By elmads

Let’s face it, it is hard to understand how companies work, all of those stuffs about the financial statements, reports, earnings, company health, capital allocation and whatnot are overwhelming, not to mention the computation that comes with it.

This is the reason why a few people will push forward into the space of active investing, which is understandable. Nonetheless, I still do believe that there are persons who would love to know more and excel in this space. And, the best way to learn it is to relate it with real worldly life experiences. In this case, the life of a breadwinner.

The Breadwinner

Most of us, if we are not one ourselves, have met or befriended a breadwinner. We know for a fact that life is hard and arduous, that some of us have been fortunate enough to be born into a rich and middle class family, while others were with the lower class families. It’s just how life plays out, it’s not like we were asked on what type of family we want to be born into.

Being a breadwinner is also a part of that, take note not all breadwinners came from poor families, there are some who were in the rich and middle class, but because of certain life circumstances they were cornered into becoming one. Because of this, breadwinners are placed into a position of the decision maker, a person who handles all responsibilities in their own life including their family’s.

People see breadwinners as a strong person with a lot of sacrifices, which is true for the most of them. They are not able to pursue their plans and dreams for themselves, because they highly prioritize supporting their family first.

On the other hand, there is actually another perspective in a life of a breadwinner, which is related to finances. Breadwinners are living a life as a company operator and capital allocator, they are their own Chief Executive Officer (CEO) of their faimly. The structure of a breadwinner’s life is nearly a direct correlation to a company.

Let me get this straight, as a Breadwinner, they are the one working and providing for their family. Their income is for the family’s survival, included here are the basic expenses, education of their brothers and sisters (if they have one), education for themselves, enjoyment expenses of the family, and other expenses as well.

The Breadwinner Company

What we need to understand is, The breadwinner is structured as a company.

The breadwinner is the initial owner of his/her income, but because the income is also distributed to his/her family members, then we can say that the family members are the shareholders of the breadwinner’s income.

Breadwinners are like any other people who work and get the income from it, the difference is, with some breadwinners their income is one with their family. The question here is what should be done with the income generated by the breadwinner? Well, like any other company, they also must have a closed door meeting to discuss where should the money go. It is an automatic assumption that a family will need to pay for their essential/basic expenses in order to survive, same as for companies.

After that, what would they need to do? That’s simple, Budgeting and financial planning.

Just a fun fact, budgeting started to be used in governments to allocate resources efficiently. It is for them to see where the money goes, and if they are spending to much in a certain branch of the government compared to others.

The Breadwinner’s power in making decisions.

The decision making within a breadwinner family also differs with others. There are breadwinners who have a larger influence in the decision making within their family, whereas others do not.

That’s the same with companies, a CEO is the top person that makes decisions in order to ensure that the company’s business operations and expansions are doing well. It is basically the same perspective with breadwinners, which is to make sure that they are doing well with their work for job stability, hence stable income and/or higher future salary.

Breadwinners are automatically the CEO, because just like what I’ve said, they are the operators and decisions maker of their breadwinner company, which generates income for everyone.

Nevertheless, a CEO can also stray from the main purpose of the company. That’s where the board of directors comes in, to supervise and check the performance of the CEO. In that note, the family of the breadwinner is their board of directors. They serve as the guiding light for the breadwinners and tell them if there is something off with how they operate their breadwinner company.

Knowing the goals of the breadwinner company

All companies in the world have a specific goal for the short, medium and long-term horizon. It gives the whole team the focus and motivation to keep on going no matter what.

For everyone else to have a unified goal, review of their performance, growth plans and actions, they would need a regular meeting with each other, that’s why there are board of directors’ meeting done regularly in a company.

This is what breadwinners must always do with their family members as well. Having a regular meeting is essential because it gives a sense of hope, something to look forward into the future, focus and motivation. This is also a significant factor into reducing the risk of making short-term decisions that can derail the family’s main focus and goal.

Goals of the breadwinner company should always be discussed within family members, it can be for the education of their siblings, a home, and a car. What’s important here is to arrive into an understanding, which one will be their top priority. Top priority because if only one person is making money for the family, then the 2^nd and 3^rd priority would not be always possible to be achieved immediately, not unless there are other family members that could significantly contribute into the breadwinner company or if the breadwinner him/herself is generating a lot of income.

Also, financial stability should always be the priority, most especially for a breadwinner company. These are maintaining and expanding cash flows, debt repayment (if the breadwinner company has one), securing Emergency Fund worth 3-6 months of the whole family’s essential expenses, and the Life & Medical insurance. I have discussed this deeper in my blogs titled “Basic Financial Planning Part 1” and “Saving money for safety and security”, just click on the links provided.

What can derail the breadwinner company

1.) Salary is a factor why being a breadwinner is hard, but having a misunderstanding with family members is a real major problem.

Companies who have a major shareholder who only thinks about his/her self interest is a problem, or doesn’t want to be a team player most especially if they have a significant influence in a company’s decision making.

Problems will always occur not just in companies but also within families. It will be up to the family members to guide each other, and see to it that it would not significantly derail the goals of their breadwinner company.

2.) Unforeseeable crisis, this is a no brainer. This is the purpose of securing our financial stability. This not just for the breadwinner company, but also for everyone in this world, you included.

3.) Debt – Debt is a good additional financing for the breadwinner company, but it must only be used as a last resort. If the breadwinner could find other alternatives to generate additional income, that’ll be the best way. Debt will always rob our future self, it is also very lethal for individuals who do not know how to manage their finances properly. This is the same with companies, although most of them acquire debt for their growth and expansion. Having a manageable amount of debt for them is essential due to tax advantages.

The Structure of the breadwinner company (The Balance Sheet)

Let’s say as a breadwinner, you decided that all of your assets are also your family member’s assets, then the debts you also have will be theirs as well.

It is literally the same with the balance sheet of a company. Company Assets Minus Company Liabilities = Shareholder’s Equity.

If the company goes into bankruptcy and will need to sell and liquidate all of their assets into cash, then the company will always pay their creditors first. Subsequently, the amount left after paying their liabilities will be then distributed to all of the company shareholders.

To know more about how to arrive into our own Net Worth see my blog titled “Financial mutant level of managing money – Your Net Worth”. If you want to have an overview what is a balance sheet of a company and the things included in it, see my blog titled “The Balance Sheet”

To sum it up

I do not expect for all the breadwinners to have this point of view, but it would be nice if one of them will be able to read this, and maybe this would give them an eye opener and a new perspective in the life that they have. I do salute them with their hard-work and sacrifices. It is an arduous task, that for sure not everyone will be able to do properly, which is almost the same with operating a business and allocating its capital.

For all the breadwinners out there, I absolutely have deep respects for you. I just have a request to you guys, I implore to you to never give up and never lose faith. You have been doing something that not all people in this world are able to do. Keep on learning, find your niche then zero in on that, and enjoy every moment of your life experiences. Our life is beyond the short-term problems we are experiencing today.

Knowledge is my Sword and Patience is my Shield,

elmads

This blog is for informational purposes only and not a Financial Recommendation. Not all information will be accurate. Consult an independent financial professional before making any major financial decisions.