Easy Guide to Cheap Business Currency Transfers

There might be many reasons why your small business isn’t thriving. One of them is the global economic crisis caused by the COVID-19 pandemic. However, for all that this recession is hitting all businesses hard, it also kicked e-commerce into high gear. Also, going global has become a necessity for businesses. After all, this gives you an opportunity to both cut costs and grow your customer pools.

But doing any kind of business internationally means you will need to send and receive money transfers from abroad. This itself is a costly endeavor. It’s costly enough that the cost of the transfer might eat up all your profit margin.

While you are developing a strategy for going global, you need to find a way to cut your currency costs. The good news is that today there are companies that allow you to reduce the cost of both the transfer and foreign currency exchange (FX or forex). But you’ll need to think carefully to pick the one that will benefit your business most in the long term.

How expensive are international money transfers?

The costs of foreign currency exchange and international money transfer fees are not the only issues you need to consider if you want to avoid being ripped off while traveling. As a business, making payments to suppliers or accepting them from customers also come with an FX price tag. And that price might be over 10 percent of the transfer volume.

Any small business trying to go global will know that the profit margin for this venture might be so small that 10 percent makes it unviable. But of course, the actual cost of international money transfers depends on many factors. The foremost is what financial institution you are using to make the transfer.

The traditional way to go is to use a bank wire transfer. That’s the safest method of international money transfers. However, it’s also one of the most expensive. For example, in the US the average outgoing international transfer fee is $45. Add to that the money lost during foreign currency exchange. Banks always use an unfavorable FX rate due to their high FX margins. Also, the fees (meaning your losses) might increase with the transfer volume.

Also, remember that some currency corridors to developing countries are far more expensive. There are still some African countries where a transfer can cost up to 20 percent!

Western Union and MoneyGram are hardly better in terms of fees—these services are sometimes more expensive than banks. PayPal is better. However, it will cost you about 5 percent of the transfer and it also doesn’t use the best FX rates.

All in all, the most common international transfer methods are expensive. But now there are FX companies created to solve this specific problem.

How to cut the cost of global business money transfers

While outrageous, transfer fees from banks and popular money transfer services don’t seem that bad for small transactions. However, as these losses grow with the transfer volume, a payment to a supplier or some international investment might end up costing you thousands. You need a specialized and affordable solution for large business transfers. Today such a solution comes from FX companies, also called online money transfer companies. These are companies like Moneycorp, WorldFirst, or OFX.

FX companies specialize in offering cheap and fast currency transfer services. Top providers among them have multiple offices in different parts of the world. The platforms are online-based, which means you can manage your account fully using nothing but a smartphone app.

The number of supported currencies varies depending on the provider. However, all these companies operate using the same principles. They all offer:

  • Low or no fees. In the majority of cases, FX companies don’t charge transfer fees at all. If they do, the cost of the transfer rarely rises over 1-3%.
  • Low FX margins. Foreign currency exchange rate margins are where banks make a lot of money. However, as FX companies run off the volume of transferred funds, they strive to keep the margins low. At the moment, WorldFirst has the lowest margins in the industry (0.25-0.15 percent for large business transfers).

FX companies can be used not only to help cut the costs of regular business payments, but they are also a great help to everyone who wants to invest overseas (in property, for example). They can also be used to pay salaries to remote workers.

But bear in mind that not all online money transfer companies are suited for businesses. Only the ones that offer corporate services are capable of handling the paperwork and other requirements that businesses might have.

FX companies: benefits beyond affordability

FX companies not only help you cut the costs of international money transfers, but they can also be used to mitigate currency exposure risk that every international business faces. This type of risk is unavoidable because currency exchange rates are fluid.

However, sometimes this fluidity turns into outright volatility. The COVID-19 pandemic caused a great surge of FX volatility. Tthis volatility will likely last for a while due to the global economic recession. Therefore, FX risks are now extremely high.

FX companies offer their business customers access to hedging tools. This means that you get a chance to minimize these risks with little effort. For example, you can use forward contracts, which allow you to get the FX rate fixed at a certain point for up to a year. So, even if the exchange rate changes unfavorably during this time, you will be protected.

For international business, currency hedging is essential for budgeting. In fact, without hedging against the currency risks in some manner planning a budget becomes almost impossible.

But, of course, one needs to be a financial expert with ample forex experience to use hedging effectively. Otherwise, you will not know exactly when to use which tool to achieve maximum long-term benefits for your company.

FX companies solve this problem as well because they offer not only a wide range of currency services but also guidance. Simply put, they can provide you with advice and information necessary to make good currency decisions. This means that your business won’t have to pay extra to outsource a specialist for this.

How to choose the right FX company for your business

The first thing you should consider when looking for an FX company for your business is its accreditation. These businesses operate within multiple jurisdictions and the industry itself is poorly regulated, so you need to choose companies that are audited by trustworthy authorities. For example, WorldFirst is monitored by the Financial Conduct Authority of the UK.

You should only work with companies that are transparent and certified to work in your country. This will limit your choices somewhat as these companies aren't yet found around the globe.

Another important factor is currency selection on offer. You need to be sure that the company you choose will be able to meet all your needs. However, as you can have more than one account, you can work with several companies simultaneously. But in this case, you will need to exercise extra caution when choosing these services.

Finally, be sure to study detailed reviews of every FX company you consider. Read both customer testimonials and professional reviews that highlight both the strengths and weaknesses of the company. This way, you will be able to make a choice that will help your own business prosper.

8 Essential Rules for Surviving Financial Hardship

At some point, most people experience an unexpected crisis that shakes their financial world. It could be losing a job, receiving a huge medical bill, or having a car break down at the worst possible time. But surviving a pandemic is a situation you probably never thought you would face.

No matter what challenge you’re facing, you’re not the first.

Along with the public health toll, the COVID crisis has put millions of people out of work. For those struggling financially, here are eight critical rules to help you manage money wisely, stretch your resources, and bounce back from this unprecedented health and economic disaster.

8 rules for managing a financial hardship

Here are the details about each rule to manage a financial setback during the coronavirus crisis.

Rule #1: Accept your situation and use your resources to seek help

The key to successfully navigating a financial setback is to be realistic. If you’re in denial and don’t face money troubles head-on, you can quickly compound the damage.

Instead of focusing on the problem, getting angry, or letting stress overwhelm you, channel your emotions into finding solutions. Start talking about your challenges with people and professionals you trust, such as a money-savvy family member, financial advisor, legitimate credit counselor, or an attorney.

Instead of focusing on the problem, getting angry, or letting stress overwhelm you, channel your emotions into finding solutions.

The following financial associations have certified volunteers who can offer free help and advice:

  • National Association of Personal Financial Advisors
  • The Financial Planning Association
  • Association for Financial Counseling & Planning Education

Rule #2: Get a bird’s eye view of your finances

To fully understand your situation, create a list of what you own and owe; this is called a net worth statement. Compiling your data in one place helps you evaluate your financial resources, make decisions more efficiently, and have essential information at your fingertips if creditors or advisors ask for it.

First, list your assets: 

  • Cash
  • Investments
  • Retirement accounts
  • Real estate
  • Vehicles 

Then list your liabilities:

  • Mortgage
  • Car loans
  • Student loans
  • Credit card debt

Include the estimated values of your assets, the balances on your debts, and the interest rates you pay for each liability. You could jot down this information on paper, enter it in a computer spreadsheet, or create a report using money management software.

When you subtract your total liabilities from your total assets, you’ve calculated your net worth, which is an indicator of your financial health. It’s not uncommon to have a low or negative net worth when you’re in financial trouble.

RELATED: 10 Things Student Loan Borrowers Should Know About Coronavirus Relief  

Rule #3: Understand your cash flow

An essential part of bouncing back from a financial crisis is keeping an eye on your monthly income and expenses. Create a cash flow statement that lists your expected income and typical expenses, such as rent, utilities, food, prescriptions, transportation, and insurance. Again, you can create this report manually or by using budgeting features in a financial program.

Understanding where your money goes is the only way to prioritize expenses and cut all non-essential spending.

Understanding where your money goes is the only way to prioritize expenses and cut all non-essential spending. Making temporary sacrifices will help you recover as quickly as possible with less long-term damage to your finances.

Rule #4: Shop your essential expenses

As you review your spending, it’s an excellent time to comparison-shop your essential expenses. Evaluate your highest costs first, such as housing, vehicles, and insurance, since they offer the most significant potential savings.

For instance, you may be able to move into a less expensive home, purchase or lease a cheaper vehicle, and shop your auto insurance to find better deals. Ask your utility provider about assistance programs that offer energy-saving improvements at no charge.

Rule #5: Communicate with your creditors

If you haven’t been in contact with your creditors, start a dialog with each one immediately. You’ll come out ahead and get favorable treatment from creditors if you are proactive and honest about your financial troubles. Ask them for solutions, such as deferring payments for several months, setting up a reduced payment plan, or refinancing a loan to reduce your financial burden.

You’ll come out ahead and get favorable treatment from creditors if you are proactive and honest about your financial troubles.

Creditors are likely to ask about details regarding your financial situation, so have your net worth and cash flow statements on hand when you speak to them. Be ready to complete any required assistance applications quickly.

Rule #6: Prioritize your debts carefully

Based on guidance from creditors and finance professionals, prioritize your bills and debts carefully. Your goal should be to conserve as much cash as possible without skipping essential payments. Always pay for necessities first: food, prescription drugs, and auto insurance.

Debts related to child support and legal judgments have severe consequences and should be prioritized

Use your net worth statement to rank your liabilities from highest to lowest priority. For instance, debts related to child support and legal judgments have severe consequences and should be prioritized. Keeping up with an auto loan is a high priority if you rely on your vehicle for transportation. Federal student loans are in automatic forbearance through September 30, and the relief may get extended through 2020.

Your unsecured debts—medical bills, credit cards, and private student loans—are lower priorities. Never pay these debts ahead of rent, a mortgage, or utilities when you have a cash shortage.

Rule #7: Don’t let collectors force you to make bad decisions

Prioritizing your debts means some may be paid late or not at all. If a debt collector contacts you about a low-priority debt, such as a medical bill or credit card, don’t allow them to persuade you to pay it before your highest priority bills.

Collectors may try various aggressive tactics, such as threatening to sue you or ruin your credit. A lawsuit could take years, and a creditor is more likely to negotiate a settlement with you. Remember that a creditor or collector can’t send you to jail for civil debts.

If you are behind on bills, that fact is likely already reflected on your credit reports. By the time a collector contacts you, the damage is already done, and paying the bill won’t improve your credit in the short-term.

Rule #8: Take advantage of local and federal benefits

If your income and savings have entirely dried up, use these resources to learn more about local and federal benefits.

  • FeedingAmerica.org has a map showing local food banks
  • Supplemental Nutrition Assistance Program (SNAP) is the federal food program you may qualify for based on where you live, your income, and family size
  • MakingHomeAffordable.gov can help you find a housing counselor or see if your mortgage is backed by the federal government and qualifies for forbearance
  • Benefits.gov has a questionnaire that helps you discover the benefits you’re eligible for
  • Medicaid.gov is the federal health insurance program you may qualify for based on where you live, your income, and family size
  • Healthcare.gov is the federal health insurance marketplace where you may find plans with substantial subsidies if you earn too much to qualify for Medicaid

Financial challenges can cause you and your family to experience a flood of emotions, including anger, fear, and embarrassment. As difficult as it might be to put a financial crisis into perspective, it’s critical. No matter what challenge you’re facing, you’re not the first. There are millions of people who are dealing with COVID-related financial hardships.

Face the fact that your recovery could take a while. Do everything in your power to manage your budget wisely by getting organized, seeking ways to earn more, and spending less. Don’t be afraid to ask for help from creditors, seek free advice from professionals, and take advantage of every local and federal benefit possible.

Who invented the index fund? A brief (true) history of index funds

Pop quiz! If I asked you, “Who invented the index fund?” what would your answer be? I’ll bet most of you don’t know and don’t care. But those who do care would probably answer, “John Bogle, founder of The Vanguard Group.” And that’s what I would have answered too until a few weeks ago.

But, it turns out, this answer is false.

Yes, Bogle founded the first publicly-available index fund. And yes, Bogle is responsible for popularizing and promoting index funds as the “common sense” investment answer for the average person. For this, he deserves much praise.

But Bogle did not invent index funds. In fact, for a long time he was opposed to the very idea of them!

John Bogle did not invent index funds

Recently, while writing the investing lesson for my upcoming Audible course about the basics of financial independence, I found myself deep down a rabbit hole. What started as a simple Google search to verify that Bogle was indeed the creator of index funds led me to a “secret history” of which I’d been completely unaware.

In this article, I’ve done my best to assemble the bits and pieces I discovered while tracking down the origins of index funds. I’m sure I’ve made some mistakes here. (If you spot an error or know of additional info that should be included, drop me a line.)

Here then, is a brief history of index funds.