders are quickly converted into an invoice, eliminating the risks of manual discrepancies.

Endnote

Invoice management is an important part of financial planning. Members of the AP team can attest that invoice management can take a toll on people, time, and financial resources. Most businesses don’t achieve invoice efficiency for these reasons, affecting business cash flow and bottom line. Shifting to automated invoice processing, saves on cost, and boosts data visibility.

Finance

Collateral Loans: Everything You Need to Know

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.

Budgeting

How to Manage Your Money While Studying

ByCFI.co Blogger

When you’re a student, money can feel like it doesn’t go a long way and is incredibly hard to come by. Managing your money well while studying isn’t always easy, and many students struggle to keep on top of their finances. Whether you’re thinking about studying or you’re partway through your degree, there are several things that can help you to manage your money effectively.

Decide Whether a Student Loan is Right for You

Deciding whether a student loan is right for you can help you to prioritise what you spend your money on. Many students in the UK are eligible for a student loan, which can help to pay for tuition fees as well as accommodation and other student necessities. Some students may also be eligible for certain bursaries, which do not need to be repaid. Taking out student loans if you are eligible can take away some of the stress of studying and help you to cover some of the major costs associated with going to university. Furthermore, you can also ask your university whether it offers bursaries for low-income students, you can apply for government loans or you can look for the best private loans based on your income level.

Look Out For Student Discounts

Many activities, from transport to dining out and shopping, often come with student discounts. This can help you to save a substantial amount of money over the course of your studies, particularly if you regularly travel home or eat out with friends and other students.

You will often need to show a student ID card in order to be eligible for a student discount. Make sure you are able to collect a card from your university to enable you to prove your student status and make the most of offers and deals. If you’re studying online, contact the university to ask how you can obtain your student ID card.

Study From Home

Studying from home can save you a lot of money in a variety of ways. For example, you could save money on commuting to and from university every day, or reduce the amount of money you might spend on food and drinks outside of the home. You can consider studying online for a degree, which can reduce tuition fees while giving you the flexibility to study from home. Studying an online MBA programme at Aston University, for example, can enable you to attain the degree you want while enjoying the perks of studying from home. It is an increasingly popular choice with first-time students, as well as postgraduate students and mature students returning to education after several years.

Avoid Getting Into Debt

Debt will mean that you have to make monthly payments to pay it off, creating additional costs that can start to interfere with your studies and put you under financial stress. If you already have debt before you begin studying, try to pay off some of the debt beforehand. If this isn’t possible, consider contacting a debt helpline to find out how you might be able to put your debt on hold while studying. You may be able to reduce payments or commit to paying off the debt after you graduate.

Avoid getting into debt while studying, and if you need money for an emergency, ask trusted friends and family or look for credit cards that are offered specifically for students. Student credit cards will often have a lower credit limit, which means you can’t get into huge amounts of debt. Many banks also offer a lower interest rate for student credit cards, helping you to keep monthly costs lower.

Find a Housemate

Living on your own while studying can be financially impossible and cause stress and anxiety when trying to manage your finances. If you’re moving away to study or your income is being reduced while you’re studying, find a housemate who can split the rent and household bills with you. Many students choose this option as it enables them to save a huge amount of money each month. Finding another student can also reduce other household bills such as council tax.

Track Your Spending

Keeping track of your spending can help you to understand more about your spending habits and see where you can make savings. It can help you to monitor your spending if you’re making large purchases, or help you to see where smaller purchases really start to add up over a few weeks. You can keep track of your spending either by using an online platform or app, or by keeping a note of it using a pen and paper.

Sign Up For Student Deals

Some websites and companies offer deals especially for students. You can sign up to receive notifications and alerts when new deals become available, which can help you to stay up-to-date with all the latest savings on the market. You may be able to save money on subscription services and streaming services, shopping for books and clothes, and buying new electrical devices. Look online and ask friends for their top tips on how to save money and make the most of student deals.

Don’t Buy More Than You Need

When it comes to clothing, kitchenware, food and more, many people have a tendency to buy more than they need. This can create a surplus in your home, and it can also mean that you’re spending money on things you don’t necessarily need. Rather than buying a large quantity of food each week, assess how much you really need to buy. Don’t buy enough food to cook every day of the week if you plan to dine out for two or three days. By being honest and accurate about what you do need, you can help to manage your funds better while studying and save money in the process.

Being a student can take a lot of money away from you and make it feel impossible to ever save any money. But certain habits can help you to manage your money and keep on top of your finances in a better way.