"In Your Business" with Michael Sayre. A Production of CUI Wealth Management

Unlocking Financial Wisdom from Big Corporations

• Michael Sayre • Episode 11

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Michael Sayre explores the principles of corporate finance and how they can be applied to personal finance. He discusses the importance of understanding financial statements such as balance sheets, income statements, and cash flow statements. Sayre emphasizes actionable strategies for individuals to improve their financial health, including building an emergency fund, optimizing cash flow, and balancing short-term and long-term financial goals. The conversation highlights lessons learned from successful corporations and how these can inspire better personal financial management.

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Michael (00:00.078)
next time you walk into a big box store like a Walmart or a Target, I want you to take some time and really appreciate what it takes to run a store like that. There are thousands of items that need to be tracked. And with so much that's going on in these stores, it's hard to know, like, how do you know if the company's actually being profitable? That's a great question. And today we are going to map out some of the powerful strategies and lessons in economics that we can learn from the world's largest corporations. When you hear of

These behemoths such as Apple, Amazon, Google, there are a lot of lessons that we can learn from them. You might think that things like financial statements and some of these complex economic strategies are really irrelevant to your everyday life aside from allowing you to buy groceries at a reasonable price. These are keys to transforming our own personal finance and they actually can be extremely helpful in our own personal financial lives.

Grab your favorite beverage, get comfortable. Let's take a deep dive into corporate finance and do it for our own personal gain. And by the end of the episode, we'll have some actionable strategies, things that can help you level up your finances and inspire you from the practices of some of these multi-billion dollar companies. To begin, let's talk about corporate financial statements. These are key documents that help reflect the economic health of the business in question.

a guide that helps with decision-making. And there are three core statements that we use in corporate finance. There's a balance sheet, there's an income statement, and there is a cash flow statement. Now, that might sound abstract, but don't worry, we're going to take a lot of time to actually go through and explain what these are and what they mean and how they can help you. So we'll connect the dots.

and help you understand some of these tools along the way and how they can apply to your personal life. In the financial world, if you utilize them, you'll be able to better optimize your personal situation and stay organized. Think of it like your own personal financial toolkit that is inspired by the large companies out there. First, let's talk about the balance sheet. In corporations, a balance sheet provides a snapshot of its financial health. It details

Michael (02:24.258)
the assets, liabilities, and equity in the company. It's kind of like a financial selfie, and you can apply these same concepts to your own personal finances by creating a personal balance sheet. What you do to achieve that is you start by listing your own assets. This includes things like your savings account, your investments, your properties, your vehicles, and any other valuables that you possess.

Assets are essentially what you own. Next, after you've written down your assets, you take a look at your liabilities. These are things that you owe. Assets are what you own, liabilities are what you owe. On the liability section, that would be things like credit card debt, student loans, mortgages, any outstanding payments. If you owe your Uncle Vinny, these are all things to keep on the liability side. And finally, you can calculate your net worth.

by subtracting the liabilities from your assets. Now, this is a very simple exercise to give you a clear picture of where you stand financially. And what you want to see is over time, you want to see that your assets are increasing and your liabilities are going down. But it helps you at least get a snapshot that you can compare periodically to where you were before. Let's talk about how large corporations use this.

Apple is a great example of demonstrating the importance of net worth. So they carefully manage a substantial cash reserve. They're known for this. So by maintaining this solid financial foundation with the cash reserve, Apple has a lot of flexibility in their investments. And when there's bad economic climates, they have traditionally been able to weather those pretty well. And they can also look at strategically expanding their operations.

because with that massive amount of cash in reserves, they have a lot of flexibility. So when it comes to your own net worth, your own assets and liabilities, if you can have a substantial amount of money in your reserves, something that's enough for your situation, that's not only beneficial to you in terms of making wise decisions and being able to pay down debt and

Michael (04:48.608)
and weathering bad economic climates, but it's also the fact that having some cash reserves can allow you to take opportunities that you otherwise may not have been able to take. Whether you are an individual or you have a business, having that cash reserve and having a good eye on your assets and liabilities and your net worth can really have a solid impact. The next statement that I like to go over is the income statement. An income statement

provides a clear picture of the business's revenue, its expenses, and its profit over a specific period of time. So it helps the business assess its financial performance and helps with decision-making. For individuals, the personal equivalent of an income statement is your monthly budget. This is a tool that allows you to track all your income streams, whether you have a salary and or a side hustle, if you do some freelance work, or maybe you have some income from investments.

It helps you compare the money that you have coming into the monthly expenses such as rent or mortgage, utilities, and any leisure activities that you have. As you consistently monitor these financial numbers, you can identify areas that you can cut back or ways that you can reallocate funds to be more efficient. And as you work towards your financial goals such as saving and investing or paying off debt, this can be a really helpful tool.

I think a great company to look at when it comes to income statements is Walmart. Now we all know Walmart is kind of that bargain retailer, if you will, and they have a razor thin profit margin. And this perfectly explains why controlling costs is critical in long-term success. despite being one of the largest retailers in the world, their profitability depends on keeping operating expenses low.

and operating efficiently in every aspect of the business. They regularly analyze the income that is coming in and they track their spending and pinpoint areas where they can cut costs. And this can help ensure that their expenditures align with key priorities. And this practice is not only helpful when it comes to avoiding unexpected financial surprises.

Michael (07:11.16)
but it also creates an opportunity to save more and invest strategically in growth. So in your own personal life, being able to track some of those things that you may not be using and find ways that you can cut the fat and reduce unnecessary expenditures, that can really help you solidify your financial stability. Next is the cashflow statement. So corporations rely on tracking the movement of money in and out of the business to survive.

And this is known as a cash flow statement. That's the statement that kind of keeps track of all of that. So it helps them understand whether they have enough cash to cover their expenses, to invest in growth and to stay financially healthy. And you can apply that same principle in your own finances by creating a personal cash flow statement. And this allows you to monitor your inflows and your outflows such as your salary, dividends or other income sources. And it...

It helps you so that you don't have that moment where you realize that you don't have any money in the bank. By keeping a close eye on your cashflow, you can better manage your finances. You can plan for future goals and you can avoid pitfalls. And I think a great corporation that helps us with this lesson is Amazon. Amazon is meticulous in their cashflow tracking.

And this has been a key factor in their ability to reinvest in new ventures. Not only that, but it's helped them expand their operations and maintain a competitive edge. Detailed monitoring allows a company to allocate resources efficiently and identify areas that they can grow. When it comes to your own personal life, it's just as important for you to learn how to do that so that you can avoid overdrafts in your account and...

make sure that you meet your financial obligations. When I started out in business, this was really important. This is one of my favorite statements to track things because when you are a business owner or a freelancer or someone that has an income that is not as steady as getting a salary or a regular paycheck, it's incredibly important for you to be able to track your cashflow because you may not get paid for a couple of weeks and then you get paid a large sum.

Michael (09:29.922)
And then you may not get paid for several weeks or several months, and then you can get a larger pay day later on. And even to this day, I really keep track of that cashflow because I've just been used to that. It's really tough when you have had big swings in your cash flow. So I think that's a really critical statement for people to...

keep an eye on. One thing that's really important is as you keep track of your cash flow, it will help you understand how to balance out your short-term and long-term decisions and obligations. Now let's switch gears and talk about some of the lessons, key lessons that we can learn from corporate finances. Businesses don't just survive because they track data, they thrive because they can apply actionable insight. And here are four practical lessons that we can take away. So first is

build an emergency fund. just like we talked about Apple and their ability to consistently maintain strong reserves of cash and how that's helped them in many times of uncertainty and to seize unexpected opportunities to invest in growth at the right moment. This can also be applied in our own lives. And this highlights the importance of financial preparedness. So for us as investors and as

those who are conscientious of our finances, building an emergency fund that covers three to six months of living expenses is a key to this. If you build a three to six month reserve, this can act as a safety net during unexpected challenges like loss of a job, medical emergencies, or sudden expenses that if you don't have that cashflow, it can really put a strain on your family, put a strain on your own personal life, and it can sometimes lead to

getting into unnecessary credit card debt. But also, like we said before, I think it's really important to have the cash reserve so that when there is an opportunity that you have the ability to seize those opportunities that don't come along very often. So let's talk about optimizing cashflow like Amazon. This allows the company to identify inefficiencies and allocate funds towards innovation and growth. And this principle can work for you as well by

Michael (11:50.018)
like taking the time to map out your income and expenses and details, and you'll gain a clear understanding of where your money is going and where you can make adjustments. There are lot of great tools out there. Back in the day, I used Mint quite a bit. They have an app. was

bought by Credit Karma, but that's what I traditionally use to track my money. There's also apps like You Need a Budget or YNAB. If you have any apps that you have used that have worked really well, I'd love to hear about them. One of the things that we can learn from Microsoft is that it is well known that they are good at balancing their short-term research and their long-term investments. They have a lot of these groundbreaking innovations that they're able to

bring about, but they also keep an eye on the short term. So they're really good at balancing. This can be applied in our own personal lives. When individuals focus on managing immediate expenses and prioritize long-term goals, that can be extremely helpful. For example, you want to be able to balance your budget, but also contribute to your retirement account so that you have savings for education and for retirement. And being able to do that is really important.

You want to be able to build a solid foundation over time. This highlights the importance of foresight and planning to achieve short-term and long-term goals. We can learn about diversification from Coca-Cola. Coca-Cola has a global brand. They have a global portfolio. And this has been extremely powerful for them. When one region encounters challenges, they have other regions that can help offset the impact.

keeps the company historically resilient. The same principle applies to us in managing our finances and risk in our personal life. If we can have multiple income streams through freelance work or for side businesses, that can be really helpful in our cash flow. Also, we all know that investing in a diverse portfolio is really important. A well-balanced investment portfolio spreads across multiple industries and asset types, and it can

Michael (14:00.706)
really help in case there are unexpected market shifts in parts of our portfolio. It's not just a strategy, it's a critical and crucial financial foundation for long-term success when we're trying to prepare for retirement and other parts of our financial goals. Here are five tangible steps that we can take today to start treating personal finances like a thriving business. First is to create a personal balance sheet. List off.

all the assets and the debts that you have and understand your net worth and track that over time. want your net worth to be going up over time. Next is to track your income and expenses. Use a budget to identify your spending patterns and the opportunities for cutting costs. Next is to review your cashflow regularly. Now watch the inflows and the outflows, ensure that you're never cash strapped and set financial goals. Decide where you want to be in the next one year, five years,

ten years and track your progress. You can also consult with experts. Just as corporations rely on CFOs and other advisors, don't hesitate to seek out the guidance of other financial professionals. To wrap it all up, large corporations don't become powerhouses by accident. They have financial strategies that are tested over time and proven. And with some ingenuity, you can adapt your life to resemble

some of these strategies that these corporations have. If there's one lesson to take away from today's conversation, it's this structure and strategy matter as much in personal finance as they do in business. Start small, stay consistent, and the results will speak for themselves over time. Don't forget to like, comment, and subscribe for more insights just like this. Thanks for tuning in. We'll see you next time.