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My Opinion About Money

Money Matters & Financial Understanding

In my opinion, it is not just accountants that we should blame for challenges in managing money (and by the way, I am a Chartered Accountant myself!), we should also blame what we were taught, not taught, or had to learn about money from a young age.

Money Matters & Financial Understanding

We are treated to all sorts of subjects at school which are vastly less important than Financial Understanding, a subject title which I have just made up, and don’t think appears on any school curriculum. As a result, through an absence of understanding of money, many many people have a very odd relationship with it. They may fear it, they may hoard it, they may spend it like water, they may be penny wise and pound foolish, they may have wildly varied attitudes to risk.

Quite commonly, they will be in denial about it, not wanting to talk about it, brushing it aside. Any of these attitudes are clearly unhelpful, and contribute to the tragically high pile of business failures.

As 70% of all fears and worries are supposedly about money, it would be as well for governments to address this issue, and try to help relieve those worries, rather than leaving it to individuals to learn about it, as best they can, from parents who, in all probability, suffer from the same fears and thus pass them on.

Which leads me to money and your business…

If You Still Have Cash, You Are Still In Business

Money Matters & Financial Understanding

If you run out, you have to stop.
 
Thus intense focus on cash, at all times is compulsory, not optional.
 
Having too much capital makes it more likely to be wasted. Having too little has the effect of wasting too much management time trying to balance the books. Having about enough is a good place to be, since it avoids overspending – all too easy to do in a generously funded start up.
Hopefully those providing the money will bring something extra to the party, over and above their financial investment – very often the latter can be a lot more useful than the former. Armed with a robust accounting system, and a determination to keep it up to date, it is now down to the business owner to use it in the same way as a careful driver uses the dashboard in the car.
 
Take a look at this short video where ‘Rich Dad, Poor Dad’ author Robert Kiyosaki shares how to become financially literate in under 4 minutes!

 
 
 
 

As ever,
Ed Wood