Apr 18

The importance of financial education is not only seen in people who have their own business but also among regular employees or even for those stay at home moms. Knowing how our money works can help us take better control of our personal finances in order for us to afford the things that we want and be financially free. The use of money has evolved over the centuries, people in the past just traded items that they had for the things that they needed. Today, the use of money has become complicated and involved terms such as derivatives, liabilities and balance sheets.  If you want to be rich then you need to have a good financial education.

People are asking “how to use financial statement for my personal use?” well the answer is simple. Whenever you want to apply for a loan from your bank, the bank manager would not require you submit your report card from school; instead, your banker would like to see your financial statement. There are three important things that you should understand in your financial statement and these are the cash flow, balance sheet, and income statement.

Many people are still not familiar on what a balance sheet is. For starters, a balance sheet is a statement that shows all your finances for a period of time. If you have a business, the balance sheet will be a summary of all your assets and liabilities. It will give you a snapshot of how your business is utilizing the funds that it receives. To better understand your balance sheet, you must understand the difference between your assets and liabilities. To put it in simple terms, your assets are the things that bring funds into your business and your liabilities are the things that take away your funds. The different kinds of assets include commodities, real estate, business and paper assets. If you want to improve your financial health, you must determine what your assets are and choose what kind of asset will be best for you.

The next item is your income statement. If you’re not familiar with what an income statement is, this is also referred to as a profit and loss statement. This is where you can see your profits and losses for a specific length of time. It can be for a month or even a year. If you have a business, this is where you’ll record your revenues and expenses for the month or year. This can also be used for you to know how much will you pay for your income tax.

Having a good financial education will greatly help you minimize your losses and increase your assets. It can also help you learn ways on how you can lower the taxes by using the tax code for your advantage. Just always remember, that mistakes can always happen, but by educating yourself about money you can avoid some of these risks and learn from your mistakes.

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"If something is going to affect your life, it's best to know as much as you can about it." - Donald J. Trump
 

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