One thing about having a lot of debts is the amount of stress that is attached to it. Indebtedness is a major stress inducer that every business owner wants to avoid. Most times, this is as a direct result of the harsh economic conditions we find ourselves with much more bills than we can handle which leads to indebtedness. We want to avoid it at all costs. Having debts though is one thing, having too much debt is on a different and more complicated level. Beyond elevating your stress level, too much debt could affect your finances and can be humiliating in some cases.
This all gives rise to an urgent need to monitor our debt. Just how much debt is too much? Debts, high or low, are relative to the individual who incurred them, their income, their savings and their money habits. Here are a few indicators that the debts you’ve incurred have become unhealthy to your finances.
You don’t know how indebted you are
The fact that you can’t say for sure how much you owe is a clear indicator that you may have more debts than considered healthy. A lot of people owe so much they are too scared to keep track of the amount they owe. Others simply don’t care as they are nonchalant towards their finances.
You may not be financially capable of clearing your debts but it is a great idea to keep track of them. It not only keeps you informed of your status but motivates you towards clearing your debts.
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Your bills keep piling up/you become selective in paying bills
The only reason you have more bills is because you have a lot of debts. Bills pile up when you don’t pay them. They don’t disappear. Rather they form this huge debt that leaves you feeling like you’ve dug a big hole for yourself at the end of the day. When you notice that you’ve become selective in paying your bills, you probably have a debt problem.
The best way to avoid this is to try footing bills as they come. Don’t let bills sit for so long. Most bills come on a monthly or yearly basis so it doesn’t exactly take you by surprise. Plan your money in a way that will enable you take care of your bills.
You don’t have a money-plan (budget)
If you aren’t making money-plans its most likely you have huge debts. There should be a plan in place for settling outstanding debts in order to reduce overall debts. Make provision in your budget for clearing off old bills. Have a working plan on how to handle your debts.
You’ve used up your savings
If you’ve gotten to the point where you’ve used up your savings for paying debts and you don’t have anything set aside for rainy days, your debts have most definitely gone overboard. Don’t allow your debts grow so much that they start eating into your savings. Consider your savings a sacred part of your finances.
You’re always borrowing
The funny thing about people who borrow a lot is that they never have enough to pay and they are always coming back to borrow more making their debts to pile. If you borrow so much from all indications your debts are going to be too much as well. Try to live on what you earn and if what you earn isn’t enough look for other means to support yourself.
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You’re constantly thinking about your debts
Each time you think about the debts you’ve incurred you get extremely stressed but unfortunately you found you that you’re always thinking about your debts. There is only one possible explanation for it; your debts are too much. When your debts are too much you’re most likely going to keep stressing over it every day.
Try to help yourself by keeping debts to a minimum. Pay off old debts and manage current bills with tenaciously and with discretion. The fewer your debts, the better. If you find that you fit into one or more of these categories, you need to make a plan on how to free yourself from indebtedness else you’re heading straight and fast towards bankruptcy.
5C’s of creditworthiness: What lenders, Investors look for in a business plan
Business owners need to be aware of the criteria lenders and investors use when evaluating the creditworthiness of entrepreneurs seeking financing.
Banks usually are not a new venture’s sole source of capital because a bank’s return is limited by the interest rate it negotiates, but its risk could be the entire amount of the loan if the new business fails. Once a business is operational and has an established financial track record, banks become a regular source of financing.
For this reason, the small business owner needs to be aware of the criteria lenders and investors use when evaluating the creditworthiness of entrepreneurs seeking financing.
Will the business that an entrepreneur actually creates look exactly like the company described in the business plan? Of course, not.
The real value in preparing a business plan is not so much in the finished document itself but in the process it goes through – a process in which the entrepreneur learns how to compete successfully in the marketplace. In addition, a solid plan is essential to raising the capital needed to start a business; lenders and investors demand it.
Lenders and investors refer to these criteria as the five C’s of credit.
1. Capital: A small business must have a stable income base before any lender is willing to grant a loan. Otherwise, the lender would not be making, in effect, a capital investment in the business. Most banks refuse to make loans that are capital investment because the potential for return on the investment is limited strictly on the interest on the loan, and the potential loss would probably exceed the reward. In addition, the most common reasons that banks give for rejecting small business loan applications are undercapitalization or too much debt. Banks expect a small company to have an equity base investment by the owner(s) that will help support the venture during times of financial strain, which are common during the start-up and growth phases of a business. Lenders and investors see capital as a risk-sharing strategy with entrepreneurs.
2. Capacity: A synonym for capital is cash flow. Lenders and investors must be convinced of the firm’s ability to meet its regular financial obligation and to repay loans, and that takes cash. More small businesses fail from lack of cash than from lack of profit. It is possible for a company to be showing a profit and still have no cash – that is, to be bankrupt. Lenders expect small businesses to pass the test of liquidity, especially for short term loans. Potential lenders and investors examine closely a small company’s cash flow position to decide whether it has the capacity necessary to survive until it can sustain itself.
3. Collateral: Collateral includes any asset an entrepreneur pledges to a lender as security for repayment of a loan. If the company defaults on a loan, the lender has the right to sell the collateral and use the proceeds to satisfy the loan. Typically, banks make much unsecured loans (those not backed up by collateral) to business start-ups. Bankers view the entrepreneurs’ willingness to pledge collateral (personal or business assets) as an indication of their dedication to making the venture a success. A sound business plan can improve a banker’s attitude towards venture.
4. Character: Before extending a loan or making an investment in a small business, lenders and investors must be satisfied with an entrepreneur’s character. The evaluation of character frequently is based on intangible factors such as honesty, integrity, competence, polish, determination, intelligence, and ability. Although the qualities judged are abstract, this evaluation plays a critical role in the decision to put money into a business or not.
5. Conditions: The conditions surrounding a funding request also affects an entrepreneur’s chances of receiving financing. Lenders and investors consider factors relating to a business’ operation such as potential growth in the market, competition, location, strength, weakness, opportunities and threats. Another important condition influencing the banks is the shape of the overall economy, including interest rate levels, inflation rate, and demand for money. Although these factors are beyond an entrepreneur’s control, they still are an important component in a banker’s decision.
The higher a smaller business scores on the five C’s, the greater its chances of receiving a loan.
Written by Chukwuma Aguwa
Don’t be fooled by COVID-related scams
Always consult the institution in charge of health-related matters to confirm any fishy information you come across.
The nature of and the manifestation of the Covid-19 disease is such that there’s only a little time available to remedy the situation before it gets chronic. Although the infection begins by exhibiting mild symptoms, if you do nothing in a short time, it could lead to death in a matter of days.
This whole picture has caused many to become desperate about Covid-related issues, launching into panic mode at the sight of any information. As a result, such people are not far away from falling for fraudsters.
With the different kinds of news flying around, you mustn’t be fooled by Covid-related scams.
The Coronavirus threatens the health of millions of people around the world daily, also killing thousands along the way. To curb the spread and remedy the situation, bodies like the CDC, WHO, and every country’s local health organisation like the NCDC, frequently circulate information around communities. However, it has also led to fraudsters taking advantage to provide fake news, and even asking for donations.
Each day, there seems to be a new account or NGO asking for donations into the health sector, and though some are legit, many are just fraudsters posing to take advantage of innocent citizens. So far, numerous complaints about scams have been recorded, especially with people who are looking to support the health cause in any way they can.
Channels used for COVID-related scams
There are three major ways scammers take advantage of the haziness of the situation to dupe people. To start with, they appeal to the emotions of humans, who see the high death toll and suffering. As a result of what is happening, people have been willing to donate funds for medical supplies, isolation centres, and financial compensation for medical workers.
Scammers take advantage of this by posing as charity organisations and solicit for funds. Most times, as soon as their target is met, they clear their footprint without leaving a trace behind.
Another way they scam people is by manufacturing and selling fake or low-quality health products. Everyone wants to get their hands on a cure, or something that can at least protect them from the virus, and scammers are meeting their needs by providing just that.
The World Health Organization currently approves only one vaccine, and any other thing outside it is outrightly fake or just a supplement that will help your body. Currently, only the Pfizer vaccine is clinically tested and approved to work. Be sure to not throw your money in the wind by purchasing some of these fake drugs around.
Lastly, scammers create systems to extract a patient’s personal information, thereby having access to the person’s true identity. It could be in the simple form of opening a registration portal where you supply all your details.
Therefore, only give information to approved bodies and not any random online site that appears legit. These fraudulent individuals can do a lot of damage to your identity. Stay vigilant, only communicate with approved bodies, and always ask questions if you are not sure or suspect foul play.
The place of electronics in COVID-related scams
These fraudsters usually reach out to you through the digital sphere. Hence, watch out for cold calls, text messages, or emails requesting donations to certain bodies. The best way to confirm the legitimacy of such a message is to visit the organisation’s official website in a different browser. Never follow the link in the mail or text directly, as it can be easily embedded with spyware. Therefore, a single click could see them extract all your personal information, including bank details.
Also, please stay away from those who claim to have a cure, and accompany it with testimonies of people who have used it. They are low graders desperate for your money. Vet them by searching online and see what people are saying. In all, always look out for suspicious messages, and opt out if you are sceptical.
In a nutshell, you should not believe any cure, vaccine or supplement that the World Health Organization does not approve of.
The government or legit health institutions do not cold call citizens to request donations or coerce them into making one. If you receive a call out of the blues, chances are it’s a scam, which is why they mostly try to hurry you to donate before you realise it. Always consult the institution in charge of health-related matters to confirm any fishy information you come across.
Balancing debt repayment and savings amid Covid-19 and economic uncertainty
Here are some tips to balancing debt repayment and savings amid Covid-19 and economic uncertainty.
Several individuals and businesses have been into arduous financial situations due to the Coronavirus pandemic. The pandemic has induced an unrivalled rise in uncertainty surrounding the economic condition of many countries. A high rate of debts has amassed because of increased unemployment and reduced income caused by the decline in business activities leaving many people struggling to make ends meet.
People face the dilemma of paying off the debts accumulated due to the pandemic or building up savings for future financial goals or threats. Many people might consider tackling the challenge in a sequential manner where they either get to save up first to pay off debts or clear their debts first to save up and invest later.
Striking a balance between both options might be a considerable choice as juggling between debt repayment and saving can be financially draining due to the impact the pandemic has on the finance and the economy. In this article, several tips that can establish harmony between paying off debts and savings are listed.
Here are some ways of balancing debt repayment and savings amid Covid-19 and economic uncertainty:
1. Plan for financial emergencies
It is necessary to make plans for financial emergencies to avoid accumulating debts to meet unplanned and unexpected expenses. Many people prepare a budget for their income without making allocations for other necessary expenses that may arise; this usually leaves them encountering debt to resolve those needs. Financial emergencies can happen at any time. Therefore planning and making reasonable savings can help one in utilizing income effectively.
2. Minimize expenses
Staying afloat financially through economic crisis involves cutting down on certain expenses. Our expenses should be prioritized by listing and arranging them in order of importance and necessity for living. Trimming expenses can fetch extra money to cover bills and also help in putting spending habits in check.
3. Assess your debt status and budget
Some debts can be manageable over time without imposing financial stress on the person. Such are usually low-interest-rate debts. Also, there are some debts, if unattended to, might accumulate unbearable interest over time. High-interest rate debts should be a priority when considering debt repayment. Assessing your debt situation and weighing what percentage of the income goes into clearing off the debts can put one on track to better debt management. Debt repayment, as well as building savings, should have allocations on the budget along with other expenses.
4. Set realistic savings and debt repayment goals
The desire to be debt-free while building up savings becomes attainable when expressed in a realistic and relatable format. Striking a balance between debt repayment and savings requires setting realistic goals and targets that involve the amount of money to be put towards clearing debts and the amount allocated to build up savings. These goals will help to keep track of the progress made and determine the income spent.
Scaling through a financial crisis is uneasy and involves careful financial planning. When faced with economic uncertainty, it is necessary to take care of your finances by assuming responsibility for your resources. The strategies mentioned will guide you on how to balance debt repayment and savings amid economic uncertainty.
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