Making Sound Financial Decisions

One of my favourite TV programs, is Global Public Square (GPS), on CNN, anchored by Fareed Zacharia. The other day, he spent some time, talking about a subject that is very close to my heart:

"Financial Literacy".


There is more to literacy, than "reading" and "writing". Financial literacy, is really about the ability to understand everyday financial issues, and here I am not talking about accounting practice. I am talking about the ability to make sound financial decisions. There are many people, who know how to read and write, very well, and yet are at "sixes and sevens", when confronted with simple financial issues.




Which reminds me.

I knew a businessman, who wanted to leave an inheritance to his two children. They were both highly competitive, with each ever seeking ascendancy on the other. So this is what he did:

To one, he gave a parcel of land, and said to her, "this land is full of minerals, which I believe are worth at least $10m. You cannot sell this land, at anytime. The land yields no income, as it is, unless you get an investor or a loan. And should you seek, an equity investor, it can only be your brother, to whom you go. I estimate you will need not less than $1m, to generate any income from it.
It is my only inheritance for you."

To the other child, a young man, he said "take this $1m, in cash. Based on your lifestyle, it will be gone in a few years, unless you find a way to grow it. Should you decide to invest it, I would insist that you go only to your sister.
It is my only inheritance for you."

Who got the greater inheritance?

Who emerged in ascendancy?

Discuss it, with your friends, and business partners.

If you have to say anything to me, about it, don't use more than one paragraph. The correct answer, in business is not philosophical or ideological. Its just business.




Whether you are in business or not; whether you have a job or are unemployed; even if you are still a student. You might even be a social entrepreneur, a doctor or a teacher:
You still live in a world, in which everyday, you have to make sound financial decisions. You also live in a world, in which others around you, including local and national leaders, as well as business leaders, must have the capacity to make sound financial decisions, for the well being of all. Ultimately, how sound your financial decision making is, will be seen in the results.


"Time will tell, as they say", whether our two young heirs, (whom I spoke about, in my earlier post), would make sound financial decisions. One is not born, with a capacity to make sound financial decisions, it comes through education, reading the right material, and also training.

Being promoted to a top position in your organisation, or even being elected to public office, does not suddenly endow you with financial literacy, if you did not acquire and develop it, earlier in your life. The Evangelist, Myles Monroe, once said, in one of his teachings:

"The rich man, and the poor man, have this in common; God gives sight to them both."

I have seen people, who inherited greater riches than what these young people got; go on to lose them. Even ending up in debts, that far exceeded what they got in the first place. Poverty, can come at a bewildering speed, if one is careless in the manner, they approach matters of financial decision making. And there is no one who is exempt from having to make sound financial decisions. Even if you are in the village, with a few cows and goats; it is even more critical. I have also seen people who started with very little, go on to create spectacular wealth for themselves and their nations. At the heart of this, is the ability to make, "sound financial decisions". It must be done, each and every day. It must be done for the short and for the long term.

Sometime, when you are on your own, in the quiet of the day, ask yourself this question:
"Am I really making sound financial decisions, in the affairs of my life? Even when I get $25 does it increase or decrease in my hands?".... It always, always starts, with how well you handle, even the smallest sums.

Make a conscious effort, to acquire, and develop, your financial literacy. It does not matter how old you are.... even if you are 63 years old.