Most of us grew up hearing, from our parents, how bad it is to be in debt and, as we got older, the same advice is given to us by friends and business associates. So, it is only natural to assume that, if you had the choice, you would buy a home with cash; or sink as much cash as possible into your home to avoid the massive debt associated with a mortgage.
There are advantages to buying your home with cash versus obtaining financing via a mortgage.
Cash Rules! Paying cash for your home eliminates not only the mortgage interest payments but also all the ancillary expenses that come along with getting a mortgage: appraisal fees; bank fees; lawyer fees; stamp duty fees. So, in essence, you get the house at a lower overall expense to you.
Cash will make your offer more attractive to most sellers, because in most cases it has the flexibility of closing the deal faster, if required, than one requiring financing. Plus, a cash offer might allow you to get the property at a lower price, a cash discount if you will.
Also, a cash buyer’s home will not be leveraged, which gives you, the homeowner, greater autonomy to sell the house more easily – even at a loss – regardless of market conditions.
Not So Quick Though…Mortgages Can Also Make Sense! Seeking finance, regardless if you have the cash, or a significant amount, also has significant benefits. Just because you can pay with cash does not mean you should.
Tying up all, or most of, your liquidity in a real estate purchase could tie your hands in other transactions. Opting to go with a mortgage can give you some flexibility in future investment opportunities’.
Cash buyers also need to be sure to consider their medium to long term plans. If the home requires major repairs or renovations, it may be tough to obtain a mortgage down the road, as you don’t know what your credit report will look like, how much the home will then be worth or other factors that determine approval for a mortgage. Having cash on hand to effect major home maintenance can be a major benefit to you.
The best advice though, when considering which option makes the most sense to you, is to opt for the choice that gives you the most return for your investment.
Understanding the value and importance of Business Interruption insurance begins with knowing what you need to know about it and how it works.
The first thing that you should note is that a Business Interruption policy should form part of your business’ overall disaster recovery and business continuity plan, which should be developed by following certain steps.
What is your business? What internal and external factors are critical to your operation? Who are your key partners? How exposed are you to natural disasters and other risks? What are your key operational costs?
Once you have answered these and other questions, the next step would be to write out an emergency plan detailing all the areas that would require immediate attention following an incident causing Business Interruption.
You should now be able to determine the type of coverage that is most suited to your business, after which a conversation with your trusted insurance broker is needed to help shape the Business Interruption coverage you need.
SO LET’S RECAP.
A Business Interruption insurance policy provides you with coverage for financial losses arising from an insured peril causing insured damage to an insured property.
The average cost of the loss of income due to Business Interruption is 36% greater than the actual damage to the property of a business itself. As a result, 40% of businesses impacted by catastrophes seldom survive.
Different businesses require different types of Business Interruption coverage, the varying types being Standard; Contingent; Non-Damage and Data Driven.
A Business Interruption policy should form part of your business’ overall disaster recovery and business continuity plan.
Whether you’re living hand-to-mouth or earning six-figures a year, it is essential that you know where your money is going, especially if you need to improve your financial situation. Budgeting gives you power over how you spend your income and if you want to have a handle on your finances it’s the only way to go.
Budgeting isn’t all about restricting your spending nor is it about cutting out all the fun in your life. It’s mostly about understanding. It involves knowing how much you have, where it goes and then planning how to best use it. Budgeting is making the most of your income!
The first budgeting requirement is determining a time-period, the most common period is monthly – as that is how most of us get paid, but in some cases, it can be weekly, biweekly or annually, depending on our income frequency.
After determining your budget timeframe, the next step is calculating how much income you receive. Usually this is your salary but remember to include your spouse’s income if you’re married. Then add in any other sources of income you may have, such as dividends, interest, income from your side business, and so on.
Now it’s time to see where all that income goes by recording your expenses.
Start with all the repeating payments you have, such as your mortgage or rent, car payments, insurance, debt (other loans, credit card debt, etc.,) school fees, and of course taxes. For most these are going to be fixed amounts that we cannot easily change.
Now let’s look at the expenses we have more control over (it’s time to dig deeper). The two ways to calculate these expenses are; 1) Take out your cheque book (looking at your bank statements can help as well) and 2) Save all your receipts for a few weeks and separate them into categories like gas, fast food, utilities, groceries, entertainment, subscriptions, restaurants, movies, drinks, repairs and miscellaneous. This will let you see where you’re spending the most money. A tip to setting up the categories is creating a separate section for every expense over a pre-determined threshold amount. If your miscellaneous category ends up as a major expense, you need to split out some spending recorded there into its own category. If you have online checking and primarily use cheques and your debit card, you may be able to download your transactions into a spreadsheet program to help with the categorizing.
You should now have all the information needed to create your personalized budget. So, go ahead, and total up your monthly income and your monthly expenses. Subtract your expense total from your income total. A positive number means that you are earning more than you are spending, congratulations! Creating a budget, in this instance, will help streamline your spending and result in a larger monthly savings potential.
If you end up with a negative number, don’t worry too much. The whole reason for creating a budget is to identify deficiencies and find out how to reverse them. Now that you can visually see how much you fall short, you can adjust your spending or saving in certain areas to improve your financial situation. Budgets help you track your spending to see where the leak is!
Often people who live paycheck to paycheck overestimate how much money they can spend and end up spending too much. You may be spending more money on things you want than things you need. Or, your money is slipping through cracks you didn’t realize were there. Whatever the case, setting up a budget and paying close attention to your spending will help you get back on track.
This process might require some lifestyle changes. For example, if you’re used to buying a latte every morning before work, you can start saving by making coffee at home, or going without coffee completely. You might have to get rid of the expensive cable package, because if you’re living paycheck to paycheck, you really can’t afford it.
Oftentimes you’ll realize that just making a few small adjustments can significantly improve your situation. This may mean cutting back on one of your newspaper subscriptions, eating out one time less a month, or even just hitting the matinee instead of the prime-time movie. Typically, just saving a few dollars here and there can be enough to not only make sure you spend less than you earn, but also apply a few extra dollars to things like high-interest credit card debt or help start a savings account.
Check back for our follow-up articles on budgeting: Ten tips to help you battle a spending habit, Setting up a successful budget system and Setting your financial goals.
Keeping up with the value of your largest asset. Three reasons why it is critical to have your property valued regularly by a professional like G.A. Farrell & Associates
Gives you an accurate, and up-to-date value of perhaps your largest asset. The real estate market keeps changing and because of that you need to keep abreast of the prevailing values to manage your asset portfolio with confidence.
Ensures your property is appropriately insured in the event of a disaster! No-one can predict a disaster, and with the weather systems being what they are these days, it seems everyone is in the danger zone. Make sure you are properly covered by your insurance, don’t lose out be being either under- or over- insured!
Assists you in your financial planning, such as:-
Indicates if you have unused capital resource that can be better utilized
Enables you to better plan on how to bequeath your estate amongst loved ones
Shows whether loan consolidations is an option to reduce monthly expenses
If a corporation:- – Results in a more accurate financial report o your balance sheet – Reflects an enhanced shareholders value – Increases ability to raise financing
Set you regular valuation schedule. Based on normal market conditions property valuations should be carried out every two years for insurance purposes and every five years for all other situations. To arrange for your professional valuation contact, G.A. Farrell & Associates Limited
