Rent vs. Packer Tickets

What’s the buzz all about? Each day the stock market can be very volatile; large gains and losses can and do happen every day. Speculators will bet their shirt that a company is doing well, and will put a lot of money on the line before the results are in. How do we know whether this savvy investor was correct in their assumptions and speculations? Best Buy doesn’t hold up a sign in front of their stores advertising their sales and profits every day. I would have no clue how any company is doing really just by walking into their store. Even a packed Best Buy doesn’t mean the other 1,149 locations worldwide are also (that is a Wikipedia figure, so it must be true!). A stock price is affected by many things, but most can be classified into two categories; speculation and results. Speculation includes that savvy investor and all his information gathering and assumptions derived from his sources. But where do we find results?

In accounting we make a thing called an income statement. The people want to know whether a company is profitable, and this sheet of paper will appease them! This document takes a long time to create, and is widely used by corporations, investors, banks and anyone else interested in how the company is performing. It’s a simple document when you boil it down, and it’s very useful. On the top of the document it adds up all of the money the company made in a period. Then it nets out all of the expenses incurred. It also classifies all of the expenses into categories that show where the expenses occurred. There are product expenses, selling expenses, salary expenses and all sorts of others. At the bottom of the page there is a magic number called “net income.”

It turns out the most recent income statement of Best Buy showed them to be doing quite well. That probably explains why they wouldn’t haggle at all with me when trying to purchase a new TV before the first Packer game. I bought it anyways, even after they bruised my ego by not negotiating!

Well we have a net income too, and that is essentially what we have in our bank account after a given period; be it a week, month or year. The government is certainly interested in our net income, as this figure will help determine how much tax you pay. Banks are certainly interested, the more you have in there means the more they can lend out and make money. You should be interested too! Keeping track of your “net income” and what you do with it will have an enormous impact on what you spend, what you save and your basic knowledge on “where the money goes.” I try to look at mine every month at a minimum. When you hear people talk about budgets, all they are really doing is making an “I think I’ll make this much so I should spend this much” income statement.

A picture like this may seem pretty dull, but when you put your own numbers in there and make your own categories I’ll bet you’d be just as surprised and interested as that savvy investor to see the results! When you meet with financial planners, something like this is a big part of what you are paying for. You can save an awful lot of money by attempting this yourself.

After you have this picture, it becomes much easier to shop around for cost savings. I spent nearly two hours talking with a big cable TV company before finally hanging up without making a change to my current plan. I did this because the number they were telling me I would have to pay each month would have been higher than I was currently paying, without any real gain in service. It almost becomes a game to see how low you can get those expenses and how high you can get that income. Think of yourself as a company, and try to post the biggest net income you can. Your (theoretical) stock price will soar, and your (actual) confidence and esteem will also. When you have that rush of excitement, it’s either time to switch careers to become an accountant, or at least pride yourself in creating a successful plan for your future.