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Various Reasons Why One Should Keep Cash

Different people have different spending habits. Some people can keep cash while other keep cash in other forms. In economics three motives explain the spending habits of an individual:

• Speculative motive
• Precautionary motive
• Transactive motive

People who reflect a speculative motive of money are those that keep cash in speculation that the prices of goods and services will go down in the future. They don’t don’t make investment speculative that the investment may cost less in the future. People who reflect a precaution motive of spending are those that hold cash in fear that unforeseen happenings might happen in the future that needs to be catered for. They hold money to honor future obligations that may arise. They are people who hold money in fear of things like diseases, inflation, and economic instability. Finally, people who reflect a transactive money motive are those that hold money for day to day transactions. They are people who never want to fall short of the minimum daily spending. These are reasons for keeping the cash.

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To make investment

Investors know that investment opportunity is very rare and come one in a lifetime. For this reason, a serious investor will always have cash preserved for making investments. There are different types of investment that one can make. The main reason why people hold money to invest is to invest in high-risk high-return kind of investment. This is investments that include the purchase of share and securities. A company’s share will fluctuate depending on the economic condition of an economy. An investor will look forward to buying a share when they are selling at a low price at latter sell them when the prices increases. For this purpose, one has to be very ready with cash. Immediately the shares of a company drop, one will make buy the share.

To give out a loan

When one has more money than he can spend, he can give simple loans to friend and relatives. This is very common in family businesses. There is always that one person who is investment adverse and have a lot of cash in his belonging. The other members use this as a source of finance to meet current expenditure. The amount of loan given should be returned with interest. The interest is used to meet the transaction charges as well as making profits. Loans should only be given to trusted persons and should be used in an income generating project.

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Meet future expenses

Expenses will always occur in the future. Future bills and obligation will need to be honored. One can hold money to meet the future bill. People say that tomorrow lives because of today. The future success depends on the amount of preparedness in the present days. One should be careful not to hold a lot of cash. In the event of inflation, the cash may lose value. One should observe prevailing economic conditions before keeping the cash. Cash can also be kept in other forms such as securities and current assets.…

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Factors That Affect Your Credit Score

Currently, businesses are using the credit score to make decisions about their clients. Credit score, therefore, can affect your life that you can even imagine. The credit scores count greatly on the amount of interest you get on your credit cards. When you visit any financial institutions, the credit score will determine if you will be approved for a loan or not. You cannot even access the car insurance when you have a bad credit score, or when you do. The interest rates will be huge. In short, the credit score can make your life terrible or more improved depending on how you handle your credits. This article highlights the Factors which influence credit conditions.

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Your payment information

Your credit score depends on how timely you pay your bills and other credits. This is the most common determinant factor that will make your credit score. You need to avoid some payment issues such as the repossession of goods, charge off, collections and being bankruptcy. These issues will devastate your credit score. Having bad credit will make it impossible for you to be approved for anything that may require you to have a good credit score. To improve your credit score, you are supposed to make your payment for your bills in good time each month.

 

The level of debt

In the process of calculating your credit score, among the few factors considered are related to the level of debt that you have. The total debt that you have in overall is calculated to determine the ratio of the credit score. The level of debt will also be considered when you are applying for a loan in any financial institutions. When you have too many debts, you will affect your credit score badly. The best thing you can do to improve your credit score is to improve the payment of all your debts to reduce your balances.

 

Your age of credit history

When you consider the credit score, the age of your credit history contributes at least 15%. The calculation considers the age of the oldest account you have and the age of all your accounts on average. When you have an old credit age, you are making a great credit score because it acts as a proof of how experienced you have been in handling your credit in the past period. These records will favor you in collecting a loan. You are not supposed to open various new accounts at the same time because they will affect the average age of your credit history.

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The types of credit you have

There are two basic types of credit accounts an individual can have, that is, the revolving accounts and the installment loans. When you have both of these accounts, you are likely to improve your credit score, and your report is better to guarantee you a good experience in handling and managing various types of accounts. These types of credits contribute about 10% of your credit score. However, not having one of the credit accounts will not devastate your credit score.…