Personal Financial Accountability
Last week I talked about my financial journey and how my journey led me to start my own business. This week I want to touch on one of the most important parts of finances: Financial Accountability.
For the small business owners out there, financial accountability may be familiar to you. You have laws and regulations you have to follow and often must report financial information to the IRS and other organizations. Many of you may even hire auditors every year. This often is what financial accountability looks like from a business perspective, but what does financial accountability look like from a personal finance perspective? Today that is what we are going to be digging into. There are two main parts we need to talk about concerning this subject, financial transparency and financial accountability.
Financial transparency is how easily an individual not involved in your finances can understand what your financial state is. Therefore there are levels of financial transparency.
You often see financial transparency modeled by non-profit organizations. They tend to post their financial statements on their website where everyone can see. You also see this with some politicians who make their tax returns public. What financial transparency tries to do is give outsiders confidence in one's ability to use their resources.
But financial transparency by its self doesn't accomplish this. Instead, it is easily used as a tool to show a snapshot of our best selves to those around us because the financial information is from a single point in time. The outcomes from that information can be controlled. That is why you need good accountability.
Financial accountability is a broad concept and, as with financial transparency, can be used to create the same outcome. It can be used to shape the perceptions of those around us. To make them think we are in a better financial position than we are. This isn't the kind of financial accountability I'm talking about. I'm going to try to give some tangible examples of what good financial accountability looks like.
The first step of good financial accountability is recognizing the fact that you don't "have it all together" financially and that you probably never will.
Step two is to find a group of trusted individuals you can share your finances with, and if you are married one of those individuals must be your spouse.
The best example I can give of why this is important is a bit extreme but drives home the point. If you have a drinking problem you can go to alcoholics anonymous because without the support and accountability of other individuals you know that you won't successfully make the best choices. The same applies to finances, but, instead of waiting for a financial disaster, setup financial accountability now so you can better weather any future storms that come your way.
Step three, be open and honest about your financial history and the mistakes you have made along the way.
To build good accountability, you have to start with honesty. This isn't about making those around you jealous of your financial prowess but about building common ground. Your goal is to deepen your trust and relationships with these individuals. That way, when they speak into your life about finances, you take it as if they are a trusted adviser, not someone pointing out your faults.
Sadly, discussing finances is frowned upon by our culture. Instead of sharing knowledge and experience to help others and grow, we tend to barricade our financial lives from the world and those who love and care for use. This creates a divide in our lives and places us in a hopeless situation when our financial life takes a turn for the worse.
There is a better way. We need to fight this cultural norm and work on placing good financial accountability into our lives. The first step might just be being transparent with those around you. A current example of battling this cultural norm is done by someone with a large social/online presense, Nas Daily. You can view this video here. But don't stop with just recreating that example. Use that momentum to start having healthy and honest conversations about your finances with your trusted circles. My biggest fear tends to be when it comes to sharing my finances with my friends and family, I don't what to burden them with the information. But more often then not your friends and family don't see it as a burden. Rather, they are happy and willing to speak into it. Do not let fear hold you back from starting a healthy relationship with your finances.
It would be hypocritical of me to ask good financial accountability and transparency of you without doing it myself. Below you will see financials for my business and personally.