Financial statements. Does the thought of them create a blank stare or create intrigue to find out more about what they’re saying? Financial statements, like written statements, articles, stories and books tell a story. They have a plot and a theme and can lead the reader on a journey to uncover hidden treasures, drama, mystery, danger and happy endings. Unfortunately, reading and interpreting financial statements requires an element of financial literacy that most people have not learned. Early on, we have learned to read words beginning with books like Dick and Jane and Spot. And, from there, we have learned to read romance, drama, technical papers, non-fiction, news and many other written words that helps us through our day. With our literacy, we can also create the written word to communicate love, research, action plans, goals and anything else to help us communicate effectively. Reading and writing with numbers is what financial statements are. They are tools to help us learn, communicate and plan our lives in the same way as the written word does.

Where do you begin to understand financial statements? You start by understanding the importance they play in day-to-day life. They are not something to be avoided or to be delegated to someone else. You don’t start off expecting to read, understand and analyze technical Fortune 500 companies, publicly traded financial statements. You start at home with what you know, in the same way you started to read with Dick and Jane and Spot. There are two main types of statements, sort of like vowels and consonants. You can start by understanding the difference between an income statement and a balance sheet. From there, you will begin to see how income, expenses, assets and liabilities are organized to tell stories – much in the same way that letters are organized to form words, which form verbs, nouns, adjectives, etc. that eventually become sentences, paragraphs and whole stories.