The bottom line in an income statement determines whether you made a profit or incurred a loss. Profit means that you have been successful at what you were doing. A loss indicates that there are adjustments necessary to becoming profitable.
When in comes to our financial health, we cannot keep enduring losses. This is indicative of spending more than comes in or outflow exceeds inflow. This situation cannot persist for too long. It is better to be in the black than to bleed red. Income statements tell us where we are financially, based upon our decisions. It is a form of either positive or negative feedback.
Our goal in having a healthy financial situation is to increase the bottom line which is our net worth. Your net worth is what you actually own. It is assets minus liabilities. It is the remainder. If it is not increasing, then something is wrong and needs adjusting.
Presuppositions
Honesty is essential in all affairs of life and no less in business and financial affairs. Some believe that you can separate law and business and succeed. Ha, Ha, Ha. It never works that way. The best thing one can do is to be with oneself. If you do not believe me, cheat your customers and see how long you stay in business.
The first thing we have to do is to recognize that each of us are limited. We do not have unlimited anything. There are many self-help gurus who promise that have the ways that will enable you to release unlimited power. This is an attempt by limited man to try to be his own god. It never works because it is simply not possible. These charlatans promise much more than they deliver. Self-help is nothing but designer god-making, a do it yourself god. It is making God in your own image. This is a myth. Avoid it. You need something that works in the real world. Even credit cards limit the amount of money that you can borrow from them. They do not give you carte blanche.
One has to be realistic and use resources that are available. Man is never creative, only inventive. In other words, he can only take what already exists. He does not speak and it is so. He creates nothing ex nihlo. Man is designed to think analogically. This presupposes that man is created. Noah Webster’s 1828 Dictionary defines "analogical" as, "...Thus analogical reasoning is from some similitude which things known bear to things unknown. An analogical word is one which carries with it some relation to the original idea..."
Without first establishing your presuppositions, you will arrive nowhere. This is because you do not know what you want. This will lead to many false starts and then failure. Without direction, you will find yourself doing things just to do them. In other words, there is no purpose nor meaning.
Most people live purposeless and meaningless lives. They lack focus and vision. They do not know what they want out of life and so they do not get it. They do not live up to their potential. This is why it is essential to have a financial philosophy behind all of your financial decisions.
To be successful, in any endeavor, you will need to find a pattern of success. You will have to find someone who has successfully performed what you are seeking to learn. You will need a teacher. Manufacturers use a model or pattern that works. Find out what works and avoid what does not.
Education and Wisdom
Many are under the delusion that having the right education and degrees will ones success. What is more important than education is wisdom. Today’s education is missing the most vital ingredient, the Bible. Without wisdom, you will never be a financial success.
Webster defines "education" as, "The bringing up, as of a child; instruction; formation of manners. Education comprehends all the series of instruction and discipline which is intended to enlighten the understanding, correct the temper, and form the manners and habits of youth, and fit them for usefulness in their future stations. To give children a good education in manners, arts and science is important; to give them a religious education is indispensable; and an immense responsibility rests on parents and guardians who neglect these duties." Education encompasses the whole man and is the responsibility of the parents, not the government.
"Wisdom" is rendered by Webster as, "1. The right use or exercise of knowledge; the choice of laudable ends, and of the best means to accomplish them. This is wisdom in act, effect, or practice. If wisdom is to be considered as a faculty of the mind, it is the faculty of discerning or judging what is most just, proper and useful, and if it is to be considered as an acquirement, it is the knowledge and use of what is best, most just, more proper, most conducive to prosperity and happiness...Wisdom gained by experience, is of inestimable value..." Life is about making the right decisions.
Conclusion
One cannot possibly hope to make sound financial decisions, if he does not possess the requisite knowledge and information to do so. This can either be done by ones effort or by seeking qualified advisors who specialize in a given area.
We can increase our financial acumen by having knowledge of basic financial laws and then applying them to our everyday life. Knowledge, without being able to apply it is worthless. We need practicality.
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