15 best tips and tricks to saving and investing
Saving early and investing wisely can hold you in good stead with your personal and business finances. Planning well and managing your finances are key to successful money management. It’s important to set your goals and determine your risk appetite. Based on the profits you’re targeting you will need to diversify your portfolio and time your investments. Let’s explore some tips and tricks to effective saving and investment.
- Pre-set your goals: When you have a set objective in mind and on paper, you can go about building an investment plan based on your unique investment profile. This helps determine if you can achieve your targeted profit margins. You can draw up an annual budget while taking into account inflation and other business expenses like insurance and taxes, which can help you forecast your savings.
- Limit expenditure: Expenses can quickly eat into your earnings if you’re not careful. You need to regularly scan your bank statements to check for unaccounted expenses, which can often go unnoticed. You should try to buy items like office supplies in bulk and shop around for the best deals on your fixed payments such as internet, utilities and so on. Use automated technology to save on energy and other areas where possible, such as using automated systems to turn off lights in the office when not in use.
- Protect yourself and your business: Buying sufficient business insurance and life insurance is imperative. You will also do well to draw up your will to include your business assets.
- Secure a line of credit early on: As soon as your business picks up from its initial start-up stage, it’s wise to approach a reputed bank to get a line of credit rather than wait to approach a moneylender when you’re facing a financial crunch.
- Approach a factoring company: When you’re at the initial stages of your business start-up it’s important to have swift cash flows, and waiting a long time for your invoices to be paid can be detrimental to your business growth. With invoice factoring, factoring companies can lend a major percent of the money to you against your client invoices, allowing you to have constant cash flow as needed. They will then collect payment from these invoices at a later date, charging you a small fee for the services provided.
- Determine your risk appetite: Each person’s risk persona is unique and largely based on their psyche. This risk profile helps determine the right product type for you. A risk-averse or conservative person will prefer investing in fixed income investments rather than riskier market-linked ones. A risk-taker with a high risk-high reward profile would much rather invest in the equity markets. It’s also important to find out when you need the money. If you want it within the short term, it’s best to avoid long-term investments.
- Diversify your portfolio: Investment funds are the ideal way to diversify your portfolio, giving you the benefit of various investment types in a single fund. You should maintain a mix of active and passive investments. The broader the fund the less risk you’re taking on. A reputed financial advisor can help you determine the right funds for you. Expense ratios and fee structures need to be identified as they all have an impact on the profitability of your portfolio.
- Buy your loyalty from your suppliers: In a suffering economy and a market like we’ve recently had with the pandemic, vendors are looking to boost their cash flow and may be willing to offer a bit of a discount on prices in exchange for your loyalty. There is no harm in trying to negotiate fair and reasonable terms for both parties.
- Maintain an automated system for strong and regular cash reserve build-up: In good times it’s ideal to try and save whatever you can and build a good cash reserve that can hold you in good stead in difficult times and not prejudice your decisions. A good margin is ten percent of your annual revenue in the bank, which should increase with increased business risk. Ensuring an automated system in place to capture this portion of revenues before they’re used up is helpful.
- Keep your tax-deductible expenses in check: When you expense a large amount of entertainment-related and travel-related expenses like fancy dinners and trips abroad through your business, you could be setting yourself up for financial woes.
- Look for missed tax deductions: By employing a great accountant to review the past three tax year submissions, you can find missed tax deductions that can help build your savings.
- Re-invest into your business: Early into your business story, it’s ideal to reinvest as much of your profits as possible into the growth of your products and services so that you can have healthy cash flows down the line.
- Save your cash: A business can employ efficient cash conservation tactics by improving its payables and receivables cycles as well as invoicing well in time.
- Adopt a simple advertising policy: Sometimes the best form of advertising is with a personal touch. Good old word of mouth, blog posts, and social media posts can afford you many loyal return customers and save your dollars as well.
- Rethink your physical office space: Fixed costs like an office space quickly eat into your earnings margin. There are some businesses like a hairdresser’s which justify a physical space while there are myriad others that can function perfectly well with a remote working model. If you have to you can think of a short-term rented space or a shared working space rather than a long lease on working space.