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My wife recently hosted her first pop-up event for her new side hustle business. It is fairly common for these types of events to be “cash only” but we wanted to also offer other payment options to customers, including Eventbrite, debit cards, and credit cards.
With the planned event date rapidly approaching we needed to come up with a solution quickly for accepting debit cards and credit cards with a portable credit card machine, while also minimizing recurring costs if possible. I was already familiar with Square Reader products, which either attach to a phone directly or wirelessly, but I always thought that these options didn’t seem quite as professional as a traditional Point of Sale (POS) terminal.
For many entrepreneurs, the importance of bookkeeping is not exactly top of mind compared to the initial excitement of starting a new business (not to mention all of the work that is required). Bookkeeping doesn’t help you design your website, market your business, or land your first customers.
Bookkeeping starts to become far more important later on when an entrepreneur begins to have some common questions about the business. How much money am I making? Is my business profitable? How much am I going to owe the government for taxes?
Working capital is an important concept, whether you are an entrepreneur with a small business, or you are a private equity firm that is looking to acquire a business for millions (or even billions) of dollars. Working capital can be fairly simple to understand at a basic level, and it can also be something that accountants, finance professionals, and lawyers debate at great length when working on the acquisition of a business.
The importance of working capital cannot be understated, because it is basically the lifeblood of a business. And you definitely don’t want to be in a situation where your business has negative working capital. So then, what is working capital?
A recent survey by the Canadian Payroll Association stated that 44% of working Canadians reported it would be difficult to meet their financial obligations if their paycheque was delayed by even a single week. This is very understandable due to many people having high levels of debt, the housing market being expensive, and rising costs of living, but I do think that establishing an emergency fund should be a key goal for everyone.
There are five important reasons to work towards building an emergency fund, which include: the possibility of losing your employment, being faced with a serious illness, encountering unexpected expenses, maintaining your credit rating, and the option to start your own business in the future. In addition to discussing these items, we will also briefly cover the recommended size of an emergency fund, where you should keep these funds, and ideas for finding the money to start contributing to your emergency fund.
EBITDA is a very common finance acronym that is encountered when reviewing the financial performance of public companies as we go about deciding whether or not to invest in a particular company. Calculating EBITDA is also very important for private equity firms when they are reviewing potential acquisition targets (it is rare to see a corporate finance pitch deck that does not reference EBITDA).
In addition, it has become increasingly common to see “adjusted EBITDA” being reported by public companies. How do we go about understanding what adjusted EBITDA means, and also whether or not we agree with the items that have been added to EBITDA?
2019 was an exciting year for us here at My Finance Instructor after the initial launch of our website at the end of 2018, and what better way to wrap up the year as we break for the holidays than to provide a recap of 2019! We will also provide you with links to all of our blog articles by topic at the end of this article.
The five Cs of credit are a basic concept in lending, and I thought it would be helpful to write an article that explains each “C” in greater detail for those that may be unfamiliar with the topic. I think that understanding the five Cs of credit really comes down to putting yourself in the “shoes” of a lender and asking yourself what sorts of things you would look for in a borrower when deciding whether or not to approve a loan.
Character is basically about deciding whether or not it would be prudent to lend to a specific borrower based on their history of making payments to other lenders. If you can demonstrate a track record of paying all of your debts when they are due, you likely have a good credit score, and if you don’t, you will unfortunately have a much lower credit score and find it more difficult to borrow money.
Tax-free savings accounts (TFSAs) are types of accounts in Canada that provide incentives for us to save money. TFSAs first became available in 2009, only allowing a contribution limit of $5,000 initially, but because the contribution limit automatically increases each year, the total TFSA contribution room is now as much as $69,500 for 2020 (it was previously $63,500 for 2019).
Once you understand the key differences between RRSP and TFSA accounts, and also which types of investments are permitted in a TFSA, the next question is typically how to go about calculating your total TFSA contribution room. Annual TFSA room begins to accumulate when a person turns 18, or in the case of someone that moves to Canada from another country, their cumulative TFSA limit begins to increase the year that they arrive in Canada and obtain a social insurance number.
Mutual funds are one of the first types of investments that most investors are likely to encounter when saving for retirement. Mutual funds are a great way to get started with investing, and offer some key benefits, including low barriers to entry, diversification, and professional management of your investments.
I think it is also very important for investors to learn about what is meant by the Management Expense Ratio (MER) fees that are disclosed for a mutual fund that they are considering investing in. MERs are also relevant for other types of investments, such as exchange traded funds (ETFs).
As we will see shortly, MERs have the effect of reducing annual returns (growth rates) for investors, which makes this a very important financial literacy topic!
Imagine a world where literally anyone could sell you an investment without first taking into consideration your specific financial circumstances and determining if an investment is suitable for you. Fortunately, we instead live in a world where investments are heavily regulated, along with the firms that sell them to you and also the individuals working for those firms, in order to protect investors.
Securities regulators such as the SEC in the United States and the multitude of provincial regulators in Canada expect investment dealers to know who they are dealing with, more specifically referred to as an obligation to Know Your Client (also referred to as Know Your Customer), which is abbreviated as KYC. KYC partially consists of collecting basic information about you as a person (name, address, phone number, etc.), as well as your financial circumstances (sources of income, liquid net worth, non-liquid net worth, liabilities, etc.).
Johnathan Klimo, CFA