In South Africa, 70 to 80 percent of businesses do not make it past the five-year mark. On the personal financial front, we are often told that only 6 percent of South Africans can retire comfortably. What both of these statistics reveal is that achieving financial success is not easy. Instead, it requires hard work and a clear strategy. Although many will accept this is part and parcel of achieving business success, few are willing to invest similar time in their personal financial success.
The challenges faced by business and personal finance can be similar:
* Cash flow is the origin of monetary survival. Cash flow is the cumulative scorecard of your collective business/individual decisions. Businesses generate cash flow from the successful management of a product/and their operational resources. Individuals generate cash flow from selling time and knowledge for salaries/self-employed income. Individuals need to manage the consequences if their cash flow suddenly dries up due to retirement, retrenchment, illness, old age or death.
* Credit management. The level of business/personal debt should be carefully managed and is a key indicator of future financial progress (considering the cost of credit). Credit adds risk within each business and personal finance scenario and is one of the biggest stumbling blocks towards reaching financial independence.