Every
journey starts from where you are. No one else is where you are. One of the
first steps in a financial plan is knowing where that is. It is useful to have a
flashing dot on a map, to guide you. Financial Statements are that flashing
dot. The key ones are a Balance Sheet, Income Statement, and Cash Flow
Statement. They don’t have to be as intimidating as they sound. A Balance Sheet
is a photo. A picture of your support structure and foundation. Your ability to
endure. A list of everything you own, and everything you owe. An Income
Statement is a TV series, where each year is a season (some better than
others). It is a list of everything coming in, and everything going out. A Cash
Flow Statement focusses on resilience. Money in and out in the short term.
Giving a sense of your ability to survive the knocks. It looks at cash from
operations (doing the thing you do), investing (building your buffer and
engine), and financing (borrowing and outside help). Endurance (Balance Sheet)
to play the long game. Resilience (Cash Flow) to survive the short game.
Creativity (Income Statement) to add meaning and value.
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