Do you know the importance of money management and financial planning? Want some tips on how you can manage your hard-earned money and secure your future?
Then you’re in the right place.
Because today I’m going to show you the 5 easy money management tips that help you to invest in equity markets like in stocks.
The best part?
All of these proven strategies are working GREAT in 2019.
You don’t need many good reasons to invest in the stock market or in mutual funds.
Besides, if you are running a small business, then making equity investments will create a secondary source of income for your business. Normally, stock market investing is compared to gambling.
However, once you recognize the potential benefits of making stock market investments, you would start thinking otherwise.
Read Also: 5 Top Rank Diversified Equity Mutual Funds To Invest In India
Suppose if you are an entrepreneur with big dreams, then being a part of the ‘stock market’ will help you in a long way.
There is a common misconception that you need to have big money for being a part of the stock market.
It is, in fact, a myth.
This is one of the reasons why we don’t find many people investing in stock markets that also keep you out of trouble in future.
It really doesn’t matter whether you are an entrepreneur who just started your local business or a big-time industrialist. You’ll find no obligations for being a part of the dynamic stock market.
Read Also: 7 Steps Retirement Planning to a Safe and Secure Future
Investing in the Stock Market
Why do you need a back up to keep your cash reserves filled?
Now, this will unnerve you a bit.
According to the Bureau of Labor Statistics, about 50% of small businesses fail in the first four years. It is not possible to reason one thing for the failure. However, 82% of small business owners have cited cash flow problems as the reason for their collapse.
If analyze the cause, money management is definitely one of the issues.
You give customers huge credit terms and then do not track the payment status. In the end, you will be short of cash when you need them the most.
Completely depending on a single source of income is harmful to a small business. You might take a bank loan or approach money lenders, but you have to pay back everything after some time.
Basically, your entrepreneurial journey will be a cycle of paying and getting paid again with no profit.
Think that you invested in the stock market and now you are the shareholder of some company ‘X’. Suppose the stock price increased and the company ‘X’ made some good profit, then you’ll be paid a bonus and dividends.
You didn’t do any work. You were just a shareholder of the company ‘X’ and made money while you were busy running your business.
This is really something that every small business owner would look forward into. Meet all financial obligations without having to approach any third-party for extra funds.
“It Takes Money to Make Money”
Nobody can understand this better than a business person.
Earlier I said that you don’t need to have big money for making an equity investment. It’s also true that you’ll have more financial obligations in the first few years of your entrepreneurial journey.
Sometimes small businesses can fail even after 10 years. However, you just have to invest more irrespective of whether you are making any profit or not.
You made some revenue, but you invested all of it in improving your small business.
The second time you did not make any money, but you still need more cash for making investments. You have no other option and took a loan. Now you are paying high interests every month.
There will be more loans, but no growth, and finally, you’ll be bankrupt.
Your business sales are good and you want to make investments in stock, but you don’t have cash.
You are just sale rich and cash poor. It’ll be not much time before you come out of the business.
Now stay with me.
Your sales are good and there is some positive cash flow. That means you have made some revenue.
Now, you invested some part of that money in the stock market and rest for other business operations.
There is very less chance that you’ll come anywhere near scenario III. Most of the times, it’s the bad way of managing money that impacts your chances of making any suitable investments. Yet, there are a lot of benefits you would gain investing in stocks.
For the reason, you should follow some defined business model that would help you optimize the cash flow for your business and here’s the list.
Money Management and Stock Market Investment
If you are managing your money that means you are saving your money…
Here are some of the money management tips to follow and keep your small business financially stable.
1. Plan your Budget & Stick to It
It’s time-consuming, but preparing a budget is very much necessary.
Creating a budget you will recognize the sources of your income, how much money you make and the expenses that will come. If you are a smart business person, your budget will also cover the seasonal expenses. Some months, your sales may dip or it may increase, but you will always be prepared for the situation.
Also, it is not just enough to have a tight budget plan. You also have to follow the plan without breaking the chain. The tendency to go beyond your budget plan will always be there if you are using a business credit card. So avoid using that and use a prepaid card instead.
It might take a few hours or even a day to prepare a budget. But it’s definitely worth your time. You’ll not just make wise spending decisions, but will save better.
2. Monitor & Track your Invoices
Your ability to run your business operations depend on the cash inflow. It doesn’t matter how many sales you have made or how much credit you have offered. What matters is how effective you are tracking each sale? And how many of them have paid you for the service/product?
At the end of the month, you have to pay your vendors and suppliers. Unless you do not have the cash you cannot pay your bills, employees, or make other valuable investments.
There are several invoice tracking tools in the market. Instead of manually going after each one of your customers, just automate the process. You’ll save your time as well as your energy.
Suppose you have given customer ‘X’ a credit term of 60 days, then you can start sending remainder messages a week before the date of payment. This is just to make sure that your customer does not miss the payment date.
3. Create a Business Expense Policy
Just because you prepared a budget doesn’t mean your expenses will stay within the defined numbers. At the end of the year, you can see the expenditures crossing the budget leaving you high and dry.
There are many reasons that create unnecessary costs. According to a study by the Association of Certified Fraud Examiners, expense reimbursement fraud accounted for up to 15% of media loss with a median loss of $26,000.
The T&E programs are important for a growing business. Normally, expenses under such a program can go out of hand when you don’t have a good policy.
These policies are a way to guide employees in spending your company money. Every extra dollar spent will be a burden for your small business finances.
Create a simple expense policy that will tell your employees how much they can spend or what is unnecessary. Take assistance of a technical team if needed.
Make sure that every point that is written is conveying a proper message to the employees about their individual expenses.
4. Go with the e-Payment System
It costs money if you are making cash transactions through checks or debit card. Maybe paying through cash is cheap, but it’s not safe. If you multiply the number of times you do transactions every day, then you are actually losing a lot of money.
Read Also: Bizarre Facts Before You Apply Credit Card Online 2018
It’s unnecessary to take a conservative approach when you have online payment systems. The online payment system is easier, safer, and convenient than how you normally handle your cash.
Even if your supplier is across the sea, you can make payments without any processing fees.
5. Do you have Surplus Cash Flow? Then Make Investments
Money management doesn’t completely focus on cutting costs or avoiding unnecessary expenses. It also means how you make use of the excess cash inflow for the benefit of your business.
Leaving the money in your bank account is a safe and conservative approach, but it’s not beneficial. You have to make the money work for you even when you are not using it.
Unless you don’t have other business obligations, you can invest in stocks. If you receive good returns, you’ll be creating a financial cushion during inflation.
Be smart while investing in stocks, because it’s your hard-earned money. If you make a bad investment, you’ll lose everything. Do your homework, be up-to-date with current market status and pick the best company.
Just to make sure you are making some good investment, survey their holdings and see how much profit they have made all these years.
Stock investment is the best way to enhance your income. Some extra cash when things are not going well for your business can save you from a lot of trouble.
The whole point is you how you manage and make use of the money to improve the financial situation of your small business.
Now it’s your turn.
Are you going to practice money management tips from today’s post and start investing in share markets?
What do you think about business and personal money management so that you can secure your future?
Either way, let me know by leaving a comment below right now.
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Published on: July 7, 2018