The ability to manage your personal finance is key for successful long term financial health and stability. Regardless of how much you earn, being able to make your income work for you is essential
Not everyone requires a large salary and an expensive home and car to be happy, but they do need to be comfortable in terms of being able to eat and sleep in a healthy environment, and provide adequate clothing and shelter for their families as well. This can only be achieved through sensible personal financial management, that is, only spending what you can afford, not borrowing money over and above what you can realistically afford to pay back, and ensuring you and your family will be comfortable and able to maintain the standard of living when you retire.
Banks are often very willing to give credit to customers, which is where you need to be careful – they are not so easy going when it comes to paying the money back. Overdraft interest can be very expensive, and you end up paying back much more than you originally borrowed. On top of that, they charge high prices for going over the agreed amount, whether by accident or not, so customers need to be extra vigilant when approaching their limit. On the other hand, when the need is only short term, an overdraft is a very viable option. If you know in advance one month you will be caught short, then having an overdraft facility can be a big help. Similarly, simply setting up and overdraft but not using it until/unless there is an emergency will give you piece of mind that you will not struggle to suddenly raise any money unexpectedly.
Credit cards can be very useful, especially when using them as opposed to debit cards purely to take advantage of any spending bonus points/offers gained by regular use – which will only happen if the balance is paid off fully at the end of every month. Having a credit card for emergencies is again a sensible idea, especially for larger, unexpected bills such as car repairs. Many credit cards offer a 0% interest on the balance for a set period, often 6 months, and this can be manipulated so that you change company every six months to avoid paying any interest. Of course, this just keeps the interest rate down; it does nothing to shave the amount of what you owe. It is a common mistake to see credit as an extension of your wages – nothing could be further from the truth, it is not your money.
You will have to pay it back at some point, and the sooner the better.
Therefore, the best advice is again to only borrow what you can afford to pay back.
Finally, to secure your future when you eventually settle down and retire, it is an extremely advisable idea to set up some form of pension scheme, whether that is with your bank, or your employers. Pension schemes can move from company to company in the event of job changing, and your employers simply take a percentage of your wage each month and put it aside, to be given to you in a lump sum as and when you are retired, so you can maintain a good living standard when you are no longer working.
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With advancement in the field of technology and automobile industry every year variety of latest models of vehicles are introduced in markets throughout the globe to attract new customers. There has been a revolutionary growth in the production of cars and so has the need arisen to obtain quick money to finance it. The most convenient and easy source of obtaining a dream car is by way of an auto loan. In today’s inflationary period it is not possible to own a car without an auto loan. There are many ways to secure an auto loan. 1) Banks/Financial institutions: - Now a day nationalized banks and financial institutions provide their customers a wide range of auto loans containing various terms in compliance with their demand. Any person can borrow up to 125% of the assessed value of car. Such loans are generally available for a term of 3-5 years but the term of the loan can be extended up to 6 years if the value of the car goes beyond $15000. Generally bank or financial institution grants the loan only after checking the financial position of any individual. 2) Secured loans: - Secured auto loans are the loans which are issued that are secured by the liens on the car/vehicle that is being purchased. It gives the much needed security to the lender on the lent out money. As repayments are made the securitization liquidates and becomes zero when the entire amount with interest is re paid. Only thing is that one must be regular in paying the repayments as the default causes in loss of vehicle. 3) Unsecured auto loans: - such loans can be obtained easily without placing any collateral against the vehicle. Here there is no fear of losing an asset but it carries a higher rate of interest as compared to secured loans. 4) Bad credit loans: - Generally a person intending to buy any vehicle must enjoy a good credit score. His monthly earning should exceed $2000 and his credit score must touch 550 points to achieve his dream car. But if in case his credit position is less than desired and still he wants to realize his dream of owing a car than he can resort to sub prime loans. Such loans are offered to people with bad credit on a higher rate of interest. One must be smart enough to negotiate a best deal with a suitable lender. 5) Online lenders: - In order to secure an auto loan a person can browse through relevant websites and compare rates with different schemes with a lender only with few mouse clicks. Such lenders starts the process of granting loans immediately through mails and one finds the best deal knocking his door within minutes at his doorstep. Secure your loan an easy way and take your dreams to a long drive.
Kuntal Mehta owns www.homeandfamilybills.com the site is meant to help individuals and families leverage their financial capabilities to the fullest. Visit www.homeandfamilybills.com/home-refinance-loans/home-mortgage-refinancing-rates.php to read more articles on mortgage and debt By Kajal Thakkar Independent Writer This article is free for republishing
*I am grateful for comments on earlier drafts to Chris Allsopp and Simon Wren-Lewis.
Abstract
This article introduces the three contributions to the Feature, which address issues raised by the sterling appreciation of 1996–97 and the subsequent prolonged overvaluation. Cobham discusses the MPC's understanding of exchange rate changes and examines policy makers' responses to the proposal that policy should respond to exchange rate misalignments. Kirsanova, Leith and Wren-Lewis construct a 'new open economy macroeconomics' model with international risk sharing shocks, in which the welfare function derived includes a term in the 'terms of trade gap'. Allsopp, Kara and Nelson investigate the exchange rate-prices pass-through and how imports should be modelled, and draw out the policy implications.
There is widespread agreement that UK monetary policy has been pursued with greater competence and success since the Monetary Policy Committee (MPC) was given control of interest rates in 1997. Policy now has a clear target and a transparent set of operating practices, the MPC's reaction function is relatively well understood, and inflation has not so far strayed far enough from the target for the Governor of the Bank of England to have to write and explain the MPC's behaviour and thinking to the Chancellor of the Exchequer. However, the period from 1997 has been characterised by a persistent overvaluation of sterling brought about by a 20% appreciation in the second half of 1996 and the first half of 1997, and there have been recurring concerns about the resulting 'imbalances' between the tradable and non-tradable sectors of the UK economy. Such concerns have raised the question of whether the policy makers could have taken some action to forestall or correct the development of exchange rate misalignments, and the broader question of whether the open economy element in the current monetary framework is satisfactory.
The three articles in this Feature explore the issues involved in the appreciation and overvaluation of sterling in different ways. The first provides a background narrative, discusses the thinking and actions of the policy makers (the Chancellor before May 1997 and the MPC since), and shows that they were indeed aware of and concerned with the sectoral imbalances created by the overvaluation, but felt there was little they could do about them. Part of the problem was that the MPC found it very hard to explain past changes in the sterling exchange rate, or to forecast future changes (which it did mainly by using interest rate differentials in an inversion of uncovered interest parity (UIP)). Cobham also examines why the policy makers did not take some other actions which might have prevented or moderated the overvaluation: in particular he examines Wadhwani's (2000) proposal that the policy makers should take account of asset price misalignments (notably exchange rate misalignments) as well as the inflation forecast in setting interest rates. He identifies the arguments deployed by other members of the MPC against this proposal, documents its lack of influence on MPC decisions, and discusses what the policy makers would have had to have done differently and when if they were following the proposal. The counter-arguments included the difficulty of identifying misalignments and the risk that such actions would confuse the markets and undermine the MPC's credibility, while the conjunctures in which action would have had to be taken were often ones of strong domestic demand growth. However, Cobham also stresses the counter-argument that the response of the exchange rate to such actions was intrinsically unpredictable. As he points out, if this is because the exchange rate is typically erratic, then the Wadhwani proposal is difficult to defend but, more importantly, there is a case for a reconsideration of the whole monetary framework, including a more open examination of the case for adopting the euro.
In the second article Kirsanova, Leith and Wren-Lewis (hereafter KLW) focus on the theoretical arguments put forward by authors such as Clarida et al. (2001), who have concluded that 'the monetary policy design problem for the closed economy is isomorphic to the problem of the closed economy' (p. 248) and, in particular, that policy should target the same price index, domestic output price inflation, rather than consumer price inflation (which includes imported goods). Such arguments differ sharply from earlier articles which had argued that optimal policy in an open economy should take explicit account of the exchange rate, e.g. Ball (1999) and Svensson (2000); but see also Taylor (2001) and Galí and Monacelli (2002). KLW generalise the small open economy model of these authors by incorporating preference shocks and international risk sharing (IRS) shocks, and they use Woodford's (2003) method to derive a welfare function from individual representative agent utility functions. They find that optimal policy should still target output price inflation, but, in the presence of IRS shocks, they find a role for policy to respond systematically not just to the output gap but also to the 'terms of trade gap', that is the difference between the actual level of the terms of trade and the level that would exist in the absence of IRS shocks and nominal inertia. They argue that this terms of trade gap is close to the deviation of the real exchange rate from John Williamson's Fundamental Equilibrium Exchange Rate (FEER). Moreover, the results from their calibrated model suggest that the use of a closed economy model in an open economy could produce significant policy errors. KLW also discuss the stability argument for targeting output rather than consumer price inflation. They show that in their model the latter strategy could generate instability, through the feedback from interest rates to consumer price inflation via the exchange rate, particularly in a highly open economy with a full pass-through from the exchange rate to prices.
With regard to the recent policy experience in the UK, KLW argue that in the context of the model they use the 1996–7 appreciation involved a large terms of trade gap as the result of an IRS shock. On their analysis policy should not have responded only to inflation and output, and for inflation it should have focused on output rather than consumer price inflation. However, their calibration implies that on optimal policy interest rates would not necessarily have been lower.
In the third article Allsopp, Kara and Nelson (hereafter AKN) provide an empirical analysis of the exchange rate-prices pass-through and draw out its implications for policy. They update and supplement earlier empirical work (Kara and Nelson, 2003) to show that the pass-through, which is typically strong from the exchange rate to import prices but weak from import to retail prices, is best modelled via the McCallum and Nelson (2000) approach in which imports are treated as intermediate inputs. In that case the appropriate index for policy makers to target is indeed retail or consumer prices (rather than domestic output prices): the appropriate target should include those prices which are sticky but exclude those which are perfectly flexible, but in this case all (final) goods and services have sticky prices.
There are a number of implications in AKN's analysis for the recent policy experience. First, they raise questions about the standard estimates of domestically generated inflation (DGI) which are derived on the basis of a misplaced assumption about the pass-through. According to the published data import prices fell and DGI rose in the late 1990s, but if the pass-through to retail prices is low as AKN argue then there would have been no such rise in DGI (and the concept of DGI needs to be rethought). Second, their analysis implies that the tendency for the MPC to keep interest rates high on the grounds that sterling was expected (on the basis of the UIP forecasts) to fall was misplaced: given a low first round pass-through to retail prices and given that monetary policy seems to be capable of controlling second round effects of exchange rate changes, the committee could have waited for the exchange rate to depreciate before taking any action. Third, they suggest that the new forecasting model being introduced by the Bank should treat imports differently (from the previous model, with its high pass-through), which would have obvious implications for both forecasts and interest rate decisions. Fourth, their analysis implies that the impact on output of exchange rate misalignments (if that concept is still useful) needs to be rethought. The treatment of imports as inputs involves a smaller pass-through to prices, but not necessarily a smaller effect than in the standard view on firms that participate in international trade: an appreciation, for example, cheapens inputs and raises potential supply while at the same time it reduces demand (insofar as other inputs are domestic their prices do not fall, so that costs fall by less than the appreciation and relative prices rise), thus having a larger effect on the output gap. Moreover, the AKN treatment indicates that what matters is not just whether firms compete, on domestic or export markets, with foreign goods but also the extent to which they use imported inputs.
Overall, the articles strongly suggest that the open economy element in the current monetary framework is unsatisfactory, and that more research is needed – on the modelling of trade relationships, on the determination of exchange rates and on the appropriate policy responses to external shocks of different kinds.
References
•
Ball, L. (1999). 'Policy rules for open economies', in J. Taylor (ed), Monetary Policy Rules,
Chicago
: University of Chicago Press.
•
Clarida, R., Galí, J., and Gertler, M. (2001). 'Optimal monetary policy in open versus closed economies: an integrated approach', American Economic Review, vol. 91(May), pp. 248–52.
Galí, J., and Monacelli, T. (2002). 'Monetary policy and exchange rate volatility in a small open economy', National Bureau of Economic Research working paper 8905.
•
Kara, A., and Nelson, E. (2003). 'The exchange rate and inflation in the UK', Scottish Journal of Political Economy, vol. 50 (November), pp. 585–608.
McCallum, B., and Nelson, E. (2000). 'Monetary policy for an open economy: an alternative framework with optimizing agents and sticky prices', Oxford Review of Economic Policy, vol. 16 (Winter), pp. 74–91
A business broker is a person or firm that acts as an intermediary between sellers and buyers of businesses.
Business brokers, also called business transfer agents, or intermediaries, assist buyers and sellers of privately held business in the buying and selling process. They typically estimate the value of the business; advertise it for sale with or without disclosing its identity; handle the initial interviews, discussions, and negotiations with prospective buyers; facilitate the progress of the "due diligence" investigation and generally assist with the business sale.
[edit] Agency relationships with clients and customers
Traditionally, the broker provides a conventional full-service, commission-based brokerage relationship under a signed listing agreement with a seller or "buyer representation" agreement with a buyer, in most states thus creating under common law an agency relationship with fiduciary obligations. Some states also have statutes which define and control the nature of the representation. These are then clients of the broker.
Agency relationships in business ownership transactions involves the representation by a business broker (on behalf of a brokerage company) of the principal, whether that person or persons is a buyer or a seller. The principal broker (and his/her agents) then becomes the agent of the principal who is the broker’s client. The other party in the transaction who does not have an agency relationship with the broker is the brokers customer.
In some states, business brokers act as transactions brokers. A transaction broker represents neither party as an agent, but works to facilitate the transaction and deals with both parties on the same level of trust.
Dual agency occurs when the same brokerage represents both the seller and the buyer under written agreements. Individual state laws vary and interpret dual agency rather differently.
If state law allows for the same agent to represents both the buyer and the seller in a single transaction, the brokerage/agent is typically considered to be a Dual Agent. Special laws/rules often apply to dual agents, especially in negotiating price.
In some states (notably Maryland[1]), Dual Agency can be practiced in situations where the same brokerage (but not agent) represent both the buyer and the seller. If one agent from the brokerage has a home listed and another agent from that brokerage has a buyer-brokerage agreement with a buyer who wishes to buy the listed property, Dual Agency occurs by allowing each agent to be designated as “intra-company” agent. Only the principal broker himself/herself is the Dual Agent.
Some states do allow a broker and one agent to represent both sides of the transaction as dual agents. In those situations, conflict of interest is more likely to occur.
[edit] Types of services that a broker can provide
Since each state's laws may differ from others, it is generally advised that prospective sellers or buyers consult a licensed real estate professional.
Some Examples:
Comparative Market Analysis - an estimate of the businesses value compared with other businesses for a similar type. This differs from an appraisal in that businesses currently for sale may be taken into consideration (competition for the subject business).
Exposure - Marketing the business to prospective buyers.
Facilitating a Purchase - guiding a buyer through the process.
Facilitating a Sale - guiding a seller through the selling process.
FSBO document preparation - preparing necessary paperwork for "Sale By Owner" sellers.
Hourly Consulting for a fee, based on the client's needs.
Preparing contracts and leases. (Not in all states.)
The sellers and buyers themselves are the principals in the sale, and business brokers (and the principal broker's agents) are their agents as defined in the law. However, although a business broker commonly fills out the offer to purchase form, agents are typically not given power of attorney to sign the offer to purchase or the closing documents; the principals sign these documents. The respective business brokers may include their brokerages on the contract as the agents for each principal.
The use of a business broker is not a requirement for the sale or conveyance of a business or for obtaining a Small business or SBA loan from a lender. However, once a broker is used, A special escrow attorney[2] sometimes called a settlement attorney (or party handling closing) will ensure that all parties involved be paid. Lenders typically have other requirements, though, for a loan.
Upon signing a listing contract with the seller wishing to sell the business, the brokerage attempts to earn a commission by finding a buyer for the sellers' business for highest possible price on the best terms for the seller. To help accomplish this goal of finding buyers, a business brokerage commonly does the following:
Ensures Confidentiality--Brokers have established systems in place to protect the confidentiality of a business.
Appraisals--Most business owners have no idea what their business is worth. Certified Business Brokers are trained in business valuation and can help business owners understand the true value of all their hard work and sacrifice.
Market Knowledge--Brokers make their living selling businesses. They are in the market on a daily basis conversing with Buyers. A local business broker understands the local market as well as what a business is worth.
Saves time and stress
Listing the business for sale to the public, often on a Multiple Listing Service, in addition to any other methods.
Based on the law in several states, providing the seller with a business condition disclosure form, and other forms which may be needed.
Preparing necessary papers describing the business for advertising, pamphlets, tours, etc.
Advertising the business. Advertising is often the biggest outside expense in listing a business.
Being a contact person available to answer any questions about the business and to schedule showing appointments
Ensuring buyers are prescreened so that they are financially qualified to buy the business; the more highly financially qualified the buyer is, the more likely the closing will succeed.
Negotiating price on behalf of the sellers. The seller's agent acts as a fiduciary for the seller. By not being emotionally tied to the transaction, Business Brokers are in a position to more effectively negotiate on a Seller's behalf. This may involve preparing a standard offer to purchase contract by filling in the blanks in the contract form.
In some cases, holding an earnest payment in escrow from the buyer(s) until the closing. In many states, the closing is the meeting between the buyer and seller where the business ownership is transferred and the businesses name is conveyed.
Business brokers attract prospective buyers in a variety of ways, including listing limited details of available businesses on their websites and advertising in business newspapers and magazines. Brokers also directly approach prospective buyers and sellers to gauge interest.
Although there can be other ways of doing business, a business brokerage usually earns its commission after the business broker and a seller enter into a listing contract and fulfill agreed-upon terms specified within that contract. The seller's business is then listed for sale, often on a Business specific Multiple Listing Service (MLS) in addition to any other ways of advertising or promoting the sale of the property.
In most of North America, a listing agreement or contract between broker and seller must include the following: starting and ending dates of the agreement; the price at which the business will be offered for sale; the amount of compensation due to the broker.
In consideration of the brokerage successfully finding a satisfactory buyer for the property, a broker anticipates receiving a commission for the services the brokerage has provided. Usually, the payment of a commission to the brokerage is contingent upon finding a satisfactory buyer for the business for sale, the successful negotiation of a purchase contract between a satisfactory buyer and seller, or the settlement of the transaction and the exchange of money between buyer and seller.
In North America a commission in the 10% to 12% range is considered "standard" for business brokerage services and is typically paid by the seller at the closing of the transaction. The standard commission is likely to be lower in the United Kingdom (see Lehman scale). Commissions are negotiable between seller and broker. The commission could also be paid as flat fee or some combination of flat fee and percentage, particularly in the case of lower-priced businesses, businesses in the multi-million dollar price, or other unusual business assets. The details are determined by the listing contract.
Out of the commission received from the seller, the broker will typically pay any expenses incurred to do the work of trying to sell the listed businesses, such as advertisements, etc.
All compensation to a broker paid by a third party must be disclosed to all parties.
In the US, licensing of business brokers varies by state, with some states requiring licenses, some not; and some requiring licenses if the broker is commissioned but not requiring a license if the broker works on an hourly fee basis. State rules also vary about recognizing licensees across state lines, especially for interstate types of businesses like national franchises. Some states, like California, require either a broker license or law license to even advise a business owner on issues of sale, terms of sale, or introduction of a buyer to a seller for a fee. The following require a license to practice as a business broker: Arizona[3], Arkansas, California, Florida, Georgia, Idaho, Illinois, Michigan, Minnesota, Nebraska, Nevada, Oregon[4], South Dakota, Utah, Wisconsin, and Wyoming.
In all states the broker must be a licensed real estate agent if real estate interest is involved in the transaction or the transfer of real estate interest is a requirement for the sale.
The largest association of business brokers in the US is the International Business Brokers Association. The American Business Brokers Association was formed recently and is growing rapidly. Many states have their own associations, e.g., the Texas Association of Business Brokers.
The most well known sponsored designations are the following:
Certified business intermediary (CBI) an IBBA designation
Accredited business intermediary (ABI) an ABBA designation
Master business intermediary (MBI) a VR designation
