Have You Struck Out Before Practicing in the Field of Finance?
Who doesn’t love baseball? Or a day at the ballpark? It’s America’s National Pastime.
Recently, I was able to spend some time with my friend and mentor, Whitt, over lunch. We hadn’t seen each other in person for the better part of a year. So, we had some catching up to do. I wasn’t surprised when the conversation turned to his beloved Houston Astros. He’s been a lifelong fan.
This image was created with the assistance of DALL·E and prompts from Brent Pritchard.
From what I can tell, there isn’t a set list of rules for the Time Value of Money in the finance industry. It’s not like there’s a TVM governing body like there is in the MLB (Major League Baseball). “For [there are] one, two, three…TVM Rules that every aspiring and current finance professional must know.”
I hope you’re thinking, TVM Rules! Not, TVM Rules?
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):
The Time Value of Money is commonly abbreviated TVM. It’s worth noting the Time Value of Money shorthand because it consists of three letters. Just like there are three letters in TVM, there are three TVM Rules. As you’ll see later, the dialing in of these original TVM Rules extends beyond being minimalistic. Spoiler alert: the first relates to Time, the second to Value, and the third to Money. Now isn’t that a novel idea? It actually is, which means it was long overdue. Doing any of these is a Time Value of Money no-no:
Add or subtract or compare money in different points in time.
Fail to correspond the time span in between periods or payments (on the timeline) and the time span of the true investment yield.
Neglect to consider different payment types and signs.
Visit a baseball field on game day, and you’ll see a lot more than balls and bats. If you saw someone with only a ball and bat walking to a ball field, you might think they’re ill-prepared. If you saw someone with all the baseball getup walking to a football field to practice, you’d be right to think they’re getting ready to practice in the wrong field.
Similarly—and this one really hits home—you wouldn’t want someone to tell you that you’re not well suited for practicing as a finance professional, or worse yet, that you’re practicing in the wrong professional field.
Learning a sport starts with learning the fundamentals. The most fundamental part of the Time Value of Money is comprehension of the TVM Rules. One of the first ways that you can prove to yourself—not yet others at this point—that the finance field is right for you is comprehension of the TVM Rules.
Numerous times, I’ve heard of interviewers asking aspiring finance professionals about the Time Value of Money while they’re in the hot seat.
Why should anyone hire an aspiring finance professional who “strikes out” with respect to the Time Value of Money (Rules)?
Brent Pritchard is an author and college finance lecturer 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.