It’s been a minute since I last posted about my journey to financial independence (FI). I’ve been busy getting my financial house in order and recording some of my insights and findings along the way. Over the last few months I’ve been sharing with you some of my revelations on personal finance, discoveries from the FIRE (financial independence retire early) movement and other tidbits. I call these discoveries my “Financial Enlightenment”.

Financial Enlightenment – What is it?

In a snap shot, Financial Enlightenment is a significant insight that has helped me become more aware of myself, my finances and how the world works (both good and bad).

 **Click on each definition below for more details**

  1. the way in which money is used and handled; especially: the way in which large amounts of money are used and handled by governments and companies
  2. money available to a government, business, or person
  3. matters relating to money and how it is spent or saved
  1. freed from ignorance and misinformation
  2. based on full comprehension of the problems involved

What I’ve Learned so Far

This post is the fifth and final installment of a five part series describing my path to “Financial Enlightenment”. Check out the summary below of each installment and discover what I’ve learned so far in my journey to financial enlightenment:

 **Click on each tab below for a summary of previous posts **

The Financial Enlightenment of Mr. Prairie FIRE

I shared with you the hard work I did when it came to self-reflection, understanding my relationship with money, and discovering that I needed to change my consumer habits and mindset to an investor mindset.  Click here to find out more about my financial enlightenment

Net Worth: You Are the Ultimate Asset

In this post I covered the basics on what it takes to create and track your net worth. I also share with you my enlightenment on how you are the ultimate asset when it comes to building your wealth. Don't forget to invest in yourself! Click here for a full description of how to calculate your net worth

Budgeting Can Be A B!*¢h

I broke down the sometimes painstaking process of creating and tracking a budget. As the title suggests, sticking to your budget can sometimes be a B!*¢h. Click here for a full description of how to create and track your budget

The Missing Link to FI

In this post I make the effort to connect the dots between two very common financial statements: your net worth and your budget. The key insight in this post is that no matter how you cut it, your net worth is fed by your ability to save money. Click here to find out how your net worth, budget and savings rate are connected to getting you to financial independence.

Before reading any further, I encourage you to read my last post “The Missing Link to FI”. There are some concepts and ideas that will help you understand where I am coming from when it comes to what I am about to share with you. 

My Misadventures in Business

If you’ve read my story, you will know that I have a side gig: being a landlord. Before I started my journey to FI, I did not treat my responsibilities as a landlord as seriously as I should have. After discovering the FIRE community I decided to treat my rental properties as a business, instead of just something on the side. Ever since making this decision I’ve been obsessed with reading more about business processes, real estate investing, and understanding the importance of tracking my progress through financial statements.

A New View of Personal Finance

In my process I stumbled onto a new perspective that most have not truly thought about and applied in their life: seeing personal finance through a business framework.

What is a Business

Defining a business really depends on context. For the purposes of this post, I want to define business as:

“a commercial or mercantile activity engaged in as a means of livelihood” – Merriam-Webster

Though this is a broad definition, it indicates that many activities have the potential to be a business. 

The Five Components of a Good Business

For me personally, a business is the act of creating value, be it in the form of a good or service, and selling it in the commercial market place. In order to do this well or when looking at investing in a business, there are 5 key components I like to use to evaluate a business :

 **Click on each component tab below for more details**

A good business is able to create a product or service that meets a need in the market. The business provides this product or service in exchange for money. A simple concept I know, but it is easier said than done.
The ability of a business to deliver a good quality product or service efficiently with the least amount of costs and utilizing the resources available to them. Productivity is improved by being able to do more with less over time. 
A good business is able to have multiple sources of revenues by serving a variety of products/services to a diverse set of customers.  This is usually done through good market research, strategic marketing and great customer relations.
Successful business must be able to leverage their assets (people, machines, factories, vehicles, etc.) to create value for all their stakeholders.
At the end of the day/month/year a business needs to make sure revenues are consistently greater than the costs to run and market the business.

So what does this have to do with Personal Finance?

Ok stay with me. What  I’ve realized is that business finance and personal finance are trying to tell us the same thing when it comes to financial success – increase income/revenues, keep expenses low/under control, invest in productive assets, and create wealth. They are just saying it in a different way.

Parallels Between Business and Personal Finance

Two areas where I saw parallels between business and personal finance was in the financial statements: (1) personal budget vs income statements; (2) Net Worth vs Balance Sheet. I’ve illustrated the elements of each financial statement below:

Budget vs Income Statement

You can see in the graphic above, the elements of a personal budget and a business income statement are very similar.

 **Click on each element below for more details**

Income: This is where it gets confusing. Income in the personal finance world is actually revenue in the business world. Don’t get too hung up on this. It is something you will just have to accept and remember.
Day to Day Expenses: Just like how a business has expenses related to its day to day operations (office rent, utilities, taxes, etc),  you have similar day to day essential expenses needed to keep you alive and healthy (e.g. food, rent/mortgage, taxes, etc). A good business attempts to manage operational expenses and trim any excess spending that is not necessary. 
Savings: This is where the magic happens. For a business net income equals profit. I think this is an important term and measure for the average person to wrap their head around. How different would people see their savings if they saw it as profit?!
Balance Sheet Vs Net Worth

The similarities between a personal net worth statement and a business balance sheet are striking:


In this case the elements of net worth and balance sheet formulas are almost identical. But, there is a slight difference in how they are calculated or viewed. Both are attempts to see how you are managing your assets, how responsible you are at managing/leveraging debt , and whether you are building wealth (i.e. equity or net worth) over time. 

What if I treated my personal finances like a business??

After seeing the similarities, I wondered what would happen if I started treating my personal finances like a business. It would require me to shift in thinking and see the ordinary things in my life a whole lot differently. For example:

 **Click on each tab below for more details**

Your Household is Your Company

Moving forward I will need to look at my household as a company. We will need to make sure we manage and control income and expenses to ensure we make a profit on a regular basis. We will also need to take our profit and build wealth by investing in ourselves, our home/AKA head quarters, and increasing our net worth/equity. All the while making sure our stakeholders (family members) are happy. In our family each member will play a different role:

  • Mr. Prairie FIRE: Sales, Finance, and Human Development
  • Mrs. Prairie FIRE: Manager of Operations and Human Development
  • Little Fire Starters: Shareholders (for now) and future franchisees

Your Labour is Your Product/Service

  One of the most radical parts of viewing your home like a business is realizing I am in the business of selling my labour. Be it your physical strength, your creative mind, or strategic thinking, we are all selling our skills and abilities in exchange for money. This is why the call it a "labour market". And guess who the customer is? Click on the next tab to find out. I hope you're sitting down.

Your Employer is Your Customer....EEEP!

  OK, this is where there may be some disagreement and dissension in the crowd. But hear me out. If you are selling your skills and abilities in the labour market, then it is a natural and reasonable to conclude that your employer and all future potential employers are your customers. They are the ones that are in need of your services and are willing to pay for it. You have to earn your pay and make sure you are creating value.

The Two Businesses of Personal Finance

Here’s the thing dear reader. There is something the world is not telling you. The reality is that we are all running two types of business when it comes to personal finance: (1) An Active Labour Business; (2) A Passive Investment  Business:

 **Click on each business tab below for more details**

Your active business is your day to day life, which is being funded by your active participation in the labour force. Let’s break it down as if your looking at your budget:
  • Income: You are actively selling your labour in the marketplace in order to generate income for your family.
  • Expenses: Your expense are all the things necessary to keep a roof over your head, eat and ensure the health (mental, physical, emotional) of those who live in your home.
  • Savings: This is your profit at the end of the month to invest in your second passive business - building your portfolio. You need to actively find ways to create profit by increasing your income, reducing expenses and stewarding your resources.
Your business is selling your labour in order to keep Family Inc. in the black and sustainable over the long term. Your home is your base of operations and it is your responsibility as a family to find ways to spend less than what you are bringing in, so you can invest in your passive business (building your portfolio).
Your passive business is building a well diversified portfolio. This second business is focused on collecting as many high quality,  appreciating and/or cash flowing assets. Once again let’s take a step back and view it from your net worth financial statement:
  • Assets: Your assets are your investments you make through your cash savings. These assets are considered passive because all they require is for you to purchase them and wait for them to produce more money.
  • Liabilities: Liabilities is all the debt or money you owe to people. Debt is neither a good thing or a bad thing, but it is risky becuase it can cut into your ability to grow your net worth. Many businesses use “leverage” or other people’s money to invest in business activities to purchase assets that can both service the debt and have a profit.
  • Net Worth: When it is all said and done, it is important for your assets to add to your net worth over time. The reason being when you retire, your portfolio will need to produce cash for you to live off of. After all retirement or financial independence means you don’t have to actively work for the rest of your life.

Your Financial Life IS Your Business

I don’t think many people give their personal finances the time and effort it deserves. The reason being is that larger forces like marketing and culture are working against us to strive to reach our financial goals (e.g. consumerism, marketing & debt).  Many think saving for retirement and building a portfolio is a nice to have, instead of a necessity.

How different would your financial life be if you treated your work and home life like a business? I know for sure mine would be a lot different. I can’t change the past, but looking forward I know we are on the right track to create wealth and prosperity for our family, our community and add more value in the world.

In the end your personal finances IS your business and no one else can assume the role of CEO when it comes to getting your financial house in order. I hope this post has brought some benefit to see things a bit differently. It is hard to shift our lives, set our goals and take control. But with the right frame of mind and framework we can stay on the path and keep doing the hard work necessary to reach financial independence.

All the best,


Mr. Prairie FIRE