Car financing has become big business. A large number of new and used car buyers in the UK purchase their vehicles in one way or another. It may be in the form of a bank loan, dealer financing, leasing, credit cards, the trusted “Bank of Mum and Dad”, or countless other forms of financing, but relatively few people actually buy a car with their own money.

A generation ago, for example, a private car buyer who had £8,000 in cash to spend would normally have bought a car worth £8,000 in cash. Today, that same £8,000 is more likely to be used as a down payment on a car that could be worth many tens of thousands, followed by monthly payments for up to five years.

With several manufacturers and dealers claiming that 40% to 87% of car purchases today are made in one way or another, it’s not surprising that many people jump on car financing to take advantage of buyers’ desire to get the latest and flashiest car available within their monthly cash flow limits.

The appeal of financing a car is very simple: you can buy a car that costs a lot more than you can pay upfront but that you can (hopefully) save on in the long run with small monthly chunks. The problem with car financing is that many buyers don’t realise that they usually pay much more than the face value of the car, and they don’t read the fine print of car financing agreements to understand the implications of what they’re doing. You will have to register again.

To clarify, this author is neither pro-financial nor anti-financial when it comes to buying a car. However, you should be aware of the full implications of financing a car—not just when you buy the car, but throughout the term of the financing and even beyond. UK regulators keep an eye on things, but they can’t force you to read documents or make smart decisions about how you pay for your car.

Financing through the dealer

For many people, it is very convenient to finance the car through the dealer where you buy the car. There are also often national offers and programmes that can make financing the car through the dealer attractive.

This blog discusses the two main types of car financing that car dealers offer to private car buyers: the Hire Purchase (HP) and the Personal Contract Purchase (PCP), with a brief mention of a third party, the Lease Purchase (LP). .. Leasing will be discussed in another blog shortly.

What is a hire purchase?

An HP is like a mortgage on your house; you pay a deposit up front and then pay off the rest over an agreed period (usually 18–60 months). Once you have made your final payment, the car is officially yours. This has been the way auto financing has worked for many years, but is now starting to lose favour over the PCP option below.

There are several advantages to renting a car. It is easy to understand (deposit plus some fixed monthly payments), and the buyer can choose the deposit and the term (number of payments) to suit their needs. You can opt for a maximum term of five years (60 months), which is longer than with most other forms of financing. You can usually cancel the contract at any time if your circumstances change without hefty penalties (although the amount owed early in the contract period may be worth more than your car is worth). Usually, with an HP, you will pay less in total than with a PCP if you plan to keep the car after the financing is paid off.

The biggest drawback of an HP compared to a PCP is higher monthly payments, which means the value of the car you can usually afford is lower.

An HP is usually best for buyers who plan to keep their car for a long time (i.e., longer than the financing term), have a large down payment, or want a simple car financing plan that has no end point at the end of the deal.

What is a personal contract purchase?

A PCP is often given different names from manufacturer finance companies (e.g., BMW Select, Volkswagen Solutions, Toyota Access, etc.), and is very popular, but more complicated than an HP. Most of the new car financing offers advertised today are PCPs, and usually a dealer will try to push you towards a PCP over an HP as it is more likely to be better for them.

Like the HP above, you pay a deposit and have monthly payments over a period. However, the monthly costs are lower and/or the term is shorter (usually max. 48 months) because you do not pay off the entire car. At the end of the term, a significant portion of the financing remains unpaid.This is commonly referred to as a GMFV (Guaranteed Minimum Future Value). The car financing company guarantees that the car is worth at least as much as the remaining financing within certain conditions. This gives you three options:

1) Bring the vehicle back.You will not receive a refund, but you will not have to pay the remainder. This means that you are actually renting the car all this time.

2/Pay the remaining amount (the GMFV) and keep the car. Since this amount can be many thousands of pounds, it is usually not a viable option for most people (which is why they financed the car in the first place), usually leading to

3) Part-exchange the car for a new (or newer) one. The dealer estimates the value of your car and takes care of the payment of the financing. If your car is worth more than the GMFV, you can use the difference (equity) as a deposit on your next car.

The PCP is best suited for people who want a new or near-new car and fully intend to change it at the end of the deal (or possibly even sooner). For a private buyer, it is usually cheaper than a lease or contract rental finance product. You are not obliged to go back to the same manufacturer or dealer for your next car, as any dealer can pay out the financing for your car and close the deal on your behalf. It’s also good for buyers who want a more expensive car with lower cash flow than is normally possible with an HP.

The downside of a PCP is that it tends to have you replace your car every few years to avoid a big end-of-deal payout (the GMFV). If you borrow money to pay off the GMFV and keep the car, you usually get a monthly payment that is slightly cheaper than starting over on a new PCP with a new car, so it almost always tempts the owner to replace it with another car. This is why manufacturers and dealers love PCPs because they keep you coming back every 3 years instead of keeping your car for 5–10 years!

What is a lease purchase?

An LP is a bit of a hybrid between an HP and a PCP. You have a down payment and low monthly payments, such as a PCP, with a large final payment at the end of the agreement. However, unlike a PCP, this final payment (often referred to as a “balloon”) is not guaranteed. This means that if your car is worth less than the amount owed and you want to sell or trade it, you’ll have to pay the difference (called “negative equity”) before you even think of making a down payment on your next car.

Read the fine print.

What is absolutely essential for anyone buying a car with financing is to read and carefully consider the contract before signing anything. Many people make the mistake of buying a car with financial compensation and then not being able to meet their monthly payments. Since your financing period could last for the next five years, it is critical that you carefully consider what might happen in your life over the next five years. Many high-end sports cars have had to be returned due to unplanned pregnancies, which can have major financial consequences for their owners!

Buying a car with financing means thinking about and talking about all the different financing options out there and learning about the pros and cons of each so you can make smart financial decisions.

Stuart Masson started and owns The Car Expert, a company that helps people buy new or used cars. The Car Expert is based in London and is a neutral and independent car buying service.

Stuart was born in Australia but has been interested in cars and the automotive industry for about 30 years. He has spent the past seven years working in the automotive retail business, both in Australia and London.

Stuart has combined his extensive knowledge of all things automotive with his own experience in selling cars and delivering high customer satisfaction to bring a unique and personal car buying agency to London. If you are looking for a new or used car in London, the Car Expert can help you find the best deal.

Equipment financing or leasing

One option is financing or leasing equipment. An equipment rental company is someone who helps small and medium businesses get money to buy or lease things like computers and other things when it is not available to them through their local bank.

The goal of a product wholesaler is to find a leasing company that can help with all of their financing needs. Some financiers look at companies with good credit, while others look at companies with poor credit. Some financiers look closely at companies with very high revenues (10 million or more). Other funders focus on small ticket transactions with equipment costs of under $100,000.

Financiers can finance equipment from €1000.00 to €1,000,000.00. Companies should look for competitive lease rates as well as equipment lines of credit, sale leasebacks, and credit application programs. Take the opportunity to get a lease quote the next time you’re in the market.

A cash advance from the merchant

It is not common for wholesale distributors of products to accept debit or credit from their merchants, even if this is an option. However, their traders need money to buy the products. Merchants can get cash advances from sellers to buy your products, which will increase your sales.

Factoring/Receivables Financing & Purchase Order Financing

One thing is certain when it comes to factoring or purchase order financing for wholesale distributors of products: the simpler the transaction, the better, because PACA is involved. Each individual deal is considered on a case-by-case basis.

Is PACA a problem? The process must be unravelled for the grower.

Factors and PO financiers do not borrow from inventory. Let’s assume that a distributor of products sells to a few local supermarkets. The debtors usually turn very quickly because products are perishable. However, it depends on where the product distributor actually buys it. If the sourcing is done at a larger distributor, there is probably no problem with accounts receivable financing and/or purchase order financing. However, if the purchase is made directly from the growers, the financing must be done more carefully.

An even better scenario is when there is added value. Someone buys green, red, and yellow peppers from different growers. They package these items and then sell them as packaged items. Sometimes that value-added process of packaging, bulking, and selling is enough for the factor or PO financier to look at it positively. The distributor has added enough value to the product or changed it in a way that makes PACA less likely to apply.

Another example might be that a distributor of products takes the product and cuts it into pieces, packages it, and then distributes it. There could be potential here because the distributor could sell the product to major supermarket chains. In other words, the debtors could very well be very good. How they buy the product will have an impact, and what they do with the product after they buy it will also have an impact. This is the part that the factor or PO financier will never know until they look at the deal, and this is why individual cases are touch and go.

What can be done under a purchase order program?

PO financiers like to finance finished goods that are shipped to an end customer. They are better at providing financing if there is only one customer and one supplier.

Suppose a distributor of products has many orders and sometimes there are problems with financing the product. The PO financier wants someone who has a large order (minimum $50,000.00 or more) from a major supermarket. The PO financier wants to hear something like this from the fresh produce distributor: “I buy all the products I need at once from one grower so that I can take them to the supermarket and I never touch the product. I’m not going to bring it to my warehouse and I’m not going to do anything about it, like washing or packing. All I do is pick up the order from the supermarket and place it with my grower, and my grower will take it to the supermarket.

This is the ideal scenario for a PO financier. There is one supplier and one buyer, and the distributor never touches the stock. It’s an automatic deal killer (for PO financing and not factoring) when the distributor touches the inventory. The PO financier has paid the grower for the goods so that the PO financier is sure that the grower has been paid and then the invoice is issued. When this happens, the PO lender may also do the factoring, or there may be another lender (another factoring or asset-based lender). PO financing always comes with an exit strategy and it is always another lender or the company that did the PO financing that can then come in and charge the receivables.

The exit strategy is simple: when the goods are delivered, the invoice is created, and someone has to pay back the purchase order facility. It is slightly easier when the same company does both the PO financing and the factoring, as there is no need to enter into an agreement between creditors.

Sometimes PO financing is not possible, but factoring is.

Let’s say the distributor buys from different growers and has many different products. The distributor is going to store and deliver it according to the needs of their customers. This is not eligible for PO financing but not for factoring (PO finance companies never want to finance goods placed in their warehouse to build inventory). The factor takes into account that the distributor buys the goods from different growers. Factors know that if growers are not paid, it is a mechanical lien for a contractor. A right of pledge can be established on the claim up to the end buyer, so that an intermediary has no rights or claims.

The idea is to make sure that the suppliers get paid because PACA was created to protect the farmers in the United States. Further, if the supplier is not the ultimate grower, the financier cannot know whether the ultimate grower is being paid.

An example: A distributor of fresh fruit buys a large stock. Some of the inventory is turned into fruit cups or cocktails. They cut and pack the fruit as fruit juice, and the family packs and sells the product to a large supermarket. In other words, they have almost completely changed the product. Factoring can be considered for this type of scenario. The product has been modified, but it is still fresh fruit, and the distributor has provided added value.

You’re in the market to buy a new car, and that’s fine. Today, almost everyone who buys a new vehicle needs some form of auto financing, and if you find that your personal finances or credit aren’t perfect, you can still get very affordable auto financing if you know how.

An informed car buyer is a smart car buyer. When you know your car financing options and have your car financing set up and approved before talking to a salesperson, you can walk into a car dealership and get a better deal on your terms without feeling intimidated, regardless of your financial situation.

Knowing that you have certain credit challenges should help you understand the differences between bad credit car loans and guaranteed car financing.

Loans for people with bad credit…

Bad credit car loans are usually available through new car dealerships when purchasing a new car or a used, certified used vehicle. The actual paperwork for financing a car loan is handled by the dealer, but generally the financing contract for a bad credit car loan is sold to another lender. That lender will service and maintain your loan. Loans typically have terms ranging from 24 months to 60 months. The disadvantages of a bad credit car loan are that many franchised car dealers are not set up to arrange these types of loans in-house, and the interest rates and fees can vary widely, limiting your choices for car purchases.

Guaranteed car financing

This type of financing is offered directly by smaller or independent car facilities and differs from a bad credit car loan primarily in that it is offered directly by Your financing contract is provided by the actual car wholesaler, and the loan is paid directly to the car dealer that you have the car sold to. In other words, you would finance the purchase of your car from the company that owns the car and sells it to you. Guaranteed car financing is used for the purchase of used or used vehicles and not typically for the purchase of a brand new car or truck. Loan terms are shorter than more conventional auto loans, and they rarely offer terms exceeding 36 months.

The main benefit of guaranteed car financing is that no credit check is usually required.Payments are normally made weekly and sometimes in person. One drawback to this type of car loan is that many car dealers that offer guaranteed car financing will never report your credit to the credit bureaus. So, paying on time and making sure you have a good payment history won’t help your credit profile or credit score.

It is best to start now and see what financing options are available to you. There are excellent specialised car financing services available online today that offer a wide variety of affordable car loan programs; even if you have been turned down for financing or have bad credit, bad credit, or other financial considerations, you will be surprised at how they can help you.I am in the market for a new car.

You now see that there are major differences between a bad credit car loan and guaranteed car financing and that there are other financing options in addition to these. Get approval first for the best car loan for you, then walk up to the car dealers and negotiate your terms.

And now I would like to invite you to a free resource where you can compare different car loan programmes and access the leading networks of car financing companies and dealers that specialise in affordable car loans with bad credit and help people in the US and Canada buy a car with bad credit. credit.

Alternative bank financing has increased significantly since 2008. Unlike bank lenders, alternative lenders typically place more importance on a company’s growth potential, future earnings, and asset values than on its historical profitability, balance sheet strength, or creditworthiness.

Alternative loan rates can be higher than traditional bank loans. However, the higher financing costs can often be an acceptable or only alternative in the absence of traditional financing. What follows is a rough sketch of the alternative loan landscape.

Factoring is the financing of debtors.

Factors are more focused on receivables and collateral than on the strength of the balance sheet. Factors lend money up to a maximum of 80% of the value to be received. Foreign claims are generally excluded, as are old claims. Claims that are more than 30 days old, as well as any concentrations, are usually discounted by more than 80%. Factors typically manage accounting and collection. Factors usually charge a fee plus interest.

Asset-Based Lending is the financing of assets such as inventory, equipment, machinery, real estate, and certain intangible assets. Asset-based lenders will generally lend no more than 70% of the value of the assets. Asset-based loans can be term or bridge loans. Asset-based lenders usually charge an initial commission and interest. Valuation costs are necessary to determine the value of the assets.

Sale and leaseback financing. This financing method involves the simultaneous sale of real estate or equipment at a market value, usually determined by an appraisal, and leasing the asset back at a market rate for 10 to 25 years. The financing is offset by a lease payment. In addition, a tax liability may need to be recognised on the sale transaction.

Purchase Order Trade Finance is a fee-based, short-term loan. If the manufacturer’s credit is acceptable, the purchase order borrower (PO) issues a letter of credit to the manufacturer, guaranteeing payment for products that meet predetermined standards. After the products are inspected, they are shipped to the customer (often the production facilities are abroad) and an invoice is generated. At this point, the bank or other money source pays the PO lender for the advanced money. Once the PO lender receives payment, it deducts its fee and transfers the balance to the company. Keeping track of inventory can be a cost-effective alternative to PO financing.

Non-bank financing

Cash flow financing is generally accessible to very small businesses that do not accept credit cards. The lenders use software to view online sales, banking transactions, bid histories, shipping information, customer comments and ratings on social media, and even restaurant health scores, if applicable. These metrics provide data that demonstrates consistent sales volume, revenue, and quality. Loans are usually short-term and for small amounts. The annual effective interest rate can be quite high. However, loans can be financed in a day or two.

Merchant cash advances are based on revenue streams associated with credit/debit cards and electronic payments. Advances can be secured against cash or future credit card sales and typically require no personal guarantees, liens, or collateral. Advances have no fixed payment schedule and no restrictions for business use. Funds can be used for the purchase of new equipment, inventory, expansion, renovation, debt or tax repayment, and emergency financing. In general, restaurants and other retailers that do not have sales invoices use this form of financing. Annual interest rates can be onerous.

Non-bank loans can be offered by finance companies or private lenders. The repayment terms may be based on a fixed amount and a percentage of the cash flows, in addition to a share of equity in the form of warrants. In principle, all conditions are negotiated. Annual rates are usually significantly higher than traditional bank financing.

Community development financial institutions (CDFIs) commonly lend to micro and other creditworthy companies. CDFIs can be compared to small community banks. CDFI financing is usually for small amounts, and the rates are higher than traditional loans.

Peer-to-peer lending and investment, also known as social lending, is a type of direct investor financing that many new businesses can take advantage of.This form of lending and investment has grown as a direct result of the 2008 financial crisis and the resulting tightening of bank credit. Advances in online technology have facilitated its growth. Due to the lack of a financial intermediary, interest rates for peer-to-peer lending and investments are generally lower than traditional sources of financing. Peer-to-peer lending and investing can be direct (a company receives funding from one lender) or indirect (several lenders pool funds).

Direct lending has the advantage that the lender and the investor can build a relationship. The investment decision is generally based on a company’s creditworthiness and business plan. Indirect lending is generally based on a company’s creditworthiness. Indirect lending distributes the risk among the lenders in the pool.

Non-bank lenders offer more flexibility in evaluating collateral and cash flow. They may have a greater appetite for risk and inherently riskier lending. Typically, non-bank lenders do not have deposit accounts. Non-bank lenders may not be as well known as their counterparts at the major banks. To make sure you are dealing with a reputable lender, research the lender thoroughly.

Despite the advantage that banks and credit unions have in the form of a low cost of capital (nearly 0% of customer deposits), alternative forms of financing have grown in recent years to meet the demand of small and medium-sized businesses. Alternative finance is becoming more competitive, and the cost of capital for these lenders is going down, so this growth is likely to continue.

Patricia McMillan of McMillan Consulting LLC can help your business with financial, leadership, and coaching issues.

If you’re talking to a business owner or reading the business section of a newspaper, you’ll almost certainly come across stories of people struggling to get enough financing to grow or maintain their business. But we’re starting to see a change in the way entrepreneurs make money. Many are now actively looking for other ways to make money.

A survey by the UK Forum of Private Business found that 26% of businesses were looking for alternative financial products, while 21% sought them outside of the traditional main lenders. In fact, another survey by the Federation of Small Businesses found that only 35% of respondents used a traditional overdraft facility in 2011.

So, if banks are persistently reluctant to lend to all businesses except the lowest risk, how can the rest of the UK entrepreneurial population fund growth? Here are some of the increasingly popular alternative funding sources to explore.

Better working capital management

This may seem like an odd source of funding, but very often companies sit on undiscovered cash reserves that can be used to fund growth. A Deloitte report in 2011 found that the UK’s largest companies were sitting on £60 billion of unproductive working capital. Inefficiencies in handling working capital (debtors, inventories, and creditors) can unnecessarily lock up your money. Taking a closer look at credit procedures, how credit terms are given, and how outstanding payments are handled can free up cash that can be used to fund self-funded growth plans.

Ensuring inventory is kept at optimal levels through better inventory management is another area where money can be freed up to support and fund growth. Look closely at your inventory management process and identify areas where cash is trapped.

Good working capital management is not just about better control of accounts receivable and inventory; it’s also about maximising creditors’ terms. Are you too eager to maintain a first-class relationship with your suppliers by paying well before the due date? You can positively influence your cash position by making optimal use of the terms and conditions of your suppliers. Have you taken full advantage of your position by looking for a wide range of terms, from, say, 30 days to 45 days?

More efficient working capital management can free up sufficient resources to self-finance growth plans.

Personal Resources

As traditional funding channels become more difficult to access, business owners are now looking to their personal resources to fund growth. Whether it’s saving, using personal credit cards or taking out additional mortgages, such funds are an immediate solution. A survey by the Federation of Small Businesses found that 33% of respondents had used their savings to fund growth. Personal money is not only easier to get, but it is also often cheaper than other ways to get money.

relatives and friends.

Sometimes referred to as the three F’s—family, friends, and fools—this can seem like a less stressful way to raise money. In some ways, it may be, but it can also be a journey fraught with peril. Using their personal network, entrepreneurs can obtain financing by either taking out a loan and offering a higher interest rate than a regular savings account or offering a portion of the equity in the business in exchange for investment.

Fundraising in this way can be relatively easy, as the request and execution are heavily based on personal trust. A business plan is usually presented, emphasising both the investment opportunity and the risks, but success ultimately depends on the depth of the relationship and the level of trust.

The danger of raising funds in this way is that the nature of the relationship changes from that of a personal one to that of a business transaction. Paying on time or not paying at all can hurt the relationship in a way that can’t be fixed, so be careful.

asset financing

The asset finance industry is based on the concept of preserving cash or accelerating access to it. Asset financing, which consists of invoice discounting, factoring, and financing of asset purchases, has been available as a source of financing for many years, but is only now beginning to gain recognition. Figures from the Asset Based Finance Association, a trade association representing the industry, show that the amount financed by the members of the association increased by 9% in the third quarter of 2011 compared to the same period last year. While the increase may not seem significant, it is against the background of a decline in traditional bank lending.

In a world where cash is king, lenders help save money by financing the purchase of assets such as vehicles, machinery, and equipment. Because the lender sees the underlying asset as security, there is usually no need for additional collateral. According to the Asset Finance and Leasing Association, one in three UK companies with external financing now uses asset financing.

Wealth lenders can help accelerate the flow of money within a company by providing faster access to cash tied up in the accounts receivable book. An invoice discount and factoring facility gives companies the opportunity to pay 80% of an invoice immediately instead of waiting for the agreed credit terms to expire. They will help accelerate the company’s cash flow, making it easier for the company to pay for major growth.

New players such as Market Invoice are entering the market to enable companies to raise financing against selected invoices. Using high-net-worth individuals and fundsThe Marktfactuur acts as an auction house, with financiers “bidding” to get advances on certain accounts.

Crowdfunding is a peer-to-peer

A relatively new phenomenon is the concept of raising finance using the power of the crowd. Due to the historically low interest rate on savings, savers have been looking for new ways to increase their returns. With entrepreneurs struggling to get the necessary financing together, it is only natural that a market be created to bring these two parties together.

CrowdCube entered the market in 2010 to match private investors looking to become Dragons with companies looking to raise capital. Once a company has gone through the first part of the process, their proposal is posted on the site. Potential investors can choose how much money they want to invest, with a minimum amount of just £10.

Companies looking for a more traditional loan may want to consider Funding Circle. Founded in 2010, Funding Circle also matches individual investors seeking better returns with companies seeking additional funding. Businesses can apply for financing of between £5,000 and £250,000 for 1, 3, or 5 years. For investors to be able to get a risk assessment, the company must have filed and had an audit of its books for at least two years.

As the concept of crowdsourcing matures, we will likely see more players enter this market to take advantage of the need for better investor returns and easier access to corporate finance.

There is more than one way to finance growth.

Accessing finance to fund growth plans doesn’t have to be difficult when you’re looking for alternative providers. Financing growth is no longer the sole domain of traditional bankers, and entrepreneurs must now seek alternative routes.

When trying to understand personal finance, it is best to understand what personal finance is NOT.

Many people think that accounting and personal finance are the same, but personal finance is not bookkeeping.

At first glance, they may seem the same; they both have something to do with money. However, the definitions will help us better understand the differences.

Merriam-Webster’s definition of accounting is “the system for recording and summarising business and financial transactions and analyzing, verifying, and reporting the results.”

Based on this definition, we see that accounting is the process of analysing and recording what you have already done with your money.

Therefore, having an accountant is usually not enough when it comes to your personal finances.

Accountants generally do not deal with personal finance (there are some exceptions to this rule). Unless your accountant is also a financial advisor or coach, at the end of the year he or she will probably just look at what you’ve been doing with your money and provide you with an analysis report.

This report is usually your tax return; it shows what you owe the government or what the government owes you.

Rarely does an accountant give a person a balance sheet, an income statement, or a statement of assets; these are all extremely useful tools for managing your personal finances effectively.

Personal Finance looks at your finances from a more proactive and goal-oriented perspective. This gives the accountant something to record, verify, and analyze. Personal financing

as well as public financeAll three relate to generating budgets and managing funds for optimal results.

Personal Finance Simplified

By understanding the definition of “finance“, we can break down our “personal finance” into 3 simple activities:-

1. Getting money or capital for any kind of spending is the same as making money.

A company makes money by selling its products and services. This is called “turnover” or “turnover”. You can also make more money by investing some of your money.

A person gets money through a job or a small business (self-employed, sole proprietorship, network marketing, or other small business). The money that comes in can be a salary, hourly wage, or commission and is also known as income.

A government gets money through the taxes we pay. This is one of the main ways that the government generates revenue, which is then used to build infrastructure such as roads, bridges, schools, hospitals, etc. for our cities.

2. Using our money to make purchases is equivalent to spending money.

How much we spend in relation to how much we earn makes the difference between optimal results in our personal finances. Making good spending decisions is critical to achieving financial wealth, no matter how much you make.

3. Getting the best results means keeping as much of our money as possible.

It’s not how much you MAKE that matters-it’s how much you LOVE that really matters when it comes to your personal finances.

This is the part of personal finance that pretty much everyone finds the most challenging.

Often times, people with high incomes (six figures or more) also tend to spend just as much (or more), meaning they put themselves in debt and that debt starts to build up interest. Before long, that debt could begin to grow exponentially, destroying any hopes they had of acquiring wealth.

Personal finance made easy

Personal finance doesn’t have to be complicated if you keep this simple formula in mind:

What you are left with = income minus costs.

For optimal results, simply earn more than you spend and spend less than you earn. This leaves more for you and your family!

If you’re not actively working toward optimal results, you’ll get less than optimal results by default.

It really is that simple!

Now that you understand personal finance and what to do, the next step is to learn how to do it!

The best way to get started is by following these 3 simple steps:

1. Know what you want to achieve: “If you don’t know where you’re going, any road will take you there” has become a very popular quote, probably because it’s so true. One of the habits that Stephen Covey highlights in his book “7 Habits of Highly Successful People” is to always start with the end in mind. Knowing where you want to go will be a big help in making sure you get there.

Have a plan that you can follow to achieve your goals. Knowing how you are going to achieve your goals in a step-by-step plan is invaluable. Sometimes this is easier with the help of an advisor or a financial coach.

3. Use tools and resources: These will help you stick to your plan and not get distracted by the things in life that can limit our income and cause us to spend more than we should. Don’t try to work it all out in your head! You will end up with a huge headache and your finances will become one giant dark fog!