Finance Definition – The True Meaning

When many people think of finances they automatically think about money. While this is true there are various aspects of finance that many people are unaware of or even have little understanding. It is generally about the way that you manage your money, assets and make investment decisions. The manner in which you handle your money can make the difference between you being financially stable or unstable. If you learn how to discipline yourself and come up with a realistic budget you can manage to survive through financial difficulties.

However, it is easier said than done to execute what few are able to accomplish. It is important that you master your finances no matter how little your income is. You have to gather and research as much as possible so that you are in a position to increase your income while reducing your expenses. There are many sources of information to guide you on what can help you improve your financial situation.

When you are in a position to manage your debt, income and expenses, then you are in a comfortable place. When you want to come up with a proper budget, you have to add up your total income and then your total expenses. This should be a start to track each monthly expense. Look into your credit cards, your loans and find ways to improve your finances. This will help you have a clear picture of what you can cut back on and where you can source some extra income.

Many hardworking people make mistakes because they do not have a clear understanding of how they are spending their money on a monthly basis. When you are dealing with your finances, you have to have a long term target so that you can have security when you are retired.

Corporate Finance Definition

Corporate Finance is the process of matching capital needs to the operations of a business.

It differs from accounting, which is the process of the historical recording of the activities of a business from a monetized point of view.

Captial is money invested in a company to bring it into existence and to grow and sustain it. This differs from working capital which is money to underpin and sustain trade – the purchase of raw materials; the funding of stock; the funding of the credit required between production and the realization of profits from sales.

Corporate Finance can begin with the tiniest round of Family and Friends money put into a nascent company to fund its very first steps into the commercial world. At the other end of the spectrum it is multi-layers of corporate debt within vast international corporations.

Corporate Finance essentially revolves around two types of capital: equity and debt. Equity is shareholders’ investment in a business which carries rights of ownership. Equity tends to sit within a company long-term, in the hope of creating a return on investment. This can come either through dividends, which are payments, usually on an annual basis, related to one’s percentage of share ownership.

Dividends only tend to accrue within very large, long-established corporations which are already carrying sufficient capital to more than adequately fund their plans.

Younger, growing and less-profitable operations tend to be voracious consumers of all the capital they can access and thus do not tend to create surpluses from which dividends may be paid.

In the case of younger and growing businesses, equity is often continually sought.

In very young companies, the main sources of investment are often private individuals. After the already mentioned family and friends, high net worth individuals and experienced sector figures often invest in promising younger companies. These are the pre-start up and seed phases.

At the next stage, when there is at least some sense of a cohesive business, the main investors tend to be venture capital funds, which specialize in taking promising earlier stage companies through quick growth to a hopefully highly profitable sale, or a public offering of shares.

The other main category of corporate finance related investment comes via debt. Many companies seek to avoid diluting their ownership through ongoing equity offerings and decide that they can create a higher rate of return from loans to their companies than these loans cost to service by way of interest payments. This process of gearing-up the equity and trade aspects of a business via debt is generally referred to as leverage.

Whilst the risk of raising equity is that the original creators may become so diluted that they ultimately obtain precious little return for their efforts and success, the main risk of debt is a corporate one – the company must be careful that it does not become swamped and thus incapable of making its debt repayments.

Corporate Finance is ultimately a juggling act. It must successfully balance ownership aspirations, potential, risk and returns, optimally considering an accommodation of the interests of both internal and external shareholders.

Balance Transfer and Housing Finance

The Indian immovable property has come of ages. Consumer is the King now and gone are the days of monopolistic behavior. And definitely, if you are the one with sound financial background and impeccable credit record you can strike a better deal with the banks in terms of interest rates and other payment conditions and purchase your dream property without any hassle.

Interestingly, the same criteria is equally applicable on those, as well, who have already availed a loan from a bank. Near about all the major public and private sector banks in the Indian banking system are now offering the option of ‘Balance Transfer’ on housing finance. Often, banks in the housing finance sector tend to increase the interest rates when the benchmark interest rates increase. But, such alacrity is not shown by them in decreasing rates whether the Repo rate comes down or not. In such circumstances, balance transfer help the customer a lot. He can replace the higher rate loan and avail a lower rate one by paying some extra charges. These charges are lower compared to the total payable interest.

What is Balance Transfer and how is it relevant in the housing finance?

There are times you find that the interest rate on your home loan is at a higher level. Take an example. Suppose you were paying at the rate of 10.5 per cent per annum. This rate is quite high in comparison of 9 per cent offered by some other bank. In such cases balance transfer of housing finance comes into rescue. You can trigger off the balance transfer option with your existing bank or lending institution, under which the unpaid portion of your housing finance would get transferred to your desired bank, thereby taking benefit of the difference in the housing loan interest rate.

Things to take care of at the time of balance transfer:

* Tenure of loan amount should be taken care: Ideally, you should consider taking the balance transfer option when the remaining part of your payment period is more than 5-years and in such a case you have the time for speculative gains. There is no profit in transferring the home loan from one bank to another if you end up paying early payment penalty and other processing charges even more than the difference of housing loan interest rate and the amount you had to pay towards interest in the normal condition.

* Early Payment Charges associated with the housing finance scheme: Banks like State Bank of India, IDBI and ICICI offer benefits like exemption of the early payment charges to your existing bank if you transfer the balance. So you must confirm the same with the new lending institution that are they ready to deal with this matter. Otherwise, the deal is not profitable.

* Additional charges involved with the loan amount: You must confirm that the desired amount for your home purchase loan is perfectly at par with the balance you had in your previous bank. It may be the case that that your new bank pays all early payment penalties and processing charges on your behalf and later add the amount to the principal of your housing loan. So, in such case your total owing remain the same and the transfer is not profitable. In this situation, you have to suffer the impact of debt compounding, which does not favour you in the long run.

Business Leasehold Finance – Does it Cost Too Much!

The commercial leasehold sector is one of the biggest if not the biggest business sectors here within the UK. There approximately 10 million commercial leasehold businesses trading today with perhaps as many as 20% of them changing proprietor each and every year. Businesses of this type trade in the health-care, leisure, licensed and retail sector, most are located on every high street. Many can experience difficulty raising “Commercial Leasehold Loans” to buy or re-finance these kinds of business without some kind of extra security.

Poor support from traditional lenders for this massive market-place comes as an unwelcome surprise to many prospective leasehold business buyers. The plain reality is, that financial alternatives are strictly limited when it comes to raising loans for either the purchase of a short leasehold business or to raise capital to improve or expand the business. The single most important reason that finding a loan in this business sector is so tough is that the length of lease available on the associated commercial property is typically 21 years or less. As mortgage lenders require a minimum period of circa 40 years remaining on any lease after a mortgage loan has been repaid, equity in other property is essential for main-stream lenders to even consider any application for funds. Even with the re-assurance of a “legal charge” over another suitable property many mortgage lenders will still be unable to tender any kind of short leasehold loan, viewing these businesses as high risk enterprises.

To fund this type of venture it is always advisable to find a specialist commercial finance broker with an in-depth understanding of the business leasehold finance sector. The severe lack of competition and therefore limited availability of loan options in this financial area leaves room for some very high cost lenders to operate in this market-place. A good broker will identify a low cost option, avoiding the possibility of selecting the wrong business leasehold lender and therefore what could be a very costly error. In short, leasehold financing definitely does not have to be expensive!

The Best Way to Understand Personal Finance

When we are trying to understand Personal Finance, the best thing to do is to understand what Personal Finance is NOT.

Many people think that accounting and personal finance are the same, but Personal Finance is NOT Accounting.

On the surface they may seem the same; they both have something to do with money. However, the definitions will help us better understand the differences.

Merriam-Webster’s definition of accounting is “the system of recording and summarizing business and financial transactions and analyzing, verifying, and reporting the results.”

Based on this definition, we see that accounting is the process of analysing and recording what you have already done with your money.

This is why having an accountant is usually not enough when it comes to your personal finances.

Accountants generally don’t concern themselves with personal finance (there are some exceptions to this rule). Unless your accountant is also a financial advisor or coach, he or she will likely just look at what you have done with your money at the end of the year and provide you with a report of their analysis.

This report is usually your tax return; what you owe the government or what the government owes you.

Very rarely does the accountant provide an individual with a Balance Sheet or Income Statement or a Net worth statement; all very helpful tools that are necessary to effectively manage your personal finances.

Personal Finance is looking at your finances from a more pro-active and goal oriented perspective. This is what provides the accountants with something to record, verify and analyze.

The Merriam-Webster’s (Concise Encyclopedia) definition of “Finance” is the “process of raising funds or capital for any kind of expenditure. Consumers, business firms, and governments often do not have the funds they need to make purchases or conduct their operations, while savers and investors have funds that could earn interest or dividends if put to productive use. Finance is the process of channeling funds from savers to users in the form of credit, loans, or invested capital through agencies including COMMERCIAL BANKS, SAVINGS AND LOAN ASSOCIATIONS, and such nonbank organizations as CREDIT UNIONS and investment companies. Finance can be divided into three broad areas: BUSINESS FINANCE, PERSONAL FINANCE, and public finance. All three involve generating budgets and managing funds for the optimum results”.

Personal Finance Simplified

By understanding the definition of “finance” we can break our “personal finance” down into 3 simple activities:-

1. The process of raising funds or capital for any kind of expenditure = Generating an Income.
A Business gets money through the sale of their products and services. This is labeled “revenue” or “income”. Some businesses will also invest a portion of their revenue to generate more income (interest income).

A Person gets money through a job, or a small business (self employment, sole proprietorship, network marketing or other small business venture). The money coming in can be a salary, hourly wage, or commission, and is also referred to as income.

A Government gets money through taxes that we pay. This is one of the main ways that the government generates an income that is then used to build infrastructure like roads, bridges, schools, hospitals etc for our cities.

2. Using our money to make purchases = Spending Money.
How much we spend relative to how much we make is what makes the difference between having optimum results in our personal finances. Making good spending decisions is critical to achieving financial wealth – regardless of how much you make.

3. Getting optimum results = Keeping as much of our money as possible
It’s not how much you MAKE that matters – its how much you KEEP that really matters when it comes to your personal finances.

This is the part of personal finance that virtually everyone finds the most challenging.

Often people who make large incomes (six figures or more) also tend to spend just as much (or more) which means they put themselves in debt and that debt starts to accrue interest. Before long that debt can start to grow exponentially and can destroy any hope they would have had to achieving wealth.

Personal Finance made simple

Personal Finance doesn’t need to be complicated if you keep this simple formula in mind:

INCOME – SPENDING = WHAT YOU KEEP

For Optimal Results you simply have to make more than what you spend and spend less than what you make so you can keep more for you and your family!

If you are not actively working towards an optimal result you will by default get less than optimal results

It really is that simple!

Now that you understand personal finance and WHAT you need to do, the next step is learning HOW to do this!

The best way to start is by following these 3 simple steps:-

1. Know what you want to achieve – “if you don’t know where you are going, any road will take you there” has become a very popular quote, probably because it is so true. One of the habits that Stephen Covey highlights in his book “7 Habits of Highly Successful People”, is to always start with the end in mind. Knowing where you want to go will be a big help in ensuring you get there.

2. Have a plan – that you can follow that will get you to your goals. Knowing how you will achieve your goals in a step by step plan is invaluable. Sometimes this is easier with the help of an advisor or a financial coach.

3. Use tools and resources – that will help you to stick to your plan and not become distracted by the things in life that could limit our incomes and make us spend more than we should. Don’t try and work it all out in your head! You will end up with a massive headache and your finances will become one gigantic dark fog!

A Dance With Finance – Make Sure You Take The Lead!

FINANCE:

Definition – A branch of economics concerned with resource allocation as well as resource management, acquisition, and investment. Simply, finance deals with matters related to money and the markets.

Role – Finance is used to raise money through the issuance and sale of debt and / or equity. Institutions could also use finance techniques to create balance sheets, general ledgers, profit and loss statements, etc..to determine the health of the business.

EFFICIENT MARKET:

Definition – A market in which the values of securities at any instant in time fully reflect all available information, which results in market value and the intrinsic value being the same.

Role – A good example of efficient markets in finance could be seen with the stock markets because information is available to all participants at the same time and the prices respond immediately to the available information.

PRIMARY MARKET:

Definition – Transactions in securities offered for the first time to potential investors.

Role – To illustrate the role that primary markets have in finance, people could look at “initial public offerings (IPOs)” in the stock markets where companies offer shares of common stock to the public for the first time.

SECONDARY MARKET:

Definition – The market in which stocks previously issued by the firm trades.

Role – The role that secondary market has in finance could be seen with numerous stock exchanges on Wall Street, such as the DOW, NASDAQ, etc. Through these stock exchanges, people trade company stocks.

RISK:

Definition – The likely variability associated with expected revenue or income streams.

Role – Risk plays an integral role in finance because it determines the probability that an actual return on investment (ROI) will be lower, or higher, than the expected return.

SECURITY:

Definition – A financing or investment instrument issued by a company or government agency that denotes an ownership interest and provides evidence of a debt, a right to share in the earnings of the issuer, or a right in the distribution of a property.

Role – The role that security has in finance could be seen when people make investments in securities such as bonds, debentures, notes, options, and shares that may be traded in financial markets such as stock exchanges.

STOCK:

Definition – Equity capital raised through sale of shares and it is the proportional part of a company’s equity capital represented by fully paid up shares.

Role – Stocks has a major role in finance because investors commonly trade stocks on a daily basis from a variety of institutions in the secondary market.

BOND:

Definition – A type of debt or a long-term promissory note, issued by the borrower, promising to pay its holder a predetermined and fixed amount of interest each year.

Role – A good example of the role of bonds in finance could be seen with how the government uses the purchase and sale of bonds to inject money into the economy.

CAPITAL:

Definition – Wealth in the form of assets, taken as a sign of the financial strength of an individual, organization, or nation, and assumed to be available for development or investment.

Role – The role that capital plays in finance is that institutions use capital, such as stocks, to create capital gains that could be used to improve on the overall business.

DEBT:

Definition – Consists of such sources as credit extended by suppliers or a loan from banks.

Role – Debt is used in finance to determine certain ratios pertaining to individuals or organizations. For instance, prior to giving out loans to individuals, banks tend to do background checks to determine the individuals “debt-to-income-ratio,” thus knowing if the loan is repayable.

YIELD:

Definition – The annual income earned from an investment, expressed usually as a percentage of the money invested.

Role – Yield is used in finance to determine how profitable an investment is, along with knowing if the investment is priced at a good value based on the “rate of return.”

RATE OF RETURN:

Definition – The annual percentage returned realized on an investment, which is adjusted for changes in prices due to inflation or other external effects. Expresses the nominal rate of return in real time, which keeps the purchasing power of a given level of capital constant over time.

Role – The role that the rate of return plays in finance is that people, including institutions, use this to adjust the nominal returns to compensate for factors, such as inflation, to determine how much of the investment is actually being returned.

RETURN ON INVESTMENT:

Definition – Return on investment (ROI) is the measure of a corporations profitability, equal to a fiscal year’s income divided by common stock and preferred stock equity plus long-term debt. The ROI is the income that an investment provides in a year.

Role – The ROI measures how effectively the firm uses its capital to generate profit; the higher the ROI, the better for the company.

CASH FLOW:

Definition – A measure of a company’s financial health, and equals cash receipts minus cash payments over a given period of time; or equivalently, net profits plus amounts charged off for depreciation, depletion, and amortization.

Role – In finance, investors and companies use cash flow to purchase assets in hopes of achieving higher ROIs. In addition, cash flow is also used to maintain the business or household, and is a necessary part of finance.

As mentioned, every entrepreneur must know their numbers. To do so, you must understand the lingual. Hopefully this post has assisted in helping you comprehend the common terms listed above better while taking the lead with your “dance with finance.”

Delaware Options in Financing a Home

Many Delaware residents today are in search of financing options to purchase their own home. Undeniably, the abode is still the priority of any individual or family out there who aims to have a more stable and secured future.

Financing and owning a home will definitely prove as a great feat. It entails that the individual is fairly capable of supporting his or her own self and the family. Providing a shelter will definitely be a plus point to anybody.

As such, it is not surprising that many people, in Delaware or elsewhere, are considering their options in financing a home. Clearly, it is not good to be in haste.

This is one purchase that will involve a lot of money, time, effort and emotions. Thus, buying your home must be carefully and seriously considered.

Seeking Delaware Home Financing Options

Seeking your options in Delaware for home financing is something that you must properly evaluate. Not everyone of us will have sufficient cash to purchase a house and lot in one payment. Financial measures need to be taken.

There are many options that you can take to be able to fund your goal of financing a home. All it takes is reviewing each of them according to your situation. Then you can easily work your way to enjoying the home you own.

Here are the various options you can consider for financing a home.

1. Getting a Bank Loan

There are many banks in Delaware that you can inquire for financing options for your home. You may even be maintaining a personal savings account or checking account on one. If you do, it will be relatively easy for you to get a home loan.

Banks are very easy to find in the market. All you need to do is to go on one during banking hours and you can easily transact a deal. There will be not much hassle as long you have the proper documents and records.

These are also financial institutions that have properly established themselves in the market. Thus, you can expect to receive proper funding.

However, you might want to consider the interest rates of the banks. They tend to be higher compared to others. It is not typical to get a negotiation because the banks are bound by the stipulated rates in their charters, and so are you.

2. Assistance from a Broker

Another option that you can resort to is to get assistance from a mortgage brokers. You can also find them in Delaware and properly consult your options in financing a home.

Mortgage brokers will actually work by scouting the different lending institutions in the vicinity. You can easily consult your situation and they will take the task of finding the terms from other firms that will suit your situation.

The good thing about brokers is the chance to get lower interest rates. However, you still have to review the financing institution that they will get for you.

3. Seek a Correspondent Lender

Finally, there is the correspondent lender that combines the benefits of the banks and the mortgage broker. Correspondent lenders are smaller financial firms. They operate in the regional divisions.

They are capable of lending you the money. They can also scout the market for the right mortgage deal for you. Once they are able to shop for this one, they can make it available to you for a lower interest rate compared when you go out and seek it for your self.

Correspondent lenders can be the very people who might help you in your endeavor. The only thing you have to work on is to find them in Delaware and consult your financing options to buy a home.

Most of the time, it is hard to determine the name of the correspondent lender from the borker. They do not usually indicate they are such lenders in their company names.

You may want to ask other people for suggestions. Even the internet can be a good starting point. You can easily narrow down your search to corporate lenders based on location like Delaware.

Finding the right assistance for your projected plan will definitely help you in getting the house of your dreams. Explore properly your options in Delaware and you will surely get the right financing to make your home.

Use Personal Finance Software to Save Money

Many of us would have been wondering how to save money in this world of a thousand needs. You will find so many requirements around you to be spending money on and when you can hardly find money to get that how are you going to save money?

I wish to tell you that it is definitely possible to save money. The first thing that we have to change about ourselves is the thought we have that it is not possible to make savings. It definitely is possible.

The most important requirement for saving money is a personal finance management tool. You can get many of them online. It is definitely easy to find one. Now after you get a tool, provide all the required data like your income statements, expenses, credit card statements, loans and all other financial statements that you need. Now the software can be used to make a personal finance budget for you. Once you get a budget, it will contain the details on how you have to spend each dollar you have got. You have to follow the budget strictly.

In the process you will come across many situations when you have got to cut down unnecessary expenses also. You will have to follow this very strictly. If you do keep your budget strictly for a month, you will find the saving mentioned in your budget in your bank very easily. You stick to the budget for a year means you will have the required savings in your account that can be used for an emergency need or for some investments. Thus you will be able to make lots of money by saving and sensible use of money. This money saved is equal to the money you have earned. Si learn to use your personal finance management tool for saving money every month.