A person who receives financial education becomes financial literate. Financial literacy is the ability to understand how money works in the world. A financially smart person has a lot of information when it comes to money: how to earn or make it, how to properly manage it, and how to multiply it through investing. In this post, we’ll be looking at 7 things you will learn from financial education.
Understanding Money and How Money Works
Prior to the invention of paper money, individuals had to meet face-to-face and exchange their goods with other people’s goods, in a traditional trade by barter system. But with the creation of money, goods no longer needed to be exchanged with goods anymore, as the purchasing power (i.e. the power to buy something) was shifted to the paper money.
And even though money exists more in electronic forms these days, the principles of how it works still remain the same. Money isn’t attracted to selfish people. It is attracted to businesses that solve problems. It’s attracted to people who fill needs and add value to the society. The amount of money in your life is a reflection to the amount of value you have given to others. Simply offer the world value, and money becomes magnetized to you.
Understanding the real meaning of Assets, Cashflow Patterns, and Business Risks
While some assets can be bought straight from the marketplace, in other instance they are created or built from scratch. Tangible assets can exist in fixed physical forms, investments,
products, bank deposits or even cash. But ultimately, assets work for business owners by producing passive income.
products, bank deposits or even cash. But ultimately, assets work for business owners by producing passive income.
And in the game of money, the direction of cashflow is very important. When expenses are made in the form of bill payments or purchase of goods/services, money flows from your pocket into the hand of another. This pattern of cashflow is described as a negative cashflow. But in a positive cashflow pattern, money flows in a reverse direction, either earned as fixed income or as passive income via sales of goods/services. The outstanding difference between what you earn (positive cashflow) and what you spend (negative cashflow) is a measure of your profitability status.
In every business venture, risk is involved. So, all business owners are risk takers. Risk is the total amount of money that is put into a business as a leverage, while anticipating an overall successful outcome at the end.
Who an Entrepreneur is
The path to entrepreneurship is like a long trek through the wilderness. The choice of becoming an entrepreneur is always a personal decision to make. The consideration is to become a job creator instead of a job seeker.
The mindset of an entrepreneur is focused on how to create a business from the scratch and grow it tremendously. He/she is always thinking of expanding, and even the next business project to embark in the future.
Successful entrepreneurs are wealth distributors, generating money from the economy through an asset exchange medium, and rewarding their employees and the government. And at the end retaining possibly tens of thousands of dollars in profit for themselves, and shareholders too.
The Role of Sales and Marketing
Sales is equal to income. Any business that cannot be able to sell enough products/services may not be able to generate revenue to cover all its operational expenses and make substantial profit. Even in the case of an employee, the total amount of income earned corresponds to the number of hours spent working.
Understanding the Business Laws
The knowledge of the various laws guiding the business world is very important if one is truly determined for some real success. Since businesses incur certain operational and administrative costs to keep employees at work, sustain their corporation with partners, and achieve customer satisfaction; several laws are put in place by the government to protect them on so many fronts.
By following their operation plans of action, and understanding the tax laws and corporate laws, registered businesses can use their expenses column to get rich. Other existing laws favouring businesses include:
- security and exchange law
- licensing law
- franchising law
- intellectual property law (patent, trademark, service-mark)
Financial Accounting is one of the most important aspects of Financial Education. It is financial literacy that will allow you to be able to read the numbers, and the numbers tell you the story of the business, based on the facts on ground.
The ability to run a company from financial statement is one of the primary differences between a small-business owner and a big-business owner. I define financial intelligence as the ability to be able to correctly calculate Gross Profit, Operating Profit, and the Net Profit.
Other essential documents used in measuring the financial status of companies are the Balance Sheet that compares the assets and liabilities, and the Statement of Cashflow.
Business Leadership
Leadership is the glue that binds the whole piece together. If you are flat and have low energy as a leader, it flows to your staff, to your customers, and to your profit.
The overall success of an organization depends on its leadership and management. Some traits shared by great business leaders include persistence, thick skin, fearlessness, toughness, an eye for talent, powerfully passionate, financially smart, etc.
Acquiring knowledge is very important, but after it is acquired it must be organized and put into use, for a clearly defined purpose with set out goals and objectives, through practical plans of action.
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5 Reasons Why Your Business Have Not Reached Its Break-Even Point
How You Can Write A Standard Business Plan By Yourself With The Aid Of A LeanCanvas
How to move easily from where you are to where you want to be tomorrow
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