There are people decided to enter the business world, but without the necessary experience to commercially exploit certain product or service. For them, acquiring the rights to use a trademark, along with experience and key knowledge, is without doubt an attractive business formula and a very good investment option, but sometimes you can get unpleasantly surprised.
Fairs and franchising exhibitions are becoming increasingly frequent, and they are already part of the usual agenda of each year. As you know, this fairs are attended by the owners and representatives with a clear desire to sell, and therefore strive to project an image of reliability and solidity.
Trying to show the best image possible has always been important in all areas in which human beings are involved, but here is at stake both your money and your financial future; therefore, when evaluating a franchise, the first thing to avoid is to get yourself caught by the attractiveness of a franchise stand, the utilities and items offered, or multicolored well-designed commercial brochures.
Since not all franchises are equal and to avoid exposing your money and taking unnecessary risks, you should look to invest in a franchise for which you can assess how attractive it is and how much its strength is. One of the first signs that you receive from a reliable franchise, is that when you show interest in it, their representatives strive to make you understand the history of the franchise along with all its business information, putting financial data at your disposal as well as growth and expansion plans. This would be a good way to get the confidence you need to further evaluate other options. Transparency is the fundamental base of business; so you must demand it in matters that really are of your interest. In the opposite case, unreliable franchises do not try to convince you about the attractiveness of the business, instead they are trying to make an immediate sell, offering “great advantages” if you sign the contract right away.
Once you overcome that first and very important contact, common sense dictates that if you are interested in a particular brand the second step is to know certain details that will provide you greater certainty and reliability; for example: how strong is the brand you want to market in your geographic market space? What do other people who share the sector of activity in which you want to dabble in think about that brand? It’s also important that you inquire about the innovation policies that have launched the franchise and what benefits you will get from such policies. This question should also be asked about the technical and commercial assistance and in relation to product development.
Of course, it’s not enough to know the appeal of the brand to make the decision, do you already you have information on the loan and the conditions required by your creditor bank? Have you analyzed the performance figures? How long before the business will start giving profits? Can you afford that time? If the franchise gives you part of the financial support you need, in what terms would be agreed such conditions?
Finally, before getting any obligation or contractual commitment, and even if you are convinced of the attractiveness in terms of technical, financial and commercial aspects, it is advisable to seek advice from a lawyer with experience in the world of franchising. The legal advice will not only protect you against possible cases that may arise, but also will advise you on proper financial aspects, including of course the tax and labor issues you cannot ignore. As you can see, there is no way to separate franchises from finances; both go hand in hand, and while it is true that franchises aimed at the fashion industry and fast foods are the most demanded, do not forget to evaluate other options in non-traditional sectors, since the investment will be substantially lower and return rates are quite significant.
When you’re going to invest, the first questions you need to ask yourself is: Is it a worthy investment? Is it advisable to take the risk? One of the most important evaluations to differentiate one investment alternative from another is the combination of risk that you will assume, and the benefits you expect to get (profitability).
Generally, rikier investment should produce higher returns. If it were not so, any investment alternative that report the same potential benefits to another with a lower risk would cease to be attractive.
The risk is linked to the uncertainty of the benefits you actually get by investing. You can earn more than what you expect, less than desired, or you can even lose all the money you invested. There is no way to avoid the risk because profitability will never be assured.
Each alternative for investment is unique because it combines risk with profitability. Since not all alternatives have the same risk or the same return, there are two “laws” that common sense dictates and you should consider when choosing:
- Between two alternatives with EQUAL RISK, you must choose the MOST PROFITABLE ONE.
- Between two alternatives with equal PROFITABILITY, you must choose the one with the LOWEST RISK.
As you can see, you cannot separate the risk that you will assume from the profitability you expect to get, and although an investment with greater risk should produce higher returns, be careful when deciding because there is no guarantee that that will happen. To accept a higher risk does not always lead to greater profitability.
It is very likely that the biggest and most important purchase we make in life is that of our first home. Upon signing our first mortgage we get excited and celebrate such an event without really considering the financial obligation we are contracting that we must honor for many years.
At first, there is no better feeling than having the keys to our own home; with the passage of time, that feeling fades and is replaced by the desire to get rid of debts; which is not unreasonable, because the simple fact of reducing expenses due to interest is already a way of saving; plus you will feel emotionally safe, you won’t owe anything to the bank and you’ll be able to say that the house is completely yours. That security is one of the biggest advantages of paying the mortgage early, even though you may have to assume certain expenses for anticipated pay off.
Perhaps you feel a wild urge to free yourself of your mortgage as soon as possible, but before doing so it is appropriate that before you try to pay off the debts with highest interest rates (eg credit cards or consumer loans), you build an emergency fund (at least it should meet expenses for 3 months of your lifestyle), and review your retirement plan.
If you decide to pay off your mortgage early, there are some recommendations:
- Make payments every two weeks. This may be the easiest way to shorten the lifespan of your mortgage. If you pay the minimal monthly quota every two weeks, you can reduce your mortgage commitment for approximately four years. It’s important to note that the payment is every two weeks, so if a year has 52 weeks, you will make 26 payments (equivalent to 13 monthly installments). This system allows you to bring forward the payment schedule and further reduce interest expenses, as the last two payments (25 and 26) will be applied to reduce the loan’s principal.
- Increase the monthly payments. Perhaps it is the most attractive method for users who have some capacity for saving. If you have a financial slack that allows you to pay an extra above the contractual obligation you got when you purchased your home, you will not only pay less interest, but also reduce the lifetime of the mortgage. It’s all about getting a pencil and doing the math.
- Making annual payments. Quite possibly, at the end of each year you enjoy a good economic situation because you receive bonuses, payments for utilities, compensation, additional wages or other extraordinary income; well, with some financial discipline you can use some of that surplus to repay the mortgage loan. As in the above cases not only you will pay off the mortgage early and get rid of that financial burden, but it also will reduce the interest expenses, which in a nutshell is a saving. Other people prefer to set aside a portion of the monthly surplus to later destine it to repay the loan through an annual payment; thus they ensure flexibility amid the financial discipline and maintain a fund to cover unforeseen situations or any contingency that may arise along that
- Refinancing the mortgage debt and reinvesting. If you don’t feel attracted to any of the above methods, you still have this option to reduce the lifetime of your mortgage. Current interest rates (rather low) are an incentive to refinance debt, and if you’re smart about it, it can also allow yourself to cancel your mortgage early. Obviously, you have to assess the cost of refinancing with your creditor Bank (because refinancing costs money) but if the new loan has favorable terms for you, you will probably have a greater saving capacity, which in turn you can reinvest and make advance payments applied to the loan’s principal.
In any case, the method you choose to free yourself from your mortgage early will depend on what makes sense to you. You must choose the option that you feel more comfortable according to your financial situation and your personal and family preferences.
One of the big differences between saving and investing is that by investing you are engaging part of your savings in hopes (which is not certainty) of earning some more money, which is fine, but every time you invest you will be accepting a risk , which does not happen with saving.
By investing you risk some of your money to get more money. This is one of the ways you have to make money work for you, even while you sleep, you’re on vacation or having dinner with friends; but investing is very different than playing roulette or any other casino game (where chance intervenes), so you have to do it with intelligence. To invest wisely it is not enough to have luck or intuition; you must also have a reasonable expectation of profitability, which depend on the quantity and quality of the information you have about the investment and the judgment with which you draw conclusions from it, besides the risk you are willing to take.
Even with the uncertainty and the risk involved, smart investments will grant you more control of your money and the financial independence you’ve always wanted, but never forget that by investing you will be using some of your savings and therefore, you are compromising your financial capacity.
Always invest wisely, and never risk money you need to pay immediate or short-term obligations.
Many times we complain about not having enough money to cover our monthly expenses; it seems that we never have enough money, because the greater the amount entered in our bank account, the faster we spend it.
Although the issue of money is a sensitive subject for most of us, it is very likely that we are unaware of what we spend, or do not know for sure what we do with our money (we just realized that we no longer have it ), and those little recurring and regular expenses are the main routes where it escapes from us. Unnecessary purchases, unnecessary expenses, certain habits and certain social compromises, undo our pockets allowing our money to “Drain”, significantly reducing our ability for saving and investing.
If you take out your pen and play around with the numbers, try to calculate what you spend on coffee, bottled water and cigarettes; sum the monthly payments you make when you invite your classmates or workmates; try to calculate all the money you spend making small purchases of what you like or what attracts you, even when you don’t really need them.
It is not about depriving yourself of the things that please you, but to become aware of what you do with your money and the need to preserve some leeway that allows you to handle unforeseen situations.
If you want to prevent your money from leaking, try to get enough discipline to stop eating at fast food restaurants, reduce your consumption of coffee and cigarettes; have fun with outdoor recreational activities such as parks and rides that do not require large outlays of money activities. If you go to the movies, think about what you spend on popcorn and soda (these costs are quite significant). Try to go to work on foot or by public transport, and attempt to reduce the use of your own vehicle to avoid payments for fuel, parking and even an occasional fine which you would be exposed to.
And if you go to groceries stores, do it after eating; that way you can resist the lure of buying what you do not need, or purchasing too much (remember that the more you earn, the more you consume). Of course, avoid buying items for their beautiful packaging, as well as articles and magazines that are on the waiting lines of the cashiers (if they are there, it’s because they are not really needed).
In short, start identifying the small holes from where your money is escaping. You may be surprised when you see that without realizing it you’re losing up to 30% of your salary, and that that amount can be used far more intelligently to reduce some of your debts at your own pace, and make investments that increase the value of your money.
Financial intelligence incorporates multiple dimensions and transcends the mastery of the concepts of finance.
Robert Kiyosaki says: “Financial intelligence refers not so much to how much money you earn, but how much money can you keep, how hard that money works for you and for how many generations it has been preserved.” Obviously, obtaining financial independence by constructing a business system (quadrant D) or by investing (quadrant I) requires that we have a degree of intelligence applied to the world of finance.
But financial intelligence is not only essential for those who live on the right side of the Cash Flow Quadrant; it is also needed by those at the left side: those who are not comfortable in their role of employees (quadrant E) or who independently and on their own work long hours to ensure economic sustainability (quadrant A). With certain knowledge and enough willingness to break emotional attachments, these people can begin to design a system of self-generating money and thus cross the threshold of their respective quadrants.
Obviously, financial intelligence is not limited to the mastery of the concepts of finance, but also is associated with leadership, strategic thinking, personal marketing, communication, negotiation, conflict management, social skills and management of emotional heritage, and others.
A good way to identify to what extent you possess financial intelligence, is checking the following items:
- Your income is greater than your expenses (you have capacity for saving).
- You manage to find new forms of income (in several quadrants simultaneously).
- You have identified your financial goals and you have designed your task list to achieve them.
- You know how to optimize and earn higher returns on capital.
- You feel you are on the right track to achieve your financial freedom.
The people possessing a meaningful financial intelligence always think big, and regardless of the circumstances surrounding them, continually design plans to enhance their assets and reduce their liabilities, thereby obtaining greater profitability and liquidity while they improve their quality of life.
If you want to have a financial culture that is your ally in the life project you’ve designed, you must start by understanding the functioning of money as well as the psychological aspects that drive people to use it in a certain way.
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