Finance Professionals Must Have Situational Awareness.
People who study and train in self-defense will tell you the importance of having situational awareness. If you’re not sure what this is, think scanning a dark parking lot as you walk to or from your car, understanding that it would be out of place for a person to be wearing a down jacket anywhere in the summer, and knowing the location of the exit as soon as you enter a building so to improve your chances of survival if stuff goes down. In short, it’s the ability to read the room or space you find yourself in, understand what’s what, and then how to effectively respond to a situation.
This image was created with the assistance of DALL·E and prompts from Brent Pritchard.
Here’s what’s not going to happen. The person intent on committing a crime or inflicting harm is not going to tap you on the shoulder and give you a heads up about what happens next.
In the classroom, finance students will raise their hands and ask me a question like, “Is this question asking for the ‘future value’ or something else?”
There are two things that employers dislike, three that are an abomination to them: self-righteousness, a lying tongue, and one who sows discord among team members.
One thing for all aspiring finance professionals must be true: awareness of the Time Value of Money. But you must know how to apply the Mathematics of Finance to analyze and evaluate real-world Time Value of Money situations.
Here’s an excerpt from my book Would Your Boomerang Return? What Birds, Hurdlers, and Boomerangs Can Teach Us About the Time Value of Money (2023):
Q14. In five years, you expect to have $60,000 in a savings account. Starting at the end of the sixth year and continuing through the end of the eleventh year, you expect you’ll be able to save $5,000 annually. At the beginning of the eleventh year, you will make annual withdrawals totaling $7,500 through and including the end of the twentieth year. Assume a true annual investment yield of 2.25% with quarterly compounding the first eleven years and a true annual investment yield of 2.00% thereafter. What do you expect to have for a remaining balance in your savings account twenty years from now?
If you got $28,590.19 then you can also answer the bigger question, “Do you have finance situational awareness?” with a response that would please a current or prospective employer.
What is the one thing that you feel holds you back when analyzing a real-world question, therefore making it a problem?
Brent Pritchard is an author and college finance educator with over two decades of industry experience and cofounder of Boxholm Press, LLC, a family-owned-and-operated publishing company providing educational content, products, and services. He pioneers an innovative and approachable new way of learning and teaching the Time Value of Money as well as thought leadership in other business topics. His most recent book is Would Your Boomerang Return? You can contact him on his website here.