ENTREPRENEURS usually struggle with wanting to achieve very difficult goals at the same time. We all want to get rich right away and ensure that our businesses increasingly capture a larger chunk of the market each year. These two goals are close to impossible to meet one after the other. Something’s got to give, always.
There was once an entrepreneur (with a story many would be familiar with) who tried his luck at getting both and failed miserably. How might this particular entrepreneur lost his hard-earned cash and got tied to bad debts? He invested in a sketchy pyramid business model while his small business ran on a tight cash flow. Instead of dividing the earnings between taking in more projects to scale and funneling his spare cash back into his savings, his bank accounts — both personal and business — suffered negative spikes. He ended up having to take out loans for both business and personal expenses. More often than not, we all really shouldn’t bite off more than we could chew.
Assuming that you employ the basic and best practice of keeping your personal finances separate from your business finances, you should do the same for your cash spending. You should be conservative on how you spend your business’ extra cash and just a little less so when it comes to earning passive income apart from your business.
Investment options to consider
We’re all in better luck these days as we can count the options to get additional income from with more than just one hand. Thanks to the wonders of digitalisation, investing can be done by literally using the tips of your fingers. Below are five promising investment options to choose from:
– Buying stocks. This would still be the go-to means of investing, especially now that it’s easier and done in real-time. COL Financial would be the go-to website of savvy millennials who invest at least P5,000 of their extra cash at a time in various companies. You could own stocks in companies like SM, Double Dragon, etc.
Signing up for an account is not difficult. You’ll just need to prepare and submit the following requirements such as a completed application form, a copy of your valid government-issued ID, and your tax identification number.
The friendly tip for first-time investors is to get to know the portfolio of companies you want to invest in. When still in doubt, it’s best to buy stocks from those who are in the “buy below price” category as these are expected to go up in value again. This is also considered optimal to buy.
For those who aren’t into the daily hustle of checking the value of stocks, you may also opt to invest in perpetual preferred shares, or PPREF shares, that would require you to invest a minimum of P50,000. But fixed returns are guaranteed with only six to seven years to wait for your stocks to mature.
Mutual funds. If you’re willing to set aside money on a regular basis and have a risk appetite that is between conservative to risky, investing in mutual funds would be a good choice as deciding on the main variables would be done through the guidance of your policy manager.
Essentially, you would be entrusting your money to a fund manager who has had years of experience and skill in buying your stocks. The mutual fund is invested in specific types of securities like money markets or you can also invest in a fund that has various investment securities.
– Real estate. Investing in real estate continues to be the top priority for most Filipinos as usually our businesses are a means to an end: our dream houses for our families.
Fortunately, it’s still best to buy residential property, but with Metro Manila getting more crowded and property value rising in the National Capital Region, the best bet for young entrepreneurs is to invest in a condominium that offers low pre-selling rates (at least P8,000 a monthly in amortisation for at least two to three years before property turnover).
What makes a property a wise investment is that if you don’t need to live in it just yet or have multiple properties, as you can lease it out as another means of passive income. The real estate market is forecasted to close the year with a double-digit growth as well as in the next years to come.
– VUL insurance. For young entrepreneurs, in case you don’t have a life insurance policy yet, a VUL insurance will provide you both a death benefit and an investment feature. The good thing about a VUL insurance policy is that you can actually withdraw from your policy in cases of emergency, without having to pay interest for the amount you withdrew.
– Investing in a small business. This would be a fulfilling way to give back as an entrepreneur while getting paid for your investment, should the business succeed. Of course, business owners should consider this option after their own businesses have stabilised. If you believe in its survival, just as you believed in yours, you can invest in a small business for as low as P10,000. You can also go online and look through a peer-to-peer or P2P platform, which is an online market for both lenders and borrowers.
– Always save cash for something else. If you’re at the stage where you think it’s wiser to spend everything on your business as opposed to investing in other things, think again. While it may seem tempting to invest all you’ve got in your own business, this isn’t really such a bright idea. Even in the midst of a cash flow problem, don’t even think about using your last personal peso to save it.
For sole proprietors, it’s even more risky as they are the only ones liable for their business and should anything happen, their personal assets would be added into the company’s liabilities. That’s why treating your business as your sole investment should be avoided.
The returns from your other investments may be your emergency cash to free your business from negative cash flows after a period of time or for your personal wealth fund. That depends on you. The point is that you should keep your investments separate, more importantly your personal expenses away from your business expenses.
In times when cash flow is tight, which every entrepreneur encounters on many occasions during the lifespan of their businesses, the best way to better manage liquidity is to get financing. There are always tried and tested finTech solutions to get fast and convenient short-term loans from, which won’t break the bank in terms of interest.