Tuesday, December 30, 2014

IN 2015 FOCUS ON YOUR BALANCE SHEET


The year is coming to a close providing us a useful opportunity for reflection, individually and as a country.

As a country we continue to trudge along, the economy continues to grow but we struggle with how to distribute these gains more equitably. The consequence is that the rich get richer and the poor get poorer. This need not be.

To begin with, if corruption could be handled more decisively we would have better services.

A better educated population should earn more individually as the economy shifts towards more specialized and sophisticated services and products. A healthy workforce should be more productive with less working days lost due to illness. And better infrastructure should lower the cost of doing business encourage expansion of existing companies while making the country attractive to new investment.

All the above are government functions or at least, government has a critical role in making them happen.


However, we have individual responsibility for our own financial well being. It starts with the way we think about money. Our financial literacy....


As simple as it sounds the way we think about money will determine our financial station. The difference between you and the richer man is the way you think about money.

Whole books have been written about it.

But if there is a lesson to be learned it would have to be that, we need to shift our focus away from how much we earn to how much we keep of what we earn.

It is basic accounting. 

Companies and even individuals' financial health can be distilled to their financial statements. The key ones being the income statement, a statement of money coming in and money going out and the balance sheet, a statement of what is owned, owed and the net worth of the company or individual.

Payday is a big deal for obvious reasons. We even measure ourselves by how much we earn compared to our peers. But the other side of the table is the expenses. Decisions on that side of the table can reduce the highest paid executive to a pauper by the end of the first week of the month or see the lowliest paid stretch his pay beyond the next pay day.

In fact show me your expenses and I can judge your overall financial health.

Income is good but to ensure long term financial health we need to focus on our expenses.

To determine a company's long term financial health the income statement is useful but the balance sheet is critical.

A strong balance sheet with a huge asset base compared to liabilities ensures viability into the future the opposite means you will be scrapping through life rather than sliding through.

Good assets should throw off more income or at worst can be sold off in times of need. The assets are built using our expenses.


"The richer among us have their expenditure slanted more towards investment than consumption. They are ever eager to convert income into assets -- land, business, stocks or bonds. The poorer among us ---regardless of our income are just as keen, even keener to consume our income in clothing, good living and trips abroad...


The difference between the two companies or people is their way of thinking.

The rich think money is for making more money.  Inevitably as they make more money their standard of living rises and they can afford the fabulous clothing, good living and trips abroad. The poor among us think that money is for spending -- "what is the point of making the money if we cannot enjoy it".

The thinking of the two is a different as night and day, is it any surprise that the results are opposite?

We are a poor country because we have a poor mindset. Our leaders are not immune to our poor thinking and therefore make decisions that keep us in poverty.

Richer countries have a critical mass of rich thinkers that through their rich actions carry everyone along.

So in the new year let us aspire to rich thinking, shift our focus to our individual and national balance sheets from our income statement. 

For God and my country.

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