My daughter is taking an elective in school that is called Business Virtual Enterprise. Part of the curriculum is for her and her classmates to create a business and run it. They had to come up with the concept of what service or product they’d be selling, what roles they would play in the company and how to market their company. If you didn’t know, you’d say this was a real business. They even have a website that looks like it was professionally made, but it was done by one of the students.
My daughter chose the class on her own, and I have been pleasantly surprised at all she is learning.
If you ask, where was this class when I was 13 years old? I would ask the same thing.
As she is one of the two financial employees, she works closely with the CFO to create their financial statements. Based on my expertise, I suggested that if they needed help, I was happy to do so. The CFO‘s dad also offered to help. It turns out that both of us are CPA‘s and familiar with financial statements.
As it has been a few months already, they have gone to trade fairs to sell their products. One of their most recent assignments was to come up with a business plan. Part of their business plan included creating their profit and loss statements and balance sheet.
For context, a profit loss statement is how much income your company made and what expenses did they have? If I were to equate that to what we do in our regular lives, that would be like creating a budget. A balance sheet is different in that it is looking at all the things that you own, and all the things that you owe and taking the net difference to come up with your net worth.
As I mentioned, I was completely blown away by the exercise they needed to do at their age. They looked at their sales, which on surface seemed like a lot of money, until we started looking at their expenses. They had even gotten a bank loan to fund their business initially.
The way I equate this is being able to look at your budget and how you are doing. On surface, while they were bringing in a lot of money, when we started doing a deep dive into their expenses, they were really high. The whole class is employed by the business. Their salary expense was very large compared to how they priced their product. Initially, they may not have known that they needed to price it to accommodate for being able to pay all of the business expenses. So while they were making a profit on the individual sale of their items, when you looked at the big picture, their business would not be sustainable unless they made changes. Which would be either letting go of employees or increasing the price on their product, or a combination.
This made me think of how we run our own financial lives. I work with what would be considered the CFO in their financial lives. These are primarily the women who are managing their finances for their families. They are doing the best they know how, but they aren’t necessarily sure of what the expected outcome should be . We are then able to go through their financial statements, a.k.a. their financial lives (budget and balance sheet) and look at where are all the income coming from and where are all the expenses.
I encourage my clients to live within their values of what is important to them. That means taking a detailed look with them to see where their money is, are they invested appropriately? Do they have all the right things in place that will allow them to not just live for today, but also plan for their future selves. We look at their complete financial picture.
I am grateful that our kids are learning about finances in this way. Unfortunately, many of us never learned it this hands on. Some of the things I am seeing now are shame and fear around money because they think they should have known this already, not realizing that they never were taught. I am deriving great joy from the conversations as I help clients navigate being able to attain financial goals for themselves and their families and making sure that they are not making big money mistakes that will potentially derail their futures.
If you are the CFO of your financial household, but you think there is more that you need to know to be able to properly manage what you have, I would love to have a conversation with you. Please feel free to reach out to me for a consulting call.