Welcome to Boosting Your Financial IQ, I'm your host Steve Coughran. Today, we're diving into "Straight-Up Advice for Those Making Financial Decisions". In the fast-paced world of business, financial literacy isn’t just an asset; it’s a necessity. You might think finance is only for the birds, but if so, you’re not alone; most people score below a D on our business financial literacy IQ test. Even if you’re not in a finance role or still in school, understanding money's language can be pivotal. I've been there; launching my first company, I couldn’t even read a financial statement. But I learned. And now, I'm here to share how mastering finance can be simpler than you think. Financial literacy isn’t just for nerds; it’s for anyone who wants to achieve financial freedom. With a rising demand for financial skills, now's the time to gain that competitive edge. So, why does financial literacy matter in business? It informs decision-making, assesses your company’s health, aids in effective strategy, ensures regulatory compliance, and boosts confidence. But remember, faking it till you make it won’t cut it; honesty trumps pretending. Ready to boost your financial IQ? Start by tuning into podcasts like this one, and consider courses or YouTube videos. The key? Find a teacher who clicks with you. It's all about commitment and hard work, but believe me, it's worth it. So, let's dive in and unlock the language of money together.
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Understanding the language of money and the concepts that drive value in business can mean the difference between success and failure. This is Boosting your Financial IQ, where I help business professionals with financial responsibility to elevate their careers and run profitable companies. My hope is that you'll apply these lessons to achieve your greatest ambitions. Cheers and enjoy. Here's some straight up advice for those making financial decisions. And enjoy. Here's some straight up advice for those making financial decisions. In the fast paced world of business, financial literacy is not just an asset yes, pun intended, it's a necessity. If you don't work in a finance role, perhaps you've fallen into the trap of assuming that finance is not important for you and it's only for the birds. If this is you, you're not alone, as the average score of our business financial literacy IQ test is well below 60%. Now, if you're in the United States and you're familiar with our grading system, that means most people score below a D. D, as in Delta as it relates to knowing basic concepts in business finance. So that's not good right Now. If you haven't taken the assessment already, you can access it really easily by going to byfiqcom. Take it, you can obtain your score. You'll get the answers. It's really helpful to understand where you're at on your financial literacy journey. I love how people take it all the time. I'll get notifications on a Friday night and I'm like, yeah, I love it. People are taking this financial IQ test on a Friday night, on the weekend. It's really great. So keep doing it. Take the assessment. Like I said, it's a great starting point. Understanding the language of money and the concepts that drive value in business can mean the difference between success and failure. However, maybe you're listening to this and you don't own a company, or perhaps you don't even have a job yet because you're still in school. This type of thinking is very problematic and it's the same type of thinking that got me into a lot of trouble when I was first starting out in business. As I've stated before in other episodes, when I launched my first company in my sister's garage and grew it into a multi-million dollar business, I couldn't even read a financial statement. Looking back, I left so much money on the table and that's okay. I have no regrets. I don't cry myself to sleep anymore, but if I could go back in time and do things differently more? But if I could go back in time and do things differently, I definitely would.
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So what is business financial literacy? Business financial literacy refers to the ability to understand and effectively use various financial skills, including financial management, forecasting and accounting, in the context of running a business. This includes a wide range of activities, from reading and understanding balance sheets and income statements to managing cash flow and recognizing the implications of financial decisions. Why does financial literacy matter in business, you may wonder. Shouldn't the numbers be left to the nerds to figure out?
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Well, if this is your thinking, you may find yourself in a similar position to where I was decades ago, making tons of financial mistakes and losing out on a lot of money. Now, life isn't all about money, obviously, but what if I told you that a lack of financial literacy could cost you 10 more years of working than you would have to do if you knew how money worked? Unless, you love working and being away from those you care about the most and the activities that provide you the most fulfillment. I don't know of a single story of someone who is laying on their deathbed saying they wish they would have spent more time at their job. Don't you want to achieve financial freedom in your life? Here's the deal.
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Learning finance isn't some mystical, complicated thing like most schools make it out to be. Actually, it's quite simple if you can grasp fundamental concepts and relate them to the real world. Where it gets complicated is when professors threw up Greek symbols and formulas that match something Einstein would put up on a chalkboard to explain how to compute weighted average cost of capital. There's a better way, and I'm going to explain how you can get there so much faster than you think you can. There's a huge demand for financial skills. In fact, the Bureau of Labor Statistics expects the demand for finance skills to rise 16% by 2028, which tells me that the demand for financial literacy is increasing as its supply is decreasing. This is a unique opportunity for you to gain a competitive advantage and become financially literate. My brother-in-law is a partner at an accounting firm and it seems like every time my wife and I meet up with him for dinner, he is constantly explaining how there's a massive shortage of qualified accounting professionals and therefore they have to turn down work because they don't have the people to do it, which is crazy. This message isn't isolated to my brother-in-law's firm. In fact, it's pervasive and I hear it across the country as I talk with other executives and hear their concerns and woes about finding people with financial skills.
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Let me explain why financial literacy matters so much in business. First, it informs decision-making. Financial literacy equips leaders with the knowledge necessary to make informed decisions, whether it's day-to-day operations or building a strategy. Understanding the financial applications of your choices help prevent costly mistakes and capitalize on opportunities efficiently. Next, understanding financial statements helps assess your company's health and diagnose potential problems before they escalate. This ability is crucial for managing and mitigating risks associated with business finances.
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Most crises in businesses unfold over time. They start with a strategic crisis, then they move to a profitability crisis and, if not corrected, will lead to a liquidity crisis and, ultimately, bankruptcy. If you're leading a business and making financial decisions on behalf of your company, having the power to spot things before they turn into major problems is critical. Financial literacy is also very important if you want to be effective with strategy. It enables you to forecast future financial conditions and market scenarios, helping you to set realistic goals and devise robust business strategies to overcome some of the biggest obstacles in business. I know too many business leaders who are strategic thinkers, but they lack the financial acumen to support their aspirations. As a result, they come up with all sorts of strategic options, but they lack the ability to apply the numbers and understand what the financial upside is for each of these options. Therefore, their skill sets are incomplete.
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Next, regulatory compliance is a consideration as it relates to business financial literacy. Having a sound understanding of financial fundamentals ensures compliance with accounting standards and legal requirements, which can protect your business from legal issues and hefty fines. This doesn't mean you have to be some green shade wearing nerd who can memorize accounting standards in the IRS tax code. Instead, it just means you have a fundamental understanding of what is required from a compliance perspective. Finally, when you know how money works in business, you will have so much more confidence when you're working not only with your team, but with your customers and investors.
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When somebody doesn't know finance and they're talking to me and they're trying to fake it, I can identify it right away. Not that I call them out on it, but it definitely hurts their credibility when they pretend that they know more than they do. I would rather have someone just be straight up and say I don't know how that works than nodding their head agreeing me, pretending they know how cashflow works in business. So don't do that. By now you should understand why I'm so bullish on business financial literacy. Next, let me tell you how to actually increase your financial IQ. First, keep doing what you're doing by listening to podcasts like these. If you aren't already listening to my other podcast called Business Strategy, make sure you check that out, because there I combine financial concepts with strategy principles. I can't think of a better way to learn about finance on the go, on your phone while you're doing other activities. Now, if listening to audio isn't enough for you and you want to take things to the next level, I would recommend watching YouTube videos, and you can start with my channel and expand from there.
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For those who are serious, taking a course can be an excellent choice. I offer a variety of courses at byfiqcom, but look, you don't have to take my courses. This isn't a pitch to buy my products, but it's a good starting point. You can also check out other programs elsewhere on the internet. Like and can relate to, in other words, someone who you can connect with and learn from their simple and straightforward teaching style. That's the key, because so many people make finance overly complicated, and it doesn't have to be that way. So just find somebody who's a good fit for you I'm not saying I'm a good fit. Who knows, there may be somebody who's even a better fit for you, and I would encourage you to just find whatever works best for you. Like I said, I don't care about selling products and services. I care about you becoming financially intelligent so you could be successful in the competitive world of business. I want you to succeed. That's my straight up intention.
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If you want to build your financial literacy, you need to weigh multiple factors to determine which method of learning about finance is right for you. These factors include your preferred learning style, budget schedule and transportation options. Once you've selected a method, it's then important to put the time in and make it a priority. That is key. What helps me instill discipline is to put something on my calendar, because once I do that, I'm committed. If I want to learn how to cook, I can talk about it all day long, but the moment I scheduled the cooking class and put it on my calendar, I'm committed, I'm all in.
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And let me just be blunt with you for a minute. A lot of people reach out to me and they ask for advice about their careers or running their business. If you want to be successful, you have to put in the hard work. If you are young now this is the time to double down. Turn off the TV, put down your social media and focus on building skills that are valuable in the marketplace. That's what I tell my kids all the time. I'm like, go out there and build skills. Now they're seven and 11. They probably look at me like dad, come on, we're trying to have fun. We're kids, but seriously, the world is so competitive and it's just going to become more competitive and if you don't have the skills, you're going to struggle to be successful, just straight up.
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As I mentioned before, there's a massive demand in business as it relates to financial skills. Even if you don't want to go into the field of finance, building skills right now will set you up for so much success in the future. But you have to open the book, turn on the podcast and take that course. I spent seven years of my life in school studying accounting and finance and since then, every single day, I try to learn something new in business. It's hard work, but I believe in you 100% because, by tuning into this podcast, it shows me that you have the ambition and the heart that's required to be successful. I'm your biggest fan. Okay, I'm here to cheer you along. So believe in yourself and keep going. You got this. It doesn't matter if you're a numbers person or not. You can understand the language of money and then apply it to achieve a better financial life. As always, hit me up If you want to connect. I'll be here to support you, and I hope you have a beautiful week and until next episode, cheers.