With the current market sell-off many investors intuitively feel that there are opportunities in the market. But they are often confused and don’t know what to do and where to begin.
Instead of rolling up their sleeves and start working with the “material” – as Anni Albers did, they find themselves “buried” in meaningless debates about market in general, or Apple or Brexit or currencies or the influence of politics on the market.
Over the past decade since the 2008 credit crisis, we have witnessed tremendous growth of shareholder activism. US is a leader in this field. Not a day has passed without reports in financial media about new activist investor campaigns or updates on companies in which activists already invested.
This trend, combined with the urgent need to be “accountable” to investors as a result of the crisis, played into the hands of investors well. But this wave seems to be fading somehow recently.
This presents investors with a challenge to get back to the basics, do their homework, start thinking for themselves and making investment decisions independently without any “external help”.
I believe that the focus on event-driven situations combined with general market decline provides an excellent lens through which investors can look at the “material”. Events provide a natural process of generating ideas with multiple and differentiated sources of risk. Specific corporate transactions, such as share buybacks, spin-offs, mergers or asset sales “create” a more exact risk/return profiles.
As an example, one can look at shares of Whitbread PLC which recently announced the sale of coffee business to Coca-Cola, the spin-off (carve-out) by FMC Corp of the Livent Corp (producer of performance lithium compounds), Wyndham Hotels & Resorts spin-off (declined ~30% since the start of trading) and many other companies.
Obviously, investors are not required to limit themselves to event-driven situations.
What is required is to roll-up the sleeves, identify opportunity set and not be paralyzed in the face of risk and volatility.
Securing Credit? Importance Of A Personal Financial Statement
If you, as an individual, are a salaried employee but now wish to start a business, then your personal financial statement will be the key to avail credit. You may not be entitled for a loan for business, as the eligibility criteria here underlines history and financial position of an existing business. Since, the business in question would be a start-up; you will have to depend on personal finances for the time being, as a means to fund the venture. It is however recommended to keep personal and business finances separate, in the long-run.
When providing monetary support to a new business, it is important for the fund-provider to understand your financial position, which is well-represented by your personal finance statement.
What Does a Personal Financial Statement Contain?
A personal financial statement reflects your financial health. It is a spreadsheet or a document that gives a breakdown of all assets, liabilities, and fiscal details.
- This document also contains general information such as your name, address, etc.
- The assets are detailed on the right side, while the liabilities are listed at the left side of the sheet.
- Liabilities include credit card balance, a personal loan, mortgage, unpaid tax, and more.
- Assets include amount of balance in bank accounts, trading accounts, retirement account balances, and similar information.
- If you are married, then you can apply for a joint personal financial statement, which shows details of all debt incurred and owned assets, of both the involved persons.
What is excluded from a Personal Balance Sheet?
There are a few things, which personal financial statements do not show.
- Business-related liabilities and assets do not surface in a personal financial statement.
- This spreadsheet also excludes leases and rentals since the rented or leased assets are not under your ownership.
- A personal balance sheet will exclude personal property such as household goods, furniture, and more, which cannot be sold off to repay a loan.
- However, property that has significant value such as antiques, jewelry, etc, can be included, if the asset value of these items are verified for appraisal by a certified agency.
Analysis of Net Worth, Possibility of Availing Credit, and More
A personal financial statement thus basically shows your net worth, which is assets minus liabilities, and it holds a great value, when it comes to seeking loans.
- Net worth translates as what you will have in cash if you sell off all the self-owned assets to repay debts.
- If the financial statement shows debts as greater than assets, then your net worth will is a negative.
- For instance, if the sum of your utility and credit bills, auto loan bills, mortgage bills, etc. sum up to be more than the cash of all the investments and real estate property you own, then your net worth is negative.
- If the net worth shows as negative, you can file for bankruptcy protection to resolve some of the debts. It may prevent creditors from collecting outstanding debt by posing any financial threat or stress on you.
- However, certain liabilities cannot be discharged, and these include alimony, taxes, child support, and more.
Thus, personal financial statements have a great impact, when it comes to securing funds to run a new business. The document allows banks/NBFCs to assess your financial situation so that they can take an informed credit decision. If your financial health is not up to the expectation, you may be given an option to provide a personal guarantee, pledge an asset, or co-apply for the loan.
How to Fund Your Start-up Business?
You can either apply for a property loan or a soft loan to arrange capital for the venture, or opt for a small cash loan or a short-term loan, until the business attains enough vintage and financial history, to shift to a business loan suited for only business purposes. Thus, by comparing personal financial statements over a time, you can track your financial health and monitor it closely to improve the same. You should keep a check on this document regularly, especially if you intend to avail credit for business needs.
What is a Business Financial Statement?
A financial statement of your company will list liabilities and assets specific to the business alone. It will depict the net worth of the company, and leave out your personal financial details. The financial statements of an organization, include income statements, profit and loss statements, proof of revenue generation over a specific time period, expenses and debts incurred, cash flow statements (indicated the amount of cash the business has), shareholder equity statements (indicate the performance of the company’s stock).
Thus, a personal and business finance statement are different from each other in lot many ways, though they serve the same purpose, which is to denote the financial position of an entity, be it an individual or a company. An organization’s financial statement comes in use when applying for a traditional business loan, which is the best way to finance your start-up initiative, after it attains at least 3-years vintage.
If you wish to secure a loan for your start-up business, do not hesitate to take support of your personal finance for the moment. And to avail monetary support via this route, you need to keep a regular check on your personal financial statement.
Video: A “How To” On Being Financially Responsible
How To Invest Your Way To Your First $1M (In 8 Steps)
While being a millionaire most certainly offers a sense of privilege and extravagance, it also provides comfort.
Despite the idea that many of life’s luxuries can cost you your bank (plus a large chunk of your future earnings), achieving comfortable wealth is possible—if you’ve got a solid investment plan you’ll follow religiously.
Here are eight investment strategies to work your way to your first million dollars.
1. Say No To Fees (Of Any Sort!)
Investing comes packed with hidden and some obvious fees – broker fees, distributor fees, exit and entry fees, maintenance fees, and a string of other service-based fees. If you can manage your own investments and money, you can save hundreds of thousands in fees over the lifetime of your investment.
2. Don’t Try To Time The Market
This can be one of the biggest blunders one can make—simply because it’s impossible, speculative and you’re gambling with your savings. While there are indicators that show market trends, this does not promise that your investment will most certainly move up or down.
#BQPortfolio | Don't try to time the market, Sunil Pandey learns as he plans his retirement.
— BloombergQuint (@BloombergQuint) July 10, 2018
3. Think Long Term And Diversify
If you put all your investments into one asset class, your investment will tank the minute the asset class goes into free fall. How do you beat this? Plan and diversify your investment – it could be debt, treasury bills, equity, real estate, startups, business ideas – anything, as long as you think long-term. This can pay off in the long run.
4. Think Like An Owner
When you buy your stocks or make your investments, think and act like it’s yours – you’ll be doubly careful to make the right checks and invest smart. When you invest in solid, robust companies with this in mind, the returns would also be equally strong. Good companies can pay you high dividends that can up your total income.
5. Invest In Yourself First
Be it education or investing for your retirement, put yourself first and then try to budget for the other frills in life.
6. Borrow If You Can, Don’t Buy
With a growing shared economy, you now have plenty to choose from – co-working spaces, ride-hailing and ride-sharing services, shared rentals and accommodation, and the list goes on. Here’s where you can really cut costs – be it while running your business or as a regular looking to channel the savings elsewhere.
7. Set Goals (And Stick To Them)
Make sure you start saving as early as possible and invest it – even a dollar can compound over time. As time goes, set bigger goals and get excited about them! Once bonuses and income increases come your way, bump up your investments – it can soon touch a quarter of a million.
8. Max Out Early
Your 401K can be one of your biggest retirement funds and maxing out your annual contribution by the end of June can be a great way to boost your retirement savings. How does this help? It gives your money an additional six months to compound.