Money Release: Making, Saving, Investing and Debt Management » business

Personal Finance Tips #7: Educate Yourself

Victorino — Wed, 09 Jun 2010 16:08:58 +0000

Knowledge is power! That is why if you want to strengthen your personal finance, you need to gain knowledge. Our seventh personal finance tip is to educate ourselves. Education doesn’t only mean you need to go to a school or a university to acquire it. It also includes education outside from schools. Education can also be our personal asset that cannot be robbed from us by any theft – though it can be shared and make yourself useful to the community. Knowledge or wisdom can be acquired from listening, reading, experiencing or from reflecting one’s self. It serves as our light in every direction we are heading. It also makes our market value increase. When you are an employee, you are considerably more valuable if you got a master’s degree or a prestigious certification than if you are not.

As we can be our best assets, we need to improve ourselves. We need to increase our market values. But how can we do that? We can do that by increasing our knowledge and education – formal or informal depending on our necessity. If you are an employee, it is just advisable that you get higher education (master’s degree, certification, etc.,) to aid your promotion. If you are an entrepreneur, you can also get higher education like MBA or the like, attend trainings and seminars or just conduct your own research to develop your business.

The fruits of education are these: if you are an employee, you can get a higher salary and if you’re an entrepreneur, you can bring your business into progress. Moreover, if you don’t have the both (business and employment), you can gain the capability to have one of them or both if you become educated. Knowledge also brings skills. Skills can give us opportunities to earn money and solve financial problems.

Education helps us reinforce our finances. It can also boost our earning capacity, orient us the discipline to control our spending, and teach us how to save and invest our money. Sometimes our financial world is dark and uncertain. But because of knowledge, we have light and calculations that give us almost precision. Therefore, education cannot be ignored. It should be prioritized just like how we prioritize our selves. There are many books that can be read. There are many reliable articles on the Internet where you can get the wisdom to manage your finances. We should not stop from learning. We should not stop and claim that we are already wise. We should be like that if we don’t want to be called fools. Remember that foolishness can lead anyone to shame.

Wise people are humble. They also live in modesty. These attributes keep them away from excessive expenses and unwanted debts. Apparently, foolish people are boastful and live in extravagance. Consequently, they lose most of their money and they fall into the trap of debt. By having wisdom and knowledge, we can have the information and cautions we need to plan strategically. We can set effective procedures that will help us achieve our financial goals. Finally, we can learn the principles and behaviors that will fortify our personal finances.

Personal Finance Tips #6: Forget the Money

Victorino — Wed, 09 Jun 2010 15:42:10 +0000

The title of this article may sound absurd. How can we become financially stable if we forget or ignore money? But what most of us don’t know is that too much attention on money can bring us financial disasters, and even a whole life problem. Many people have loved money more than anything else. They even sacrifice their real treasures and assets for money. They have forsaken their loved ones and even God for the love of money. Other people give up their integrity, honesty and good name just to not lose money. Aren’t they aware that the love of money is the root of all evil? And evil can lead us to destruction – even financial destruction?

Now, why I am saying that one practical personal finance tip is to forget about money? I’m telling this, because I want everyone to focus on becoming great instead of concentrating on money. The Bible even said, seek first the kingdom of God and all these things be will added to you. This means let’s seek first for greatness rather than things which do not last forever. Becoming great is a combination of being humble and one who serves God and His people. But how can greatness (humility and service) can help us stabilize our personal finances? Simply, if you become great, you will bear greatness.

By becoming great, we can avoid financial troubles – even long-term and permanent troubles. In earning money for example, when you work great in your business (serving your customers well, treating your employees the right way, and becoming responsible to the government), you will be assured that your financial condition and operation will have a bright future. Just imagine if you will just concentrate on money. For example, if you deceive your customers to have bigger profits, give unjust compensation to your employees just to cut your cost, and practice tax evasion just to save more money – what will happen? Do you think you will prosper? But of course you can be financially successful. But that will only be temporary. You customers will not return to you, your employees may leave you, and the IRS may impose tax penalties on you. The consequence will be a great financial tragedy for you and your business.

How about if you are not a businessman? Let us say you’re an employee. The virtue of greatness still applies. If you concentrate in doing great to your job, performing well and having the best results, there will be a huge chance that you will be promoted and will receive incentives and bonuses. Thus, helping your financial capability to be strengthened. Moreover, if you will not boast and will stay humble, you will be exalted and win bunch of good friends. These true friends that will be yours will help you in any aspects of your life, including the financial aspect of your life.

If you wish to get out of debt, greatness also applies effectively. Often, people, because they don’t want their money (even their last money) to leave them, they don’t pay their debts responsively. A responsible person does his promises, including his promises to pay his dues. That’s why if you want to really extinguish your liabilities, you should do great in doing your vows. You should not just focus on keeping that money in your hands, but you should concentrate in preserving your word of honor, as well as your credit score, which are beneficial to both of you and your creditor.

Therefore, concentrate on becoming great in everything you do. Sometimes or even most of the times, you must forget that money. Be great and be righteous, and money will not leave you – even if you will not focus on it. Don’t hold your money too tight, so that it may flow freely, and return to you voluntarily – giving you the freedom you have first given to it.

How to remove curse and bad luck?

Victorino — Fri, 14 May 2010 05:53:36 +0000

Have you ever thought that you are cursed or having bad lucks? Life can be filled with unpleasant to terrifying things and events we usually called bad lucks. These things can happen to our love life, career, business and finances. I am not a Feng Shui expert who perhaps manages to control the position of elements (wind, fire, earth and water) to attract good lucks and drive away negative energies. I am a servant of God, who believes in His unfaultable words which are written in the Holy Scriptures. The question how to remove curses is actually answered in the Bible. I’m not discriminating any religion or spiritual beliefs beyond Christianity, but I strongly believe that my basis is justifiable, verifiable and comprehensible, more than believable. In the book of Proverbs, we can read the following:

Proverbs 3:33
“The Lord’s curse is on the house of the wicked, but He blesses the home of the righteous.”

Now it’s clear that the Lord gives two different things to two different people – the wicked and the righteous. Actually, He has given us the free will to choose between righteousness and wickedness. Do you want to become wicked or righteous? In case you don’t completely understand who are wicked people and who are those called righteous people, here are some of the Bible’s written descriptions and comparisons between the two:

In the Bible, we can read the following passages:

Proverbs 12:5-7
“The plans of the righteous are just, but the advice of the wicked is deceitful. The words of the wicked lie in wait for blood, but the speech of the upright rescues them. Wicked men are overthrown and are no more, but the house of the righteous stands firm.”

Proverbs 12:10
“A righteous man cares for the needs of his animal, but the kindest acts of the wicked are cruel.”

Proverbs 12: 12-13
“The wicked desire the plunder of evil men, but the root of the righteous flourishes. An evil man is trapped by his sinful talk, but a righteous man escapes trouble. A righteous man is cautious in friendship, but the way of the wicked leads them astray.”

1 Corinthians 6:9-10
“Do you not know that the wicked will not inherit the kingdom of God? Do not be deceived: Neither the sexually immoral nor idolaters nor adulterers nor male prostitutes nor homosexual offenders, nor thieves nor the greedy nor drunkards nor slanderers nor swindlers will inherit the kingdom of God.”

We can say that righteous persons are those who pleases God by following His commandments, which include being truthful, loving, caring, kind, peaceful, gentle, just, faithful, diligent, servant, humble and other virtues that make a person upright in the eyes of God. On the other hand, wicked people are those who dismayed God by doing sinful actions like lying, murder, cruelty, sexual immorality, theft, greed, drunkenness, slander, injustice and other bad behaviors that weaken a human soul.

As it is written, righteousness and justice will bring us blessings. It’s not the position of your doors, neither your windows nor the angles of your furniture that will control your fortune. It’s not even the amount of money that you pay to your priest, nor the abundance of foods and wines in the feast and ceremony of the blessing of your home that will bring you good luck and good fortune. But it is your will to righteousness that will make God bless you. Isn’t it more logical, spiritual and justified?

This article is not written to condemn or judge people. I wrote this to enlighten people and guide them to blessings and good lucks. You have a choice! You can choose to be righteous and be blissful with you life, career, family, business and finances, or you can ignore righteousness and stick with wickedness that will bring you misfortune, and in worst – hell. But forget hell… let’s concentrate our way to fortune and ultimately, heaven. You are free to ask for more enlightenment – just fill out the comment box below.

What is a statement of cash flow? Financial definition

Victorino — Sat, 24 Apr 2010 03:33:18 +0000

International Accounting Standard (IAS 7), issued by International Accounting Standards Board (IASB) states that the statement of cash flow analyzes changes in cash and cash equivalents during a period. Cash and cash equivalents comprise cash on hand and demand deposits, together with short-term, highly liquid investments that are readily convertible to a known amount of cash, and that are subject to an insignificant risk of changes in value. An investment normally meets the definition of a cash equivalent when it has a maturity of three months or less from the date of acquisition. Equity investments are normally excluded, unless they are in substance a cash equivalent (e.g. preferred shares acquired within three months of their specified redemption date). Bank overdrafts which are repayable on demand and which form an integral part of an entity’s cash management are also included as a component of cash and cash equivalents [IAS 7.7-8].

The statement of cash flows is presented into operating, investing and financing activities. Operating activities are the main revenue-producing activities of the entity that are not investing or financing activities. These activities may include cash received from customers, cash paid to suppliers or employees, interest paid, income taxes paid, and cash paid for other operating expenses.

Investing activities are the acquisition and disposal of long-term assets (such as property and equipment, investment in associates and subsidiaries and investments in bonds) and other investments not considered to be cash equivalents.

Financing activities are activities that alter the equity capital and borrowing structure of the entity. These activities include proceeds from issuance of shares, cash receipts from obtaining loans and payment of those loans.

Interest and dividends received and paid may be classified as operating, investing, or financing activities, as long as they are classified consistently from period to period. Cash flows arising from taxes on income are normally classified as operating, unless they can be specifically identified with financing or investing activities.

The operating portion of a statement of cash flow can be presented using direct method or indirect method. Direct method presentation is encouraged, but the indirect method is acceptable. The direct method shows each major class of gross cash receipts and gross cash payments. The indirect method adjusts accrual basis net profit or loss for the effects of non-cash transactions.

The statement of cash flows shows how the changes of accounts in the statement of financial position and income affect an entity’s cash and cash equivalents. The statement gives users a picture of the flow of cash flowing in and out of the business.

Users of statement of cash flow include creditors, who needs to know the entity’s ability to repay its obligations; investors, who want to know if a business is sound and can guarantee return of investment; employees, who need to know whether a company can pay them the right compensation; and owners and shareholders, who want to assess if the business can be able to distribute dividends.

Reference:
International Accounting Standards Board (IASB)

What is a statement of comprehensive income (income statement)?

Victorino — Wed, 21 Apr 2010 13:54:44 +0000

The statement of comprehensive income illustrates the financial performance and results of operations of a particular company or entity for a period of time. It is one of the five basic components of a complete set of financial statements, the other four being the statement of financial position, statement of cash flows, statement of changes in equity, and notes to financial statements. The statement of comprehensive income shows the comprehensive income for the period. Comprehensive income for the period includes profit or loss for that period plus other comprehensive income recognized in that period. Comprehensive income as defined by the Financial Accounting Standards Board (FASB), is the change in equity (net assets) of a business enterprise during a period from transactions and other events and circumstances from non-owner sources.

Based on International Accounting Standard (IAS) 1 as amended, issued by the International Accounting Standard Board (IASB), the comprehensive income consists of changes in revaluation surplus; actuarial gains and losses on defined benefit plans recognised in accordance with IAS 19; gains and losses arising from translating the financial statements of a foreign operation; gains and losses on remeasuring available-for-sale financial assets, and the effective portion of gains and losses on hedging instruments in a cash flow hedge. These items are not part of the net profit or net income, but included in the statement to give its users the clear view of an entity’s results of operations, and the operating and financial events that have changed the worth of an owner’s interest in a business.

The components of statement of comprehensive income include the following items:

revenue
finance costs
share of the profit or loss of associates and joint ventures accounted for using the equity method
tax expense
a single amount comprising the total of (i) the post-tax profit or loss of discontinued operations and (ii) the post-tax gain or loss recognised on the disposal of the assets or disposal group(s) constituting the discontinued operation
profit or loss
each component of other comprehensive income classified by nature
share of the other comprehensive income of associates and joint ventures accounted for using the equity method
total comprehensive income

The following items must also be disclosed in the statement of comprehensive income as allocations for the period:

profit or loss for the period attributable to non-controlling interests and owners of the parent
total comprehensive income attributable to non-controlling interests and owners of the parent

Aside from the above items, additional line items may be needed to fairly present the entity’s results of operations. Extraordinary items are not already permitted to be presented in the statement of comprehensive income.

By reading the statement of comprehensive income, the user can assess the revenues, cost, expenses, other income, and other comprehensive income of a business enterprise for the accounting period ended. The net profit or total comprehensive income of a particular company indicates its performance and how its operations went. It answers the question whether if a business incurs a comprehensive loss or comprehensive income for the period. This statement can be very important for owners, investors, creditors and even the estate or government in analyzing profitability, return on equity, return on investment, ability to pay interests on debts, and income taxes.

How to reduce income tax payable and expense

Victorino — Wed, 31 Mar 2010 13:37:27 +0000

For the year that has passed, we will be obliged again to pay our income tax dues. It’s somehow ridiculous to think that you will be punished, in the form of tax obligation, when you do well in business or in employment – that is having a net income or profit. Have you ever wished you never had an income so that you will not be charged for an income tax? But that is life, if you live in a country that relies on the profits of its citizens; you need to give back the favor for standing on its land. Now we need to face the reality. We need to bravely face that obligation. This article aims to guide everyone in legally reduce their income taxes.

To save money from our tax dues, we need to have tax planning. For our last year’s income tax, what we can do now is to pay for it on or before its due date to avoid penalties and save you money. For the current accounting period or taxable year that has not yet ended, we can still do something to reduce our taxes. As I said, we need to plan our tax flows. We can still legally avoid tax. Tax avoidance, in contrast to tax evasion, is the legal solution to reduce tax payable by utilizing of the tax system to one’s own advantage. To wrap-up everything, I listed the following ways to reduce our income tax payable.

1. Pay tax before it dues. Simply, penalties and surcharges adds up to your income tax payable, hence avoid it by remitting your dues on or before the deadline.

2. Utilize your tax credits. Sometimes, people are lazy to gather documents. However, certificates of creditable taxes can be good help or can even reduce your income tax payable to zero or negative. So move out! Search and ask those certificates to your customers, tenants or employers.

3. Claim prior year’s overage of tax payment or tax refunds. There will be no inflow or outflow of this amount. You simply claim it to decrease your income tax payable. But watch out also for expirations.

4. Deduct your deductible expenses. Since income tax is based on net income, it means the lesser your net income is, the lesser the tax you will pay. But not all expenses are deductible. In this case, you need to properly plan your future expenses to maximize what are deductible and minimize what are not deductible.

5. Earn more non-taxable income. Like expenses, not all revenues and income are taxable. Hence, if you need to choose between taxable and non-taxable income, it’s always beneficial in tax sense earning free-tax income.

Remember that tax planning should become one of your important financial planning. But still keep in mind that though there are opportunities that we can save money on our tax, it may also means sacrificing our other form of money saving. We can maximize our deductible expenses, but not maximize our revenue potential. We can also minimize our non-deductible expenses but miss types of expenses that are important in our business. Therefore, we should take the whole picture and align our tax planning to our overall financial planning to effectively manage our business and personal finances.

What is the Difference Between Debt and Equity Securities?

Jay — Sat, 27 Mar 2010 07:03:44 +0000

It is normal for business owners to search for financial resources that will help their businesses to achieve investment expansion. There are varieties of financial resources that business owners can utilize. Basically, there are two categories of financial resources – debt and equity securities. A debt refers to the borrowed money that is repaid with interest rates while equity securities deal with producing money by selling interest rates within the company. In this article, we will discuss further the differences between debt and equity securities including its advantages and disadvantages.

Debts do not weaken the ownership interest of business owner within the company since the lender does not have the assertion of the business equity. A lender is only allowed to repay the principal agreed-upon of the loan including the interest rates. The lender also has no direct assertion on the business’ future points. Apparently, if the business is successful, the owner obtains a bigger portion of the rewards rather than selling the stocks in order to finance the growth of the company to investors. However in case of interest and principal obligations, and variable rate loans, the amounts are often planned and forecasted.

Debt and equity securities are considered as basic types of financing or loan. It is important to know which of these types is realistic for your business. The borrowed money from debt financing can either be short-term or long-term. The short term can be less than a year while long term can be more than a year. For smaller businesses, debt instruments are often required. This is when commercial debt financing is similar with personal debt financing.

Equity financing is the act of exchanging money for a business ownership share. This type of financing allows business owners to obtain funds without the accumulation of debts or having to repay certain amount of money at a given period. However, one great disadvantage of equity financing is the increase of ownership interests, thus the possibility of loss of control is present. This loss of control may lead to sharing of ownership with supplementary investors.

Debt and equity securities or financing provide various opportunities in producing funds. In the commercial sense, the ratio between the debt and equity securities should be maintained. However from the perspective of lender, the ratio between the debt and equity securities is often measured based on the amount of available assets for repayment of the debt in any event of default. Any excessive debt financing will lead to impairment of the business owner’s credit rating as well as his or her ability to produce money in the future. If a business has too much or extensive debts, it can be considered as an unsafe, overextended, and risky investment.

Too much equity financing on the business will not help business owners to make use of the most productive benefit of the capital. Moreover, the capital is not being used essentially as influence in obtaining cash. However, if the equity financing is too little for the business, the owners are obviously not committed to their business.

How to Avoid Declaring Business Bankruptcy?

Jay — Fri, 26 Mar 2010 07:08:04 +0000

In order for a business to become successful, cash and assets are important elements. Without these elements, a business is not possible to operate. If a business is in danger of declaring bankruptcy, there is often a proposed workout plan from a group of creditors. This plan is often used before the business or company approaches a bank for credit. The group of creditors is often paid in different sources that include equity infusion, new financing, and future cash flow. However, before a business can offer repayment plan to its creditors from future cash flow, the business should generate enough cash flow to repay all of its delinquent debts.

Typically, a business would often find possible means to avoid declaration of bankruptcy. One of its solutions is to find a lending institution that will help them pay off its current creditors. However, this solution can be a very tough endeavor for the business since it is hard to search for a lender that provides considerable credit terms. Just the same, equity investors are not that willing enough to allow the combined capital to be consumed by the current creditors.

In most cases, creditors would often ask a business or company to present a restructuring plan that will show on how it will sustain its ongoing operation as well as its future. A review on the historical finances of the business is often done. Part of the review is the prepared projections of balance sheet, loss, profit, and cash flow. The projections must show that the business has enough cash flow to maintain its existing operations.

Hiring for a bankruptcy lawyer is another solution for business to avoid declaration of bankruptcy. This is usually done when the cash flow of the business is tightening and the creditors are starting to interfere with the operations of the business. A bankruptcy lawyer is a legal adviser specializes in business reorganizations. It is common that management does not have enough experience in handling a distressed business.

A bankruptcy lawyer must able to guide the business throughout the process of recovering. This person will act as the filter or barrier against dissatisfied creditors. He or she will also act as the medium to creditors that the business is doing everything to avoid declaring bankruptcy. Searching for a bankruptcy lawyer that is competent, reliable, and experienced can be tough. It would be a good idea to ask for referral from your trusted advisors, accountant, or company legal adviser. Most of the bankruptcy lawyers today undergo a certification process for their specialization, thus look for a lawyer that is certified for the job.

Aside from a bankruptcy lawyer, the business can also hire for a turnaround or financial consultant. This individual can assist the business during the workout process in implementing workout plan, negotiating, formulating plan, communicating with creditors, and preparing financial business projections. Essentially, a business should focus on improving or maintaining its financial performance and operations. Negotiating with the creditors is also an effective solution to avoid declaring business bankruptcy.