What you can learn from companies on managing finances?

[Dennis Ng]

Perhaps individuals should run their financial lives by following how corporates manage their finances.

For a company, what matters is the bottomline. Whether a company is profitable or not, we look at the Net Profit After tax.

We don't look at the topline, which is Revenue or Sales.

If we look at individual, our income (be it salary or self-employment or business income) is similar to Revenue or Sales. Our Net Profit is actually our Net Savings per year. If a person spends all his/her income, he is only operating on a "break-even" level, he/she would never get ahead financially. However, compared to corporates, individuals is worst off since an individual's "working lifespan" is not in perpetuity but has a contraint of up to say, 60 or 70 years old.

Thus, if an individual operates on a break-even leve, this person can NEVER afford to retire one day. I don't have to be a fortune teller but I can predict this person's fortune when he/she becomes old. It is going to be a very sad tale.

Are you operating on a "profitable level" (do you have NET Savings after tax?) If not, try to aim to be profitable as soon as possible.

Corporates also make "financial budgets" every year. However, individuals would just pull out the ATM card/Credit Card from his/her wallet and just spend, spend, spend.

No wonder there're so many "loss-making" individuals around.