At Holistic Literacy Empowerment, we assert that money makes life worth living and business worth pursuing. It is the language and symbol of translating value in life and business. So, having basic financial literacy in how to make and use money is necessary for any entrepreneur. In a world where business entrepreneurship is domineering, financial literacy is essential and a basic need for everyone. The fundamentals of finance Schools and Colleges do not teach the fundamentals of financial knowledge. Here I will explore the fundamentals of financial literacy as an entrepreneur, solopreneur, freelancer, and small to medium business owner
What is Financial Literacy?
At its basic financial literacy is the ability to understand money, its value, how it works, how you can make it work for you, invest and manage it. Anyone who understands the financial language of money finds it easy to do business with anyone. Being able to understand money and the language of money is universal. It is the most common means of trading in the global world.
Basic Financial Literacy Skills in Business
Basic financial literacy is necessary to understand how money works and how it can work for you as an individual or an entrepreneur. It enables you to make wise and informed decisions with their financial resources like assets and income. You also need to understand basic principles like budgeting and investments with some basic knowledge of compound interest. It helps you realize that life is not solely about having lots of money. But how to achieve a holistic lifestyle that is financially balanced, sustainable, and fulfilling. That is where Holistic Literacy Empowerment inspires you to look at your finances with a holistic mindset that promotes the best in you and everyone concerned and makes the world a better place for everyone. Let’s get through the basic financial terms you need to be familiar with in business as an entrepreneur, solopreneur, and freelancer. From my exposure so far as a solopreneur, I think these are the most intimidating terms when talking about knowing how your business is performing in the market and how they help to understand your net worth.
I grew up I did not understand what an asset applies in my daily life. That is why I am sharing this knowledge with you through this blog. Knowing whether you have any property in life and business is the beginning of wisdom through holistic financial literacy in entrepreneurship and business. Assets translate into the value of what you own minus what you owe on your balance sheet. It is what you own and what your business venture owns. So, owning something of value also adds value to life. So, an asset is anything that you can use to produce positive economic value. It is a resource with economic value that an individual or company owns and controls. The most common examples of assets are properties like a house, vehicle, machinery, Furniture, Patents, and Cash.
That is the most common financial term that scares most people from being entrepreneurs. Lack of capital is always an excuse for failing to venture into business. Most entrepreneurs believe that all business ventures should start with capital. So capital is the money needed to produce goods and services. So, in its most basic sense, it is money. In business, it is the money a company might need to function in its business activities and operations. Your business needs capital to purchase assets and maintain operations. Anything that contributes to the creation of value for the business venture is capital.
The term revenue should be any entrepreneurs’ common vocabulary. You only know your entrepreneurial venture is coming alright when revenue is featured positively on your balance sheet. So, revenue is money generated for your business operations, whether from the sale of products at a profit or providing services with positive invoicing on your accounting books. That means profits and earnings define your revenue. It is financial gain through sales and services rendered. In simpler terms, it is the total amount of money cashed in by selling goods or services to customers. So, revenue shows that your business is alive and active on the right footing as an entrepreneur. No revenue, no business.
That is the day-to-day proof of how your business is transacting in finance. It is the daily circulation of money in your business venture. That is the amount of money transferred into and out of your business. That means cash received signifies inflows. And cash spent shows outflows. That is easily always stated on the cash flow statement, which is a financial statement you need to understand on your venture’s financial report over time. It is the amount of money that comes and goes out of business during a period. It is the inflow and outflow of cash from your business venture. That is necessary for your daily operations of the business venture. That might be for transport, fuel, stationery, taxes, employees, and other costs incurred in your business operations.
Not only do stars and celebrities have a net worth you, as an internetpreneur, solopreneur, and freelancer, must know how worthy you are in life and business. And how worth is your business venture? The most important terms you need to be clear with to understand your Net worth is assets and liabilities. Assets are your possessions, like your clothes and furniture. Liability is what you owe, like a loan or debt. So, the value left after subtracting liabilities from assets is the Net worth. So, if your assets are more than your liabilities, that means a positive net worth. If your liability value is higher than your asset value, that is a negative net worth. That will help you make adjustments wherever possible so you do not sink deep into the mud with debt without any means to get out of debt.
Financial Literacy Skills are needed to understand these concepts for practical and functional application in life and business especially in today’s world of entrepreneurship in the digital economy.