Monday, June 8, 2015

Your tool for survival!

It’s everywhere around us. Traveling from one side of the world to the next in the blink of an eye. Transforming between tangible and intangible format whenever necessary.  It’s a blessing and a curse, or as some would categorize, good and evil.  The Romans had such an affinity for what I’m referring to, that they used one of the world's most valuable minerals in its place. Whatever it is clearly it’s a powerful, multi-faceted object, with some superhero powers too.  Take a moment and look around you to ponder what this could be if you haven’t guessed already.


If this were ten years ago I’d say reach into your wallet or purse, and pull some of it out. But today’s world has many people void of any money (for various reasons), although the trend may differ between generations.

The idea of money has been around for centuries. It’s utility and composition changing throughout the years.  You would think an object with such historical, and societal importance would have been taught to everyone in school right?  Well it’s not.  Each year millions of students graduate from high school, and even college without ever learning about the most dynamic, and important concept ever created by man. The result is an endless stream of young American adults completely dumbfounded, insecure, and oblivious as to how they should handle the only tool for survival in today’s world.  Think I’m kidding?  Go ahead and try living off a piece of land like the Native Americans did(whom had no monetary system by the way).  You’ll only find all the land already belongs to someone else, and if it happens to be the government's, well they don't look to fondly upon freeloaders roaming around the public forests and prairies ripping things up for personal use.  YOU NEED MONEY! If you want to survive it’s the only tool you need today.  I can see the standard response now as“Oh well I’ll just start growing my own food in the yard, and blah blah blah”. Nope you’re dead wrong.  You’ll need money to buy the seed, important tools, water, and possibly fertilizer to name a few items.  Unless of course you get them for free, but I wouldn’t bet the farm, or garden on it.  Now you have to make sure you not only grow enough food, but can store it for the entire year without it going bad(more supplies & more money). Or maybe you’ll just hunt your food in the nearby forests.  Well now you need to pay for a license and take a hunter safety class which is required in many states.  Funny the government actually requires you to take a class for this, but no class is required to understand basic financial concepts.

So where is this all going?  Well I can tell you where it’s been. It’s a, federal budget deficit over $18 trillion, 16 trillion dollars of personal debt, $13 trillion in mortgage debt,$900 billion in credit card debt, & $1.3 trillion in student loan debt *, sadly I could keep going.  If you’re saying “HOLY SHIT!” right now I’d say that’s an appropriate response. “Oh well I remember in my Accounting 101 class that assets=liabilities+owners equity so we probably have a lot of assets Mr. MAD Consulting!” one might say.  I’d agree you’re correct as that’s exactly what my teacher taught me. Except our country has assets of only $362k, liabilities of $816k, and owners equity of -$454k PER PERSON!* That means every single one of us is in the red for our share of the US economic pie. Let me restate this one more time.  Each person has a negative worth of -$454k.  It means that not only do we suck as a nation at saving money, but even more so as individuals.  We are a nation in dire need of help, and if our  smart, educated, responsible political leaders can’t keep track of money properly; what hope does an individual have? Maybe by recalling all those important financial management classes they took in high school and college. Oh wait, those were not part of the curriculum.

Now debt is only part of the problem.  There are just too many people & companies out there run without proper financial management.  It’s not just spending money improperly, but knowing which segments of your business generate cash & operate efficiently, which ideas present the best opportunity, and knowing what your ROI is on everything you do. To many people run out and start operating a company without even knowing basic financial/accounting principles. There are plenty of shows on television documenting this epidemic. Restaurant Impossible, The Profit, & Hotel Impossible, showcase the plethora of individuals running a business without proper know how.  According to the SBA more than half of all business started will fail after 5 years. If you watch any of those shows you’ll notice the same general trends in almost all the failures.

  1. No financial management guidelines in place to make decisions
  2. No idea on what parts of the business were doing well, or poorly
  3. No clue to cost structure and its relation to the price of services

Quite a dour outlook can be gleaned from what’s written above, but we’re optimists at MAD Consulting.  It’s our goal to change the negatives into life lasting positives.  To help individuals and business’ to think more intelligently about spending, and figure out the ways to best maximize income. This great country allows you to rise from the bottom, reach the top, hit the bottom again, and still give you more shots at hitting financial success. I’m not saying the path is easy, or short, but it’s there.  By taking a different view of your business, your household, and your life, maybe we can see how clear the path has been all along.    

*As of the day I wrote the article. The debt clock I referenced literally changes every second.

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