It certainly looks all doom and gloom at the moment doesn’t it?
Open any newspaper or tune into the news on TV and if you are anything like me, you get punch drunk with all the articles on how bad the stock market or property market is etc etc.
It may seem perverse then to write an article on savings!
However, as ever, this is an immensely important subject that affects our clients’ future security. As we view a Doctor or Dentist’s financial affairs over at least 15/20 years, we can clearly see the effect this has on their overall position.
Quite often the savings and investments they made in the early years were fairly modest, but have now built up very nicely thank you over time. This helps massively towards their ‘Financial Independence Day’- the time they can choose to stop working.
Because the service we offer to our clients includes being able to look ahead at how their lives will look in, say, 15 years time (by using cash flow forecasts), we can show how much they need to save/invest NOW so that they do not run out of money in the future.
So, looking at the big picture, are we Brits serious savers?
Well, we certainly used to be. It took some time to recover from the war, but by the mid 1950s, we started to make real progress.
Here is the average UK savings ratio for 1960-1989:
60’s – 5.65%
70’s – 7.95%
80’s – 8.65%
The peak came in the difficult winter of 1979, when the savings ratio hit an all-time high of 14.1%, or to put it another way, one in seven pounds.
Now let’s look at how well we saved in the Nineties:
1990 – 1994 – 10%
1995 – 1999 – 8.28%
Yes, we saved hard during the recession of the early Nineties, but our savings habit started to slip when the housing market took off from the mid 90s onwards. However, things have certainly taken a turn for the worse recently, as the final table shows:
The UK average savings ratio, 2000-2008:
2000 – 2003 – 5.35%
2004 – 2008 – 4.30%
So, a declining trend, and the situation gets even worse.
In the first quarter of this year, the savings ratio collapsed to 1.1%. This is £1 for every £90 earned after tax, and takes us to a 49 year low.
In the past, a squeeze on our disposable incomes would have made us look to cut back and save more. Sadly, after a twelve-year housing and credit boom, it appears that we’ve almost forgotten how to save.
Of course, the purpose of having a bit of a financial cushion was to help when the bad times came. Well, the bad times are here, and for some people it looks like the cushion that has been there in the past is no longer available.
Perhaps the more you earn the more leeway you will have. However it is our experience that the more you earn the more you spend! (It’s important to focus on how much income you’re left with at the end of the month, not necessarily how large the income is).
So, ask yourself – are YOU saving enough?
Key Considerations:
It does pay to save. If you are serious about optimizing your finances to secure your future, do look at what you can afford to save and invest.
Once this is decided make sure that this money is targeted at fulfilling your goals in life.
ACTION POINT
Ensure you have an up to date expenditure template to identify where your money is spent, and compare this to your income now and in the future by analyzing your cash flow forecast (CFF).
This is VITAL.
If you do not have a CFF, ask your adviser to build you one, and if they cannot do this find a planner who can.
Do you have the scope to save/save more? If you have – do it!
It will bring Financial Independence Day nearer!
By: Ray Prince
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Venture Capital is a type of private equity that works on the basis of cash being invested into businesses in exchange for a share of a business. Venture Capitalists don’t however just offer their skills to a business; they also provide managerial and technical expertise.
Venture Capital is popular among new companies and new ventures. Many of these Venture Capitalists who invest in your business have a background in being chief executives at firms and investment bankers as well as connections with other firms in corporate investment and finance spaces.
Venture Capital is a viable source of financing for a business. Venture Capitalists have the option of investing at any stage of business, whether it is business start up or investing in an established business; however more typically than not a Venture Capitalist will invest in a more established and on going business.
When is comes to the type of businesses that Venture Capitalists invest in they are free to invest in which ever business sector they please, even though if you look at the trend of Venture Capitalists you will see that the main businesses that Venture Capitalists invest in are high tech such as research and development, electronics and gaming industries. Venture Capitalists also deal in large sums of money, which often run into millions of dollars.
Most Venture Capital arrangements have a fixed life of ten years and it should be noted that a Venture Capitalist isn’t suitable for all entrepreneurs; same as not all businesses get the opportunity to use the help of a Venture Capitalist. The Venture Capital market is very selective; a Venture Capitalist may only invest in one in 400 hundred opportunities that are presented to them, so if you want to attract a Venture Capitalist you need to have a well documented business plan and you need to be able to demonstrate how your business will be able to bring in enough capital after the help of a Venture Capitalist has been invested in your business.
If a business does posses the qualities that a Venture Capitalist is looking for, such as a solid business plan, a good management team, investment and passion from the founders, a good potential to exit the investment before the end of their funding cycle and target minimum returns in excess of 40% per year, you will find it easier to get a Venture Capitalist to invest in your business.
A Venture Capitalist will also consider aspects such as:
• Is your product or service commercially viable?
• Does your business have potential for sustained growth?
• Does your management team have the ability to use this potential and control the business through growth phases?
• Does the possible reward justify the risk involved in the investment?
• Does the potential financial return meet the investment criteria of the Venture Capitalist?
Almost three million people in the UK are employed by companies backed by venture capital, according to the British Venture Capital Association. Many of these companies might not be in existence without the injection of cash and guidance venture capitalists provide.
By: Helen Cox