What is financial literacy? What does money truly represent?
A lot of the time, we focus on how much money we make. A lot of people say these big numbers: “I made $500,000 this year.” That can sound enviable and enticing – but what’s far more interesting is, how much money did they keep?
There are a couple of books that talk about this, and one of them is Profit First. This book focuses on making sure that you’re paying yourself first, then working your way backwards to make sure that you actually have a profitable business.
Especially in Canada, we pay significant taxes a lot of the time, whether personal or corporate. So you have to make sure that you’re doing everything you can to keep as much money at the end of the day.
What do you consider to be a fair profit margin? Is it 20%? 30%, 50%? How can you cut expenses to make sure you’re achieving those margins, or reset your accounting methods to ensure that you’re taking profits first, and that you still have enough money to pay everything after?
Financial literacy, well, it means a lot of things. One of the most important distinctions to make, as we’ve learned today, is understanding not just how much you make in a given year, but how much you actually keep.
Because by keeping more money, you’ll be able to invest more. And by investing more, you’re setting yourself up for a prosperous life both now and well into the future.