What do you think of when you hear someone talk about financial literacy? Take this one step further now. What would you need to know to be financially literate? How to balance a checkbook; how to pick a winning stock; an in-depth knowledge of corporate finance? Possibly.

Think of the richest person you know. This could be your boss at work. Maybe it’s your doctor or dentist. Perhaps it’s your broker or an investment banker. What makes them so rich? Or are they? How long would they be able to maintain their current standard of living if they one day decided to quit their current job or position? It’s an interesting question to ponder. How long could you survive without your job or profession?

Just because someone earns a huge paycheck doesn’t make them financially stable. I hate to break it to you, but millionaires file bankruptcy too. Prime example: M.C Hammer. So what is the common thread among the financially stable, or financially literate? We’ll continue to explore this question but let’s start with some basics.

All companies on the U.S stock exchanges must file financial statements with the SEC (Securities and Exchange Commission). Why do they do this? Investors need to know how healthy and financially stable a company is before investing. So what do this have to do with anything?

Next time, we’re going to talk about your personal financial statements…

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