Chapter 13

Finance like the 6 sides of the Black box can be understood and mastered with a little discipline and commitment. No one is too young to master its teachings and principles all one needs is the basic skills to read, write and count. Financial wisdom starts with a few simple principles and grows with the commitment to learn more as the world of finance evolves and innovates. The ability to develop the skills of discerning between sound financial advice and logic is essential to obtain the full benefits of a financial education. A financial education will reap long term personal wealth, economic success and security for you, your family and community.

Become a master of finances and economics

Throughout the centuries financial mastery is a subject often disguised to appear complicated and confusing, to allow the privileged to manipulate power and fear over the uneducated. Secret misconceptions and beliefs have been created about wealth throughout history to simply enslave the many and free the few. Many answers to financial mastery are still preserved in our emotional mastery and control of our financial decisions and impulses. 

Those who discipline themselves in a financial education will protect and increase their fortunes, understanding how the wealthy acquire, grow and protect their wealth. How through history and across all continents governments have created systems for rewarding the financially educated and wealthy through tax systems on income, property and assets. They will learn the lessons of history and the importance of knowing when things are least or most valuable as assets and forms of tender i.e. precious METALS, coins, paper money or modern currency. They come to learn how our economies work and operate and how understanding even the simplest principles i.e. saving, interest, compound interest, inflation, investments etc. can change their relationship with money. 

Men and women have lost fortunes through the centuries by passing ownership of their financial decisions to others. Many of us allow our government, employer, spouse, business partner or financial advisors to make the most important of all our financial decisions. Financial mastery is not exclusive to the wealthy we all possess the single essential tool for financial mastery. 

The single difference between the masters of finance and the normal lay person is that financial masters make their decisions with their ‘brain’ and the normal lay person by their emotions and their ‘heart’. Through the centuries the poor have been enslaved by their emotional attachment to money. Emotions connected to the fear of poverty, a deep rooted lack of ignorance on the subject and the egos lack of discernment. 

The wealthiest individuals in history have taken control of their financial thinking and committed to studying, reading or taking lessons each calendar month on the subject of finance and economics. You know you are on the right path when you learn to disconnect your emotions to money and replace the connection with logic and knowledge. Once you are aware of your emotional connections to money you will be much more equipped to make logical and rational decisions and one step away from no longer being a slave to money.

Master financial education and money will become your servant

Our ability to generate wealth is limited by the efficiency of our tools, the value of our individual skilled labour, expertise and education are restricted by the individual hours we can perform in a day, week, or month as servants to money. The most efficient means long term to creating wealth and security will not always be from you or your employee’s labour but through educating yourself sufficiently to understand what makes money grow, making money your servant and you its master.

The greatest obstacle to a financial education and taming money to become your servant is your own negative personal relationships and connections with money. If you obtain a full working knowledge of finance you will ultimately destroy your fears. Take time to seek out and listen to the wealthy, rich, wise financial elders, financial history, books, our entrepreneurs and economists.

Learn to discern between needs and wants.

Secondly to master money one must change our emotional connections starting by discerning between needs and wants. An individual can come from poverty and build wealth from a great career and enterprise. But too often the poor person’s misperception of wealth believes that this means having everything; the displays of material goods, the bigger lifestyle, the persona and image of perceived wealth. The financially educated understand that financial security and wealth is built on discerning between needs and wants and using your surplus earnings to invest in your future without this wealth will only be temporary. 

Without this our lives will become harder as we become consumed as servants working for money. If one can adopt the lifestyle of needs not wants one will begin to accumulate the resources to save and invest in building our financial future. This is the first step to financial freedom by learning to live within our means. This is one of the simplest lessons which when mastered can offer an individual greatest emotional release from the “fear” of money and provide a new sense of self empowerment. It is an essential lesson valued and practiced by the most successful of entrepreneurs, a lesson often learnt early in the inception of an enterprise and if practiced will help build a valuable enterprise of assets not liabilities. 

Learn to discern between assets and liabilities.

Hand in hand with learning to discern between needs and wants is recognizing the difference between assets and liabilities. To ultimately be free of money and no longer be its slave we must look at developing assets and means of converting our money and savings into our servant. Then our lives can weather the good and bad times providing strong foundations and platform to build our financial future and securities. One must change ones focus both personally and in business to the simple question of assets and liabilities.

I. An asset is a purchase which will increase your wealth & add to your financial income every calendar month.

II. A liability is a purchase which will reduce your wealth & add to your financial expenses every calendar month. 

Ones focus must be to build assets that you need, not liabilities that reduce your wealth and are simply impulsive wants that add to monthly expenses and living costs. An asset can be as simple as a carpenter’s tool or a fisher mans rod enabling one to make a living to a self generating asset like a piece of property or business which brings you a small consistent and profitable rent or income every month.

Only begin building your financial assets once you have created a reliable emergency fund for lives unexpected difficulties and challenges from loss of property, security, health or employment. One can begin to feel the empowerment of financial education when one has acquired enough assets and savings that they become your labourers and provide an income every month to pay for the liabilities we need to live. The wealthy ensure every one of their labourers is serving them efficiently by being their own book keeper or a tight overseer of all their financial decisions and judgements. 

Be your own book keeper

A good book keeper will focus on income producing assets that give you cash flow and money in your pocket from: property, shares, bonds, commodities, business or art. And not liabilities that take money out of your pocket: bigger home, more expensive food or clothing. 

A good book keeper is an effective negotiator and buyer able to discern between emerging trends and fads and financially skilled in investing in areas of personal interest or areas they possess specialized expertise. They are sufficiently educated to take risks based on solid facts, estimations and forecasts and will always be free from personal debt. 

Being a good book keeper is like the simple disciplines and principles of taking care of your health, exercise, and diet keeping your body in good physical shape. You need to learn good habits early as a child learning always to pay attention to the small print, taking care of the pennies that in turn take care of the pounds, how to budget, save and invest. Being sufficiently educated prepares you for adulthood by taking responsibility for defining your own long term financial vision and plan and understanding the basic fundamentals from tax entitlements to taking care of your wealth with the appropriate forms of insurance.

Build your Financial Portfolio in your area of expertise.

As a good book keeper you are then well prepared to intelligently build your own financial portfolio. A good financial portfolio is a well defined plan for achieving your financial goals through means relative to your individual areas of expertise whether its Business, Property, Stocks, Bonds or Intellectual Property with diversified risks that are always insured and protected. Define your financial goals and invest your savings in areas you have the greatest level of expertise and knowledge reducing any vulnerability to risk. Define your personal time lines that you need to maximize your financial payouts and returns to ultimately provide you with a sufficient income to sustain your life style free from labour. 

Financial timing

‘Financial timing’ is crucial to all issues of financial mastery from knowing strategically when to buy or sell to understanding economic seasons. Mastering financial timing can compound your financial assets in one single decision with the timing of when to both purchase and then in turn sell property, business or major investment. 

The skill in financial timing must be combined with specialized knowledge and your understanding of a subject or market i.e. property, art, antiques, business’s. Every great financial house or family throughout history have benefited repeatedly from a clear understanding of this single skill. As stated earlier the nature of life is ever changing in cycles of both fortune and misfortune, but neither is ever constant our economies are like the seasons of the year and the cycles of new life and growth, with our financial seasons rotating over a decade rather than a 12 calendar month. 

We must learn to discern which season we are currently in and anticipate and prepare for the coming seasons. As individuals we have a life spanning four seasons our Childhood, Youth, Adulthood and Old age. The wise teach their children early about the habit of saving and the secrets of ‘compound interest’, their youth understand that it will not always be ‘summer’ so invest for those rainy days. This same principle applies to our economies nothing ever stays the same and like nature we have our spring, summer, autumn and winter with differing rewards, challenges and demands. 

Spring: Like the farmers we sew our seeds, planning and preparing for extra labourers and managing our flow of money.

Summer: We harvest our crops, spending our profits and expand with new equipment, the hiring of new farm hands; we enjoy life and a little extravagance.  

Autumn: We do our housekeeping, we get rid of dead wood reduce our costs, repair our equipment and buildings. We prepare for the downturn and look after what we have.

Winter: We look after what we have, trim back on our labourers save the pennies and the pounds we look after our existing customers. We tighten our cash flow and buy up- cheap bargains, reducing our overheads, getting back to basics.

It is important to keep perspective of the natural cycles of life and like our lives economies and business is not free from the good times or bad.

Summary

I. Become a master of finances and economics

II. The brain is the single essential tool in financial mastery.

III. Master financial education and money will become your servant

IV. Learn to discern between needs and wants.

V. Learn to discern between assets and liabilities.

VI. Be your own book keeper 

VII. Build your Financial Portfolio in your area of Expertise

VIII. Financial Timing

Learn more: The Enterprise; Black Box Thinking

Sign-up to be the first in the coming weeks for my series of deep dives into how to prepare, strategise & plan as a business owner for Inflation, Interest Rate Hikes, QE/QT, Recession (Depression?), Market Correction (Market Crash?) or increased Supply chain disruption.