Welcome to the Money Maven's Financial Blog

Money Maven Blog by Sheryl Sutherland, Authorised Financial Adviser and Director of The Financial Strategies Group

Recommended Reading

Recommended Reading by Sheryl Sutherland: Girls Just Want to Have Fund$ - Every Women’s Guide to Financial Independence, Money, Money, Money Ain't it Funny - How to Wire your Brain for Wealth, and Smart Money - How to structure your New Zealand business or investments and pay less tax.

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The Financial Strategies Group

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Friday, 27 October 2017

Frame and Investment

Women Are Owning More and More Small Businesses

Owning your own business is often touted as the ultimate coup in the working world. You set your own hours, pursue projects you’re interested in, and maybe work in your pajamas.
About 29% of America’s business owners are women, that’s up from 26% in 1997. The number of women-owned firms has grown 68% since 2007, compared with 47% for all businesses.

The progress for minority women has been particularly swift, with business ownership skyrocketing by 265% since 1997, the report says. And minorities now make up one in three female-owned businesses, up from only one in six less than two decades ago.

Why have minority women had such an apparent breakthrough in the world of entrepreneurship? It’s partially a numbers game – in 1997 minority women represented such a small number of owners – less than one million – that even moderate growth would have likely helped them outpace the growth of the broader field of women-owners. But Jessica Milli, a senior research associate at IWPR, says that the characteristics of minority women who opt to open businesses may also play a role in the runaway growth.

“Women of colour are more likely to be younger when they first found their business,” says Milli. “Given today’s climate – when a lot of purchasing occurs online and social-media usage can really make or break a business this can mean that those businesses might have a competitive advantage.” 

The growing prevalence of female entrepreneurs of all races didn’t happen by accident. Instead, it may be proof that legislation targeted at women and minority small-business owners are having an effect.

Women business owners still face a significant wage gap and continually have smaller amounts of start-up capital than their male peers.

For one, women-owner businesses make only about 25 cents for every dollar their male counterparts earn. That’s a much larger gap than the one that exists in the overall labour market, where the median earnings of women were about 83% of men’s.

Although challenges like access to capital and wage equality persist having more women entrepreneurs may be helpful in and of itself when it comes to boosting the successfulness of female owners. Researchers who studied the effect of peer relationships on female entrepreneurs in India found that women who received business training with a friend were more likely to take out business loans, and more likely to report higher business activity and household income than peers who received training without a peer. And though equality on all fronts is still a long way off, the field of entrepreneurship is “moving toward equality in terms of representation, which is a great thing,” Milli says. “Overall, the picture is optimistic.”

Source: theatlantic.com

Tuesday, 24 October 2017

Everyday Money

This is One Inheritance You Don't Want

You may have received a big inheritance, even if you're not aware of it: how you handle your money.

Economics professors at the University of Copenhagen have found that if a parent was in default on a loan at the end of the year (their study looked at data from 2004 to 2011), the chance of default for their children was more than four times as high as for those whose parents were model financial citizens. And that’s across all levels of parental income, loan balances and other measures, including that of intelligence.

The study analysed about 30 million personal loans held by some 5 million Danes ages 18 to 45. It linked that information to government data, including income level and education for the borrowers and their parents.

The key finding: The share of 30 year olds in financial trouble – narrowly defined in this study as being at least 60 days late on a loan at the end of the year - was 5 percent among those whose parents showed no similar sign of financial trouble. It was 23 percent for kids whose parents’ records showed financial trouble.

The study follows other research concluding that risk attitudes seem to be handed down by generation. It couldn’t rule out the chance that long-lasting health shocks had an effect on income that carried over to the next generation, but it did find evidence that shared common shocks tied to the business cycle, such as a parent and child unemployed at the same time, weren’t likely causes for the correlation.

An earlier study that lends support to the Copenhagen work found that adoptees with parents who take on more investment risk in their portfolios tend to make financial decisions for their own portfolios that reflect similar levels of risk. It concluded that nurture plays a substantially larger role than nature in financial risk-taking among parents and children.

That’s not to say our hard wiring plays no role. A 2015 study of identical and fraternal twins in Sweden concluded that “genetic differences explain about 33 percent of the variation in savings propensities across individuals,” finding that parenting plays a part in the differences in the twins’ savings behavior early on but that the effect waned over time.

Even if some of our attitudes toward money are hard-wired, no one wants to pass along a legacy of financial instability. There are many ways to nurture self-control and highlight the difference between “wants” and “needs.”

If you’re able to be a smart saver and shopper and make the tough budgeting tradeoffs – and if you let your kids see all that at the grocery store and when you’re paying the bills – they’re likelier to adopt these behaviors as adults.

Source: Bloomberg.com