Financial Concepts Everyone Should Know

Posted December 18, 2020 by in Lifestyle

Finance can be a convoluted world. It can often be hard to piece together a strategy for continuing to capture growth–both in business and in personal finances. High quality fiscal strategies can seem to be highly technical and impossible to grasp for the majority of us.

But the truth is, strong financial fundamentals can be built by anyone. It simply takes a bit of leg work to understand the best practices for your home or business, in order to sail into a newfound financial freedom that will carry you forward for years to come.

Business Accounting

Your small business may suffer from a lack of transparency. The larger industrial giants spend a fortune on streamlining software and outsourced auditing in order to ensure their budgets are on track and don’t represent any unaccounted for discrepancies. Small businesses can take advantage of these services as well, however. Credit card reconciliation, for instance is an easily conducted, yet powerful tool in the arsenal of account managers all over the United States, and indeed the world. Reconciliation is the process of validating credit cards and other purchases made by the business in order to prevent lapses in accounting or even fraudulent activity on the account. This is a crucial step for businesses hoping to run with maximal efficiency (and therefore, every business).

Hiring an e-commerce accountant is a great way to streamline this and other business processes. Accounting departments are often one of the most expensive payroll line items and for good reason. The professionals that make up your accounting department are there to ensure that your enterprise continues to run smoothly and that your books are in order at all times. Instead of building out a large accounting wing within your company structure, hiring out this critical process is a great way to reduce costs overall and tap into the expertise of industry-leading professionals in the business of book checking.

In addition, many accountants are not specialized in the unique needs of the e-commerce industry, relying on a partially overlapping knowledge base that lies firmly within the brick and mortar space. With the coronavirus pandemic sending most business online, the ability to account for digital processes, spending, and intake has never been more important.

Real Estate

The property market falls firmly within the realm of finance for its sheer commodity value. Homes are the single most expensive piece of property that most of us own, and yet millions of homeowners are not tapping into this value to create collateral for other financial opportunities. Your home can be leveraged to purchase additional real estate, you can extract capital with a home equity line of credit to fund renovation projects that will increase its value, or renegotiate the terms of your mortgage to lock in a lower interest rate with a refinancing opportunity.

Professional realtors like John Foresi of Venterra Realty suggest constantly reevaluating all the options available to you. In order to make the most of your real estate property you need to treat it as both an asset–an investment–and as the space that you seek comfort, refuge, and relaxation within. This space that you call home is a powerful financial tool, while also providing you and your family with the much needed comforts that we all rely on to recharge and prepare for the new day to come. Conducting routine upgrades or major renovation projects on your home can help you stay ahead of the market so that your home fetches a major return when you eventually sell the property. Similarly, every homeowner needs to stay up-to-date on the market rates offered at financial institutions on new mortgage loans.

The difference between a variable and fixed rate mortgage today could mean the increased repayment obligation of thousands of dollars. The same is true for any refinancing opportunities that you come across. Banks are willing to renegotiate these terms because they can charge a new origination fee and will still receive the sum lent back over the long term. You, on the other hand, get to lock in a new, lower rate, whenever the opportunity presents itself.

Index Funds

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On a personal finance level, index funds are the best and perhaps the most boring financial instruments that retail investors have access to. Funds like the Canadian Couch Potato exchange-traded fund (ETF) are big winners in the portfolios of some of the greatest growth portfolios around. Index funds lock on to the movement of the market as a whole, or onto a particular segment. They act as a basket that holds its own portfolio of stocks, bonds, or real estate properties. When you buy into an ETF or index fund you are purchasing shares of a variety of commodities. This provides an investor with greater strength against a down market and increased access to upswings when stocks are performing well. Index funds typically track with the market’s overriding conditions, so if the market is moving up, so is your stock. These commodities provide a unique insulation that investors leverage in order to buy into other, riskier trades. This combination creates the potential for major growth over the long term, coupled with the security of the market itself.

The stock market has over two hundred years worth of an aggregated yearly 8% increase. While no year can be a guaranteed winner, you can bet your bottom dollar that over the next decade or longer that your investment will grow at about this averaged rate. This means that time is your greatest weapon when investing in stocks, and particularly in ETF and index funds. Time coupled with a strategy that combines security and risk is the secret weapon of some of the most successful investors in the market.

Finance doesn’t have to be a challenge. In fact, most winning financial strategies are built on common sense logic. Relying on research as you approach any financial decision is always the best way to proceed. This will help you make the most of any opportunity that you find before you.