A financing strategy is integral to an organisation’s strategic plan. It sets out how the organisation plans to finance its overall operations to meet its objectives now and in the future.
A financing strategy summarises targets, and the actions to be taken over a three to five year period to achieve the targets. It also clearly states key policies which will guide those actions.
A suggested structure and contents for a financing strategy are outlined below.
1. Where are we now?
This section summarises where the organisation is at the start of the strategy. This includes an assessment of the key risks facing the NGO and the opportunities and resources it has available.
2. Where would we like to be?
This section summarises key financial targets for three to five years’ time, and is informed by the risks and opportunities identified in the first section. It will include as a minimum:
- The desired funding mix – the balance and sources of restricted and unrestricted funds.
- Donor dependency – linked to the funding mix, this is the realistic and appropriate level of funding to accept from donor agencies (expressed as a percentage of overall income).
- Level of general reserves – usually expressed as the number of days that the organisation could continue without external funding.
3. How do we get there?
This is the ‘meat’ of the financing strategy. It describes what actions you will take each year to finance the strategic plan and achieve the financial targets identified in the second section.
This might include sections on:
- how to increase the mix and level of unrestricted funds
- how to finance core costs
- how to build up reserves
- how to replace and maintain fixed assets
- how to apply funds to achieve maximum benefit
For example, actions to increase the percentage of unrestricted income might include:
- increasing or introducing fees for users of services to recover some or all of the costs of providing the service;
- introducing income-generating activities;
- making use of under-utilised resources (eg renting out office space, vehicles);
- increasing the priority given to fundraising for unrestricted funds.
4. Key policies
This section will include policies that guide the financing strategy. The examples given are for guidance only, and may not be appropriate or detailed enough for your organisation.
- Reserves policy – what level of reserves you aim to build up, and how surpluses will be handled.
Example: It is our policy to maintain general reserves equivalent to 6 months of operating expenditure. This policy is reviewed by the Board every three years. General fund surpluses in a given year will be added to this reserve. If the reserve level exceeds the policy level, we will spend it on behalf of the beneficiaries in line with our strategy.
- Core costs policy – what method will be used to recover programme support costs from projects and funders. It will also clarify the policy on subsidising ‘poorer’ projects and how that will be decided and managed.
Example: It is our policy to appoprtion overhead costs to projects on a monthly basis, in proportion to the direct costs incurred by each project. Each project should generate enough income to cover both its direct and apportioned indirect costs, unless the Board authorises otherwise for particular cases.
- Pricing and cost recovery policy – where charges are to be made to service users, this will explain the basis and formula used for the charging, and the pricing structure.
Example: It is our policy to charge users of the clinic for consultation, drugs and lab tests. The basis for the charge is cost plus 10% to cover overhead. Patients unable to pay may apply to our ‘Special Scheme’ for assistance.
- Ethical policy – this will explain who the NGO will or will not accept funds from and what funds may or may not be used for. This will be particularly relevant to NGOs involved in advocacy work.
Example: It is our policy to consider the ethical nature of all funds offered to us before accepting. For example, we will not accept funds derived from any illegal source, or from corporates engaged in arms dealing or child labour. We will not accept funds that create a conflict of interest. We consider each case in line with our values.
Getting a bank loan approved is not the easiest process. In light of recent economic troubles across the nation, lenders are looking for a lot more in a loan applicant and are more strict. While there are several key areas lenders will be focusing on, it is important that you are ready to present the perfect, complete package for review if you hope to get approved.
Here are 5 important steps you need to follow to ensure you bank loan can be processed without problems:
1. Understand your preferences
Before heading to your bank, check out loan packages online and see what competitors are offering. You need to be aware of what kind of loan you are looking for, the terms you can reasonably afford, and your goal for paying off the loan as fast as possible. If you are looking for a specific type of loan (auto, mortgage, personal) make sure you find the best deal for you. There may be many loan offers arriving in your mailbox, but check out the fine print before going further.
2. Ask questions
When you find the loan package you are most interested in, contact the bank directly to find out upfront what the requirements are for loan eligibility. You may need to make an appointment in person to discuss the necessary materials, documents, and timelines you will need to get started on the approval process. Banks have different requirements and it will be important to know what they are upfront so you can be prepared.
3. Know your limitations
If you are pursuing a loan, you should already be aware of your credit history and current score. The bank should tell you the range of credit scores required for loan approval. Plan ahead and request a copy of your history and score several weeks prior to your application. Review your credit history for accuracy and give yourself time to correct any errors in your history report. Lenders today will rely heavily on your past usage of credit. If there are mistakes on your report, you may end up with a lower score which can hurt your chances of loan approval. Consider your financial limitations when planning for a loan. Apply for the loan based on your financial ability to make repayments you can afford.
4. Create a checklist
Based on the information from the bank, it’s wise to create a checklist of the appropriate documentation needed for the loan application. It can take some time to secure the documents you need from creditors, your employer, and other financial resources. Incomplete applications can be cause for loan denial.
5. Have the right expectations
Again, applying for a loan when you’re in a hurry is never a good idea. Loan officers have a certain protocol for approving a loan and getting you the money. During the process, make sure to discuss the sequence of events so you’ll have an idea of when to expect an answer. While some loans can be pre-approved upfront, the specifics may not be known until a few weeks have passed. Ask the loan officers for advice on following up. Your goal will be to secure a loan you have the means to repay. You may also need to outline the reasoning behind the loan. If it’s a personal loan, the lender might want to know how you plan to use the cash, for example, you may need it for home improvements or debt reduction. The loan process can be a frustrating one and if the loan you applied for is not approved, the lender may provide the specific reasoning behind the denial. It can be dangerous to your credit to continually apply for just any loan you think you may be able to get. Too many loan applications can ruin your credit and obliterate your chances of securing one in the near future.
1. Balancing the Budget with One-Time Fixes
States and many cities have a legal obligation to balance their budgets each year. But there are all sorts of tricky maneuvers that can place a government in technical compliance with that rule. Shifting payments into the next fiscal year, for example, can instantly take the problem off the current books. But it serves only to make the following year’s budgeting that much more difficult. Borrowing money for operating costs, another common tactic, may be even more dangerous. It adds to the public’s long-term debt without creating any related future public benefit.
DeKalb County, Ga., was downgraded by rating agencies in 2012 after years of transferring money from one fund to bail out another in an effort to meet operating costs. The result was an overall deficit that never seemed to go away. Finally officials in DeKalb took a painful but responsible step. They raised taxes, cut expenses (including a reduction in staff) and added to cash reserves. The county also imposed new controls on fund transfers. By the 2014 fiscal year, DeKalb had stopped cash-flow borrowing and its credit outlook was raised to positive.
2. Ignoring the Long-Term Consequences of a Deal
Few governments have a long-term financial plan and even fewer have multiyear budgets. Many don’t even require a fiscal analysis of proposed legislation. That’s made it possible for some, facing immediate demands for wage increases, to buy off public employee constituencies by increasing retirement benefits at an unsustainable long-term cost. Other governments have been wooed by the prospect of privatizing assets as a way to get quick cash, a move that some have called the governmental version of an unwise payday loan.
Chicago learned a lesson. Five years later, Mayor Rahm Emanuel, elected in 2011, halted a possible deal to privatize Chicago’s Midway International Airport. Citing the problems with the city’s parking deal, he insisted that an airport privatization arrangement share revenue with the city and demanded a Travelers’ Bill of Rights to cap parking costs and food prices. The demands were enough to scare off the potential investors, almost certainly a benefit to the city in the long run.
3. Taking on Too Much
One of the reasons privatizing assets has become alluring to governments is because many of them have been burned by taking on more public investments than they could handle. This frequently involves development projects funded by municipal bonds. If a project’s tax revenues don’t deliver, governments have to pay the difference to bondholders out of their general fund budgets — a promise that becomes an embarrassing burden for some that can ill afford the actual risk. “It’s a question of scale,” says Julie Beglin, vice president of Moody’s Investors Service local government team. “Is the scale affordable for the government if the project doesn’t go well?”
By contrast, the development of a downtown sports arena in Washington, D.C., in the mid-1990s has been heralded as the starting point of a hugely successful revitalization of the center of that city. The arena was privately developed; the city provided the land and infrastructure in what was then a barren and oft-times dangerous part of town. Now the area is home to retail, restaurants and hotels that churn out millions in annual tax revenue. The city is attempting to apply the same concept today with a major league soccer stadium after local officials refused to take on the main responsibility for developing the project.
4. Misapplying a Temporary Windfall
This is the sin that many governments commit when it seems like the good times will never end. Every economic boom is followed by a bust, but elected officials are often tempted to spend money as if that weren’t true, using one-time surpluses in especially good years to cover recurring expenses that they will have to meet in the bad years. When the downturn comes, the money to meet these expenses isn’t there. “State and local officials get into this over and over again,” says Steve Dahl, a consultant for Deloitte. “They make very generous decisions at the top of a bull market run instead of recognizing where they are in the economic cycle.”
Meanwhile, in Southern California’s Riverside County, the Eastern Municipal Water District was using its skyrocketing revenues from connection fees during the boom to pay only for one-time expenses. It expanded wastewater treatment plants and water storage facilities, and improved its recycled water program. “So, when everything went bust, their expenses were very affordable as they hadn’t incurred debt,” notes Suzanne Finnegan, chief credit officer of Build America Mutual. “It’s ironic sometimes that when you really need the discipline is when things are going well.”
5. Shortchanging Pension Obligations
The most serious threat to some government pension plans has been a chronic unwillingness by lawmakers to contribute what is necessary to keep the plans fully funded. To be sure, many governments skipped or pared down payments into pension plans during the recession. But some places did that for years prior to the downturn and continue to do it today. The longer they delay, the larger the long-term liability becomes.
Lexington, Ky., had a similar problem with habitually shortchanging its pension plan. But in 2012, it put together a pension task force made up of city officials and public employee union representatives, guided by an outside financial consulting firm. The result was a new agreement that guarantees Lexington will increase its annual contribution to the pension fund to $20 million from $11 million. In return, employees agreed to an older retirement age and increased paycheck deductions.
6. Making Unrealistic Projections About Rate of Return
Every budget or financial planning document has to start with some assumptions about the rate of interest that will be earned on an invested portfolio. It’s tempting — too tempting sometimes — to stretch those assumptions beyond what sensible economics can justify. Some pension funds still base their total liabilities owed on an expected annual investment return of more than 8 percent, a figure that affects the formula used in figuring out how much governments should contribute each year. “That means they’re targeting a pension funding level that’s lower than what most people might consider prudent,” says Donald Fuerst, a senior pension fellow at the American Academy of Actuaries. Similarly, a budget that expects too much from a volatile revenue stream like the sales tax can be burned in any given year if the economy hits the skids.
In 2012, Rockland County, N.Y., faced a $40 million budget deficit and was hit with a credit rating downgrade to one step above junk status. In its downgrade action, Standard & Poor’s cited the county’s “vulnerable” management practices based on overly optimistic budgeting. The following year, the county based one-fifth of its revenue returns on sales tax receipts — and expected a 4 percent increase in those returns when consumer spending growth had been far slower. The financial practices prompted the state to step in, demanding that county officials scale back their estimates and develop a realistic financial plan to escape Rockland’s deficit woes, which had mounted to $125 million by 2014.
7. Ignoring Financial Checks and Balances
Don’t lose track of the money you have. It seems like the most obvious advice in the world. But in government finance and fund accounting, where there are many different ways to count the same revenue, weak financial controls can lead to serious dollar losses. Governments can lose track of how much money they actually owe one of their special funds. Or lax internal monitoring can result in poor financial choices not getting flagged until it’s far too late.
A number of organizations have published best practice guides that help governments limit their vulnerability to financial reporting problems. The Government Finance Officers Association
recommends that reporting systems incorporate an antifraud program and that financial managers periodically evaluate internal control procedures to ensure they are still working as envisioned. The Association of Local Government Auditors recommends that, at a minimum, governments have an ethics policy, established performance measures and an audit committee. State governments also cite best practices for their local governments to follow. Vermont, for example, has fact sheets available to localities offering advice on financial management of fixed assets, cash receipts and accounts receivable.
When it’s time for you to retire, will you be able to afford it? Almost all of the research conducted on the subject, over the last few years, shows that most individuals are unable to demonstrate financial readiness for their retirement years. This only serves to underline the fact that saving for retirement is a challenging process that requires careful planning and follow-through. Here we review some helpful tips that should help you on your way to a comfortable retirement.
- Start as Soon as You Can
It is obvious that it is better to start saving at an early age, but it is never too late to start – even if you are already close to your retirement years – because every penny saved helps to cover your expenses.
If you save $200 every month for 40 years at a 5% interest rate, you will have saved significantly more than an individual who saves at the same rate for 10 years. However, the amount saved over the shorter period can go a long way in helping to cover expenses during retirement. Also, keep in mind that other areas of financial planning, such as asset allocation, will become increasingly important as you get closer to retirement. This is because your risk tolerance generally decreases as the number of years in which you can recuperate any losses goes down.
2. Treat Your Savings as an Expense
Saving on a regular basis can be a challenge, especially when you consider the many regular expenses we all face, not to mention the enticing consumer goods that tempt us to spend our disposable cash. You can guard amounts you want to add to your nest egg from this temptation by treating your retirement savings as a recurring expense, similar to paying rent, mortgage or a car loan. This is even easier if the amount is debited from your paycheck by your employer. (Note: If the amount is deducted from your paycheck on a pre-tax basis, it helps to reduce the amount of income taxes owed on your salary.)
Alternatively (or in addition), you may have your salary direct-deposited to a checking or savings account, and have the designated savings amount scheduled for automatic debit to be credited to a retirement savings account on the same day the salary is credited.
3. Save as Much as You Can in a Tax-Deferred Account
Contributing amounts earmarked for your retirement to a tax-deferred retirement account deters you from spending those amounts on impulse, because you are likely to face tax consequences and penalties. For instance, any amount distributed from a retirement account may be subject to income taxes the year in which the distribution occurs, and if you are under age 59 1/2 when the distribution occurs, the amount could be subject to a 10% early-distribution penalty (excise tax).
4. Diversify Your Portfolio
The old adage that tells us that we shouldn’t put all of our eggs in one basket holds true for retirement assets. Putting all your savings into one form of investment increases the risk of losing all your investments, and it may limit your return on investment (ROI). As such, asset allocation is a key part of managing your retirement assets. Proper asset allocation considers factors such as the following:
- Your age – This is usually reflected in the aggressiveness of your portfolio, which will likely take more risks when you’re younger, and less the closer you get to retirement age.
- Your risk tolerance – This helps to ensure that, should any losses occur, they occur at a time when the losses can still be recuperated.
- Whether you need to have your assets grow or produce income.
5. Consider All of Your Potential Expenses in Your Financial Plan
When planning for retirement, some of us make the mistake of not considering expenses for medical and dental costs, long-term care and income taxes. When deciding how much you need to save for retirement, make a list of all the expenses you may incur during your retirement years. This will help you to make realistic projections and plan accordingly.
Saving a lot of money is great, but the benefits are eroded or even nullified if it means you have to use high-interest loans to pay your living expenses. Therefore, preparing and working within a budget is essential. Your retirement savings should be counted among your budgeted recurring expenses in order to ensure that your disposable income is calculated accurately.
7. Periodically Reassess Your Portfolio
As you get closer to retirement and your financial needs, expenses and risk tolerance change, strategic asset allocation must be performed on your portfolio to allow for any necessary adjustments. This will help you ensure that your retirement planning is on target.
8. Reassess Your Expenses and Make Changes Where Possible
If your lifestyle, income and/or fiscal responsibilities have changed, it may be a good idea to reassess your financial profile and make adjustments where possible, so as to change the amounts you add to your retirement nest egg. For instance, you may have finished paying off your mortgage or the loan for your car, or the number of individuals for which you are financially responsible may have changed. A reassessment of your income, expenses and financial obligations will help to determine if you need to increase or decrease the amount you save on a regular basis.
9. Consider Your Spouse
If you are married, consider whether your spouse is also saving and whether certain expenses can be shared during your retirement years. If your spouse hasn’t been saving, you need to determine whether your retirement savings can cover not only your expenses, but those of your spouse as well.
10. Work with an Experienced Financial Planner
Unless you are experienced in the field of financial planning and portfolio management, engaging the services of an experienced and qualified financial planner will be necessary. Choosing the one who is right for you will be one of the most important decisions you make.
1. Investing isn’t just for high rollers
You don’t have to have Warren Buffett’s bank balance to dabble on the stockmarket. Most investment funds will accept monthly deposits of £50 or lump sums of between £500 and £1,000. You do, however, have to be able to stomach watching your savings fall in value as well as rise.
Investing is a long game, so you must be prepared to lock your money away for a minimum of five years, ideally a decade or more. It is therefore best suited to those with long-term financial goals, saving for retirement or a child’s education, for example, rather than a house deposit or a new car.
2. Beware reckless caution
Gambling your money on unpredictable markets can be nerve-wracking. But history has repeatedly shown that over the long term equities outperform cash savings. This is hardly surprising when you consider the pitiful returns offered by banks and building societies on savings accounts at the moment.
The average cash Isa pays just 1.59%, according to financial website Moneyfacts. That is less than the current rate of inflation of 1.6%, meaning that the majority of cash savers are actually losing money in real terms.
3. There are tax advantages of investing
Savers are entitled to an annual tax-free allowance of up to £11,880 this year on money invested through a stocks and shares Isa. From 1 July, this allowance will rise to £15,000.
You do not pay capital gains tax on any income earned or interest paid on investments made through an Isa. You will also pay a flat rate of 10% on any dividends, which benefits higher-rate taxpayers in particular as they would otherwise pay 32.5%.
4. Think about what you want to invest in
Cash is traditionally seen as the least volatile asset class, your money is safe unless a bank or building society goes bust. But as shown in point two, its buying power can be eroded by inflation so you end up losing money in real terms. Fixed interest investments, which are loans to companies (in the case of corporate bonds) or governments (known as government bonds or gilts), provide modest but reliable returns are traditionally regarded as lower risk than equities.
However this risk profile is changing and when interest rates start to rise their prices could fall and the risk of capital loss increases. Shares, also known as equities, offer a stake in a company. Shares tend to rise in value when a company does well and fall when it does not.
You can also invest in residential or commercial property and commodities, such as steel or oil.
5. Don’t put all your eggs in one basket
If you funnel all your hard-earned cash into shares in one company and the company tanks, you will lose it all. The idea is to ‘diversify’, which involves dividing up your lump sum across a portfolio and investing portions into varied companies, asset classes or global markets.
As some markets fall, others will rise and cancel out losses. How you spread your money will be led by your attitude to risk. Cautious investors shouldn’t have too much in equities.
6. Think about investing through a fund
You can buy shares directly but this can be expensive, difficult and risky. For a beginner, it’s usually better to invest through a collective fund, which offers an affordable way to buy up lots of different assets without the responsibility of making your own investment decisions. In the most popular type of investment fund, such as a unit trust or open-ended investment company (OEIC), you buy units and your money is pooled with others.
A fund manager then uses their expertise to buy and sell shares (or bonds) on your behalf to maximise returns for investors. There is a charge for investing in funds, but because you are spreading the cost with your fellow investors, it works out much cheaper than it would be for you to invest in the same shares yourself.
7. Spend time choosing the right fund
There are more than 2,000 different unit trusts and OEICs, so you need to do your homework to pick one that meets your financial goals and suits your appetite for risk. The funds invest in more than 30 sectors, categorised by asset class (equities, say, or fixed-income); geography, for example UK small companies, or Asian emerging markets; sector type, such as technology or property; and investment style such as growth or income.
Monitor the performance of a fund over a period of time, five or seven years, rather than just looking at whether a fund did well last year. Remember you are playing a long game.
8. Consider passive or tracker funds
Passive or tracker funds, which mirror or ‘track’ the performance of global stockmarket indices, are not run by managers but by computers. As a result, they are much cheaper. The jury is out on whether passive or ‘active’ funds – those run by a manager – produce better returns over the long term.
All trackers charge a management fee, so they are guaranteed to underperform the market they follow. But costs are low, as little as 0.15%, so the return you get will pretty closely match the index. By comparison, most active funds charge more than 1%. Your returns therefore need to at least equal that if your fund is to stand still.
9. Buy through a fund supermarket to save money
Unlike opening a savings account, investing in a fund costs money. Buying your units directly from a fund manager is the most expensive option. It is cheaper and easier to buy through a fund supermarket or platform, which lets you hold, manage and review all of your investments in one place. Platforms, from companies such as Hargreaves Lansdown, Interactive Investor or Bestinvest, charge either a flat fee or a percentage of your investment.
For smaller investors, the cheapest is usually a platform that charges the lowest percentage-based fee. If you are investing a hefty sum, you are probably better off with a flat fee.
10. Invest regularly to minimise losses
It is impossible to pick the perfect moment to invest to beat the market. Improve your chances of maximising your returns by drip-feeding your money into a fund on a regular basis, for example once a month, rather than investing a lump sum in one go. This is known as pound-cost averaging. You buy fewer shares if you catch the market when it is rising but you can buy more at cheaper prices if it is falling, averaging out the overall cost and risk.
- Think small. It sounds counter intuitive, but it’s true. The fast money is made by investing in micro and nano cap stocks, start ups and extremely cheap stocks that are on the verge of huge success.
- Invest small. Micro and nano cap stocks are the smallest companies traded on the stock market. They are just entering the market or entering a new phase of their life cycle. Find one who’s revenue is about to skyrocket and you’ll be in the money in a hurry.
- Think new technology. Emerging technologies are great places to hunt for the next Google. This is where you’ll find the majority of start ups. Read up on new technologies in their infancy and take a gamble. For instance; if you think bio-fuels have a real future, get in now.
- Catch a wave. Some stocks are just going through an extreme cycle. If you can catch one at the bottom, the ride up will be fast and furious. For example: The American auto industry crashed in September 2008 and was down for months, but the C.A.R.S. government stimulus program gave the entire industry a huge boost. In a very short time period people made lots of money.
Investing in the stock market can be a scary thing to do. Unfortunately, if you don’t want to invest your money, you’re missing out on one of the most common ways people can turn their paycheck into serious wealth, or at the very least have enough money to live comfortably once they retire.If you don’t want to invest, there are other ways you can bring in extra money on the side to boost your cash flow, as well as help you begin saving for retirement.
Make Money with Money
- Ask your primary employer for a raise. If you’re a valued employee and do your job well, you can actually boost your income without doing a thing–other than asking your boss for a raise.
- Earn interest on your savings by purchasing high-yield CDs. It’s only 3 to 5 percent interest, but this is guaranteed income, and every little bit helps.
- Store your cash in a high-yield savings account. It’s not ideal, because most savings-account interest rates only meet or slightly beat inflation, but if you do your homework, there are some savings accounts that yield 2 to 6 percent if you know where to find various rewards-card checking accounts. (See Resources.)
- Loan money via peer-to-peer lending websites (also called P2P lending). You are essentially acting like a bank or credit-card company by lending money to finance consumer debt. These debt holders will repay your loan over time plus interest, where you can make a rate of return ranging from 5 percent to 35 percent depending on the borrower’s credit score. Prosper.com and LendingClub.com are two excellent choices.
- Try your hand as an amateur gambler. If you have the skills to count cards at the blackjack table or think you’ve got what it takes to win a Texas Hold ’em poker tournament, consider using some of your natural skills. It’s risky, but if you start small and find you are good at it, you might have stumbled upon your calling.
- Invest in the real-estate market. If the stock market seems like smoke and mirrors to you, try investing in something you can see and feel. If you don’t own your own home, buy a home you can live in, then purchase other investment properties that suit your goals. You can buy residential or commercial properties where you bring in rental income every month to offset your mortgage payments.
Second Jobs–Monetize your Skills and Education During Downtime
- Tutor the neighborhood kids in math, science or a foreign language. Use your education as a way to benefit your local community, while earning a few bucks doing it. If you are Internet-savvy, create a few YouTube videos to teach a larger audience; you do the work once and harvest the ad revenues as students find your work.
- Start a babysitting or daycare service. If you love children and you’re a trusted member of the community, childcare services could be a legitimate way to supplement your income without leaving home.
- Perform the annual maintenance on your neighbors’ vehicles or be a part-time mechanic. If you grew up working on cars and know how to change the oil in a vehicle or can replace a few spark plugs, ask around and find those neighbors who are afraid of being scammed by a shady auto garage.
- Do some landscaping or mow a few lawns. There are many people who hate or can’t do their own yard work, so identify those people who are willing to pay $10 to $20 for lawn maintenance.
- Start a business in a field or concerning subject matter you are passionate about. If you have an entrepreneurial spirit or have a great idea or invention you feel strongly about, spend a few bucks, form your own company and get the ball rolling.
Make Money Online
- Start your own blog. Blogger.com and WordPress.com are great places to start a free blog where you can write about a subject you know well. Once you become a known voice in your niche market, you can sell advertising spots on your blog, install Google Adsense technology or create affiliate marketing partnerships with sites like Amazon.com. (This isn’t a get-rich-quick idea: It takes substantial time to build an audience.)
- Become a part-time freelance professional. There are thousands of people who do freelance work full time, and many more who do it on the side, performing work that parallels their career path or makes use of a particular skill set. Whether it’s doing graphic design, computer programming or basic accounting, there is a wide range of freelance jobs available. Websites like Guru.com, GetAFreelancer.com or Elance.com are all great places to get started.
- Become an online virtual assistant. There are many professional-level employers who outsource their work to their administrative assistants, and a growing number of these are moving to online communities. If you have the computer skills to use programs like Microsoft Office (MS Word, MS Excel, MS Access) or you can transcribe audio recordings, websites like Odesk.com or Virtualassistants.com are worth a look.
- Sell the stuff you no longer use or need. Sites like Craigslist and eBay exist because the neighborhood garage sale just isn’t a large enough market for people to make any substantial money. Simply write up a few paragraphs on the product(s) you wish to sell, and you’re good to go.
- Write a few articles online at established websites like eHow, Hubpages, Associated Content, Helium and BrightHub, and share in the advertising revenue generated from your content. A substantial amount of passive income can start to flow in once you have published several dozen articles.
Understanding Land Acquisition in Mozambique
- Recruit the services of an English-speaking Mozambican lawyer from a list recommended by the commercial section of your diplomatic mission. You will need to understand from your selected legal adviser how to become the owner of a company already incorporated and registered in Mozambique; this is by far the easiest and quickest way for a foreigner to acquire and hold a land concession with a valid land usage title document, known officially as a DUAT (Direito de uso e Aproveitamento de Terra), in his own name . You should first look for existing companies that may already hold title to land in your preferred vicinity. As land may not be transacted, only the immovable real estate that it contains can be legally sold. Be very clear as to what you want to use the land for. Land already acquired is generally licensed for a specific purpose, so changing its designated usage, for example, from residential to tourism, may not be straightforward.
- Detailed due diligence is absolutely essential, Any existing company that you may consider buying must be able to provide tax and social security compliance certificates plus licenses for any existing land and any partial construction which should also be underwritten by either an environmental license or an exemption certificate. By contrast, registering and incorporating start-up companies is an extremely long process with no real average time-line. The purchase of a ready-made company dictates that land, existing buildings on that land and any other assets are automatically transferred to you as the new owner and you do not need a local partner. You should also check the cost of maintaining a land lease, which varies. Apart from the application fee and the charges for the legal journey through the process, a DUAT ostensibly costs nothing. However, there is an annual land tax payable to the government and occasionally annual compensation for people displacement.
- Assuming that you have found a suitable existing company and it is willing to sell, you must take into account that any construction projects approved for land with a license already granted, especially a provisional stage license, must be completed within two years. It is therefore vitally important to check that any land applications declared by the company you are buying have actually progressed beyond the provisional title stage. In other words, do they have the right to transfer the approval as an asset? If not, you may as well reapply to license the land and any proposed construction projects yourself, once you have bought the company for a lower price.
Also, before proceeding, a serious examination of the original investment plan that supported the granting of the license should be conducted. Submission of an investment plan is a mandatory part of the land application process. Even if you have bought a company without a current land interest but with the intention of using it as the vehicle for a land application, you must provide an investment plan. A positive result on both of these issues is crucial to the future health of your finances.
- At this stage, finance becomes the key. External finance is almost certainly the only option you can pursue, as Mozambique looks to encourage inward foreign investment. In any case, loans from Mozambican banks are generally over short terms. South African citizens, compared to other nationalities, are probably in the best position to raise finances for purchases in Mozambique. They have access to Barclays. Putting a business plan forward to raise capital for investment in Africa would have to be approached with an international bank, already familiar with and holding interests in Africa. British institutions such as Barclays, Standard Chartered and Lloyds TSB do operate in Africa as does Morgan Stanley, which also has an office in South Africa. From a U.S. banking perspective, the continent is under-served; the nearest Bank of America office, for example, is in Greece. Therefore, unless you can secure finance on home ground against collateral and a powerful business plan, self-funding must be considered, but you should certainly approach Africa-located internationals first. Companies for sale in Mozambique probably vary from $300,000 to $1.5 million (U.S. dollars).
- As someone who has previously invested in a wildcat oil well here are some things to look for and to watch out for when you are considering this investment.
First of all, successful oil companies do not usually send out mail outs or place lots of magazine ads searching for investors. The good ones, successful at finding oil usually have a following of loyal investors with deep pockets and don’t need to advertise.
- The fly by night and not so successful companies will usually be the one seeking investors.
It helps to have a friend in the business and network with oil and gas industry professionals to find out who these companies are and make a contact and convince them to let you in as an investor. Ways to meet such people vary but can include through your church, social clubs or fraternal organizations.
The minimum investment that you will usually find will be around $30,000 or more for a small share of the oil wells lifetime revenue.
This would be for a shallow well, say 5000 feet in an area where the drilling is not difficult.
For deeper exploratory wells it becomes big money investor territory with minimum investments of a hundred thousand or more.
- Investing in a wildcat oil or gas well is just slightly better than taking your money to Las Vegas and playing the slot machines. It is a gamble.
The success comes in finding a company that will allow you to invest in a well that is being drilled near other productive wells and in finding a company that has very good seismic information. To buy seismic information is expensive, especially the newer, more accurate 3D type and companies that have had past success in using this technology are the ones you want to find.
If this type of investment is too risky for you consider buying shares of a successful company that is actively drilling in a newly discovered area. An example would be Chesapeake (CHK) which has large holdings in the newly discovered Barnett Shale and Marcellus Formations. These formations are fairly uniform and in many cases pipelines will be laid to wells as they are being drilled because the success rate of making a good well is so high.
For the smaller investor individual stocks are a good choice. If however you want to be even more conservative but still invest in oil and gas exploration consider an ETF or exchange traded fund made up of several oil and gas exploration companies. There are a variety on the market from companies such as Invesco Powershares.
The Real Estate Investor
- A real estate investor makes money through real estate. An active investor that is good at analyzing real estate market values and trends can become rich. Investors use several different methods to turn a profit in the real estate market. This article discusses the following types of real estate investments: development properties, distress properties, fixer-uppers, long-term investments and rentals.
- Real estate investors that specialize in developing properties are often called developers. Developers purchase bare land and build on it. Alternatively, they may purchase land with an existing structure and tear it down to build a new structure, or add more structures to the property. The developer builds on the property and sells the developed property for a profit. A small development can consist of a small plot of land that one house is built on. A large development can consist of an apartment complex, office complex or a retail complex.
- Some real estate investors look for properties that are in threat of foreclosure, are in foreclosure, or have been foreclosed on and are bank owned. These types of properties are called distress properties because the owner of the property is close to losing his home. Investors can often purchase these properties for less than their market value, because the owners are desperate to get out of a property that they cannot afford.
For instance, if the seller purchased a house for $100,000 and has paid off $50,000 of the home loan, he may sell to the investor for $60,000 and lose the majority of the money he have paid into the property. The seller takes the loss to prevent a foreclosure on his credit file. Investors can usually purchase bank-owned properties for a fraction of the market value, because the bank often is just looking to recoup the remaining balance owed on the loan before foreclosure.
- Real estate investors often purchase fixer-upper properties, fix them and sell them for a profit. Fixer-upper properties are usually a quick turnaround investment. The investor purchases the property, quickly has the repairs done, and instantly puts the property back up for sale.
- Long-term investments are properties that the investor buys and holds on to for a long time. Investors buy the property when the market is down and sell it when the market is high. Another strategy is to buy a property in an area that has very little development and wait for the area to grow in population. Once the population increases and development starts to increase, the property is worth more money and the investor sells it.
- Investors usually rent out properties that they are keeping for long-term investments. The rental income helps to pay for the property while it sits. One strategy that many investors use is to sell a house with owner financing. This is a popular strategy in a down market. Say the investor wants to sell a property, but the market is down. The investor offers the property for sell with owner financing. People with poor credit who cannot obtain a conventional loan through a bank will often overpay for a house that is offered for sale with owner financing.
- Banks consider individuals with credit scores below 620 to have poor or bad credit. Banks find out your credit score from at least one of three privately held credit reporting agencies. The credit reporting agencies are Equifax, TransUnion and Experian. Most banks offering to do business with individuals with bad credit are internet-based or local businesses that offer payday advances. Some payday advances are more like personal loans because they are renewable each payday until the borrower is able to pay in full. Of course, fees apply with each renewal.
- The banks offering to loan money to those with bad credit do have some basic lending requirements that individuals must meet in order to apply. The banks require the borrower to be at least 18 years old and a legal resident with a minimum verifiable income of at least $800, although some require $1,000. Banks may require the borrower to have no outstanding payday loans or an active checking account.
- Most banks seem willing to offer unsecured personal loans of up to $1,500 to individuals with bad credit. Common offers are loans of $500 without a credit check deposited into your checking account in 24 to 48 hours. Secured loan amounts are a percentage of the value of the collateral.
- High risk lending banks may charge loan origination fees to applicants as well as high interest rates that may be three times the average interest rates or more. If a borrower cannot pay on the due date these banks may offer to delay payments with extension fees. The terms of the loan may include prepayment penalties; these are additional fees for paying off the balance early, so read the fine print. Lenders may also offer loan insurance for an additional fee. If you are considering this option, be sure you fully understand the costs and exclusions. If the banks fees and rates are tier-based, then a loan for $2,000 may have a significantly lower interest rate than a loan for $1,999, so be sure to ask.
- Once you begin searching for personal loans you may be approached by fake lenders, phony debt counselors or scam artists who may even be using real names of loan companies. Learn about the latest advance fee loan scams and identity phishers before giving anyone your personal information such as your social security number or bank information.
- Review your credit report to determine if your credit history is strong. A high credit score is required to secure a small business loan. Annualcreditreport.com allows you to receive a free credit report from the three major reporting agencies, TransUnion, Equifax and Experian, once a year. After pulling your report, purchase your credit score. Consider locating a cosigner if your credit score is not high enough to secure the a small business loan.
- Compose a business plan for the lender. A business plan states your objective, financing goals and long term plan for your business. A strong business plan provides the business concept, financial features, achievements and marketing strategy. Give the lender a road map showing how you plan to grow your business. Most lenders require experience in your business. Financial statements are part of a business plan.
- Contact lenders through the Small Business Administration (SBA) about various loans available. The SBA able to provide you with information regarding securing financing for your type of business and what collateral is necessary to obtain the type of loan. Small business loans are secure loans and require assets to back the loan. The amount and type of loan may vary based on the type of business and location. For instance, the SBA offers information about lenders that offer specific loans for small businesses located in rural areas.
- Provide collateral for your small business loan. Collateral is property or assets used to secure a small business loan by providing the lender with the promise to repay the loan or the collateral is forfeited. Find land, equipment or other assets. Generally, for a small business the property or equipment used within the business is offered as collateral to secure the loan. However, personal property with equity, such as your home, land or vehicle, may secure a loan for your small business.
- Provide substantial equity or investment in your business. In other words, a lender wants to know that the loan is only an ancillary, not a main, source of funding.
- Open a stock trading brokerage account if you do not already have one. You can do this online, over the phone or by mail.
- Know your risk tolerance.
You can make money in the stock market with any level of risk aversion. Knowing your comfort level is going to help you sleep at night when you picks the right stocks for you.
If you don’t like risk, stick to the Blue Chips.
If you’re up for some risk go for the emerging technology penny stocks.
- Set goals.
Having specific goals will help you pick the correct stocks for you. Are you investing for retirement, college, a house, etc?
These goals all have different time lines. You wouldn’t pick the same stocks to achieve these different goals.
For a long term goal like retirement, think large cap dividend stocks like utilities. And then make sure to enroll them in a DRIP.
For shorter term goals like a house, you’ll want to focus on more risky growth stocks like the technology sector.
- Allocate funds.
Whether it a lump sum or a monthly amount, you need money in your brokerage account. This makes the money available to invest the moment you want it.
You can set up an automatic electronic transfer if you’re going to invest the same amount every month.
Protect yourself from losing your entire investment by diversifying. This is like buying insurance within the stock market. To truly diversify you’ll want to invest in at least 5 different industries or sectors.
Auto, retail, food, health care, banks, technology, utilities are all examples of different sectors.
- Have an exit strategy– you don’t actually make money unless you sell above what you paid.
Knowing when to get out is the most important step to making money in the stock market.
Whether your exit strategy is based on time, like for retirement or college, or based on profit– like having enough for a house mortgage down payment — you need a plan.
- Take the money and run.
Once you’ve achieved your goals, take the money and use it for your lifestyle.
- Open an account with either an online brokerage or a penny stock firm. If you are not familiar with trading penny stocks, try starting with a penny stock broker. There are also a great many newsletters and sources of research that provide recommendations on penny stocks.
- Trade penny stocks with paper money until you feel that you’re ready to trade with real money. There are many programs that will allow you to do this; take your time until you get a feel for the penny stock market and how it interacts with the larger markets.
- Invest a small amount to begin with. If you can make this amount grow, then you can add to your principal. But protect yourself by limiting your initial investment so that you don’t lose your shirt. Don’t keep pumping additional principal into your account if you lose at first; this is a recipe for disaster.
- Stick closely to your trading program or analyst recommendations and don’t let emotions start dictating your actions. You will need to keep your fear and greed in check in order to succeed at penny stock trading. Most investors are controlled by greed and fear, but speculators who make money can get past these emotions when they make trading decisions.
- Use the profits you make from trading penny stocks to reinvest into the program. This is perhaps the safest way to grow your profits over time. If you clean up on one stock, use the gain to purchase others. This provides you with additional diversification without requiring additional principal.
- Find a broker-dealer who is authorized to sell penny stocks. The SEC requires increased suitability and disclosure regulations by firms selling penny stocks. Ask a professional tax adviser or financial planner for referrals.
- Open the account by filling out an account application, prior investment history and disclosure of assets. The SEC requires each broker-dealer to maintain this “suitability” information as part of the “know your customer” rules. You will not be able to open the account without at least basic financial disclosures.
- Confirm the commission schedule for each transaction. The SEC allows no more than 2.5 percent on each transaction. Commission is negotiable, particularly for larger transactions.
- Fund the account with the amount of money you will be investing. Minimum values are required at some firms, but not all. Ask your broker or customer service representative for details when opening the account.
- Learn the jargon regarding the “spread” when buying and selling stocks. The spread is the difference between the bid price and the offer price. Bid price refers to the value one broker-dealer is willing to buy the stock for from another. The offer price is the value one broker-dealer is willing to sell it for to another. For example, ABC stock may have a bid of $0.10 and an offer of $0.15 with a spread of $0.05. For you to make money, your bid must rise above the spread plus any commissions on the trade.
- Locate resources you can trust. This is often the greatest challenge for those starting penny stock investments because reliable information is often so scarce. Some broker-dealers offer due diligence reports on stocks they hold inventory on as broker-dealers, but you still want to do independent research. Contact the investor relations department of the company and look for any industry journals pertinent to the company and what it offers. Select stock information is also available through online research resources, such as Yahoo Finance or MSN Money.
- Place an order to buy the stock directly with your broker. Plan on holding the stock for a while if there is not a lot of daily activity on it. Invest funds you don’t anticipate an urgent need for since no one may be interested in purchasing your stock when you want to sell.