Resources come in all shapes and sizes. Whether they’re tangible, like cash, or intangible, like informative articles on how to improve your financial situation, when managed well, resources help us do more with our finances and provide opportunities to grow our wealth. And although many people think of resources as capital (aka money), most anything can be a resource if you’re creative enough.
What Are Financial Resources?
By definition, financial resources are a stock or supply of money, materials, staff, and other assets that can be drawn on by a person or organization in order to function effectively. They’re the means by which we create wealth either individually or as a business. When we say that most anything can be a resource, that’s because there are an abundance of creative ways to utilize things we have to do just that. You might come up with a business idea based on your ability to bake cookies. The intangible resource of your experience along with the tangible resources of the ingredients. Then finding customers through your connections, and strategic pricing (two more intangible resources!), you can hopefully sell what you make for a profit. But then what?
Investing: Putting Resources to Work
When we give up money, materials or other resources, the logical expectation is that you get something in return. In other words, we look at it as an investment. To invest is to expend money with the expectation of achieving a profit or material result by putting it into financial plans, shares, or property, or by using it to develop a commercial venture. So to keep going with that example, the resources you invested (expertise, ingredients, connections and strategic pricing) were all used to give you a profit. Now you have another opportunity to invest that profit into your business to make, and hopefully sell, even more cookies.
Eventually, you might get to a point where you can’t keep doing it by yourself. You have to decide whether you want to invest your resource of money in hiring an employee. If you spend the money, the two of you could possibly make far more cookies - or maybe you want them to help with sales, or both! That’s what we mean when we talk about managing our resources well. It’s all about making the decisions that will net you the best results, also known as return on investment (ROI).
As we discussed in our earlier post on budgeting, taking stock of your resources to get an objective understanding of what you’re working with is the first step to managing those resources and investing them well. It gives you an idea of where you stand now, so that you can make smart decisions based on where you see opportunities for growth. While our example focused on the idea of starting a business, these same principles apply for individuals as well. Spend some time taking stock of the resources you could possibly invest to put yourself closer to financial success!
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