Five Thoughts As We Learn Finance

thoughtsToday, I’m not going to discuss any Finance topic, but share with you some of the methods I adopted while learning the subject. Coming from a Computer Science background, Finance was a new subject for me. Having graduated from the college in 2003 and then working in the corporate sector for eight long years completely into computer technology and its related field, it was very difficult for me to absorb the contents. Moreover, trying to learn the things on my own was a big challenge (and change) that demanded tremendous amount of effort and dedication from me. Today, after gaining a good understanding of this subject, I realized that I should have done it in early part of my life, but nevertheless, somebody says, “Everything happens when it has to happen”. So, I’m sure it was for good.

I’ll keep this article short and simple, and at any moment you feel you should ask questions, or share your experiences, ideas and thoughts with me and others in this blog, please do not hesitate to leave your suggestion(s) in the “Comments” section below. Let’s get started!

(1) Always Keep a Paper and Pen/Pencil Beside You

Franklin Allen, Nippon Life Professor of Finance, The Wharton School says, “It’s important to realize that Finance is not a subject where you can just simply read things and understand them. You have to absorb the material over time and be able to apply it, which is somewhat different than understanding the concepts.”

So, in my opinion, the best way to learn this subject is through practice, practice and practice.

Before you pick up that finance text and start reading it, ensure that you have a cool mind. As you read, try to understand the fundamentals to the core. Always keep a paper and pencil/pen beside you, and take notes as you learn the concepts. After understanding the concept, practice a few problems in that area, and then try to solve “real-life” problems (using case studies) so that you can apply the concept. Net Present Value (NPV), Internal Rate of Return (IRR), Payback Period, Opportunity Cost of Capital, Annuity and Compounding are few of the concepts that will find its play in any aspect of finance. So, learn them in depth and apply them real-time. Also, do not confine yourself to one book. Read other authors’ compositions so that you understand the subject from every angle. Make a habit of reading finance related topics every day.

When learning a difficult concept, recall it again and again during your spare time, when you are in the rest-room, having your food, taking a walk or on the bed before retiring for the day. Finance concepts are like potatoes – they add value to any meal (vegetarian or non-vegetarian). So, don’t skip the basics. Take your time, but learn them thoroughly.

Another important point to keep in mind is that Economics and Statistics go hand in hand with Finance. So, keeping a basic text on them on your study table helps a lot (you can make a quick reference to it.) This is very important for learners (like me) who come from a non-finance background. I learned Microeconomics first, followed by the basics on Statistics, Macroeconomics and Corporate Finance. Statistical terms such as mean, median, mode, probability, permutation and combination, regression, standard deviation, variance, co-variance, co-relation, etc. formed about 10% of my daily finance learning session; most of the math, that I did, involved these statistical calculations.

As you progress to the advanced topics like Corporate Restructuring, Debt Restructuring, Distressed Investing, Mergers and Acquisitions, the concepts will form the heart and become a memorable love affair.

(2) Form a Group

While I didn’t have the advantage of participating in a group that follows finance religiously, I learned that it’s an essential part of the whole process. Group discussion encourages people to talk and share their thoughts with others which can benefit everyone in the team. It flourishes new ideas for learning new things. To give you an example, when you face difficulty while solving a problem, just share it with the group, and you will discover how new ideas come up during the problem solving process; how different people look at the same problem from different angles. This is why people say, “Ten heads are always better than one!”

Learning in a group also keeps you motivated. Finance is a big subject with some topics being very long, deep and difficult to understand. Staying between like-minded people will enable you to stay engaged. Additionally, by working in a group, you will learn the art of team playing, which is an essential component for this corporate world.

(3) Subscribe to Finance Literature

Subscribe to as many good finance wikis, blogs, discussion forums and online free magazines and journals as you can. But before enrolling yourself to the free version/edition, just ensure that the information available on these sources is validated. Evaluate paid magazines by reading the content of their 2-3 past issues (most of them have trial versions available on the web) and decide whether you should spend that bit on it. I’ll definitely recommend subscribing to “Harvard Business Review” magazine – it’s undoubtedly good!

Open an account with Twitter and Facebook and follow good Writers, Influencers, Speakers, Authors, Business Leaders, Government Officers and Entrepreneurs. Subscribe to “Groups” that are of interests to you. You never know you might find some of the best case studies, concepts and strategies in them.

(4) Share Your Knowledge

By sharing your knowledge, you are not doing any social service, but actually helping yourself to improve your own. When you teach others, you learn how to articulate your thoughts and present them in front of others. While delivering your presentation, your learners will ask questions, which will compel you to think differently to answer them. Spreading knowledge only broadens your perspective.

(5) Stay Healthy

I’ll stress this point a bit. As you enter the finance world, please keep these three simple yet effective steps in mind. A lot has been written on this, but I’m still going to repeat them for my Readers.

  • Sleep at least six hours a day: Your brain needs rest after a day-long effort of solving number crunching finance problems. A good night sleep wakes you up next morning with a fresh, fully-charged mind for another solid performing day. In the last two years, I have stopped burning mid-night oil and have made an effort to maintain a disciplined lifestyle.
  • Exercise regularly for 30 minutes to stay healthy. Exercising boosts your hormones to secret necessary enzymes that activate certain metabolism in your body to keep you healthy and active. It also enhances your blood circulation. I make a sincere attempt to walk five kilometers everyday irrespective of all the odds.
  • Take a balanced diet. It’s just not about the carbohydrates, proteins, vitamins and minerals, but also about taking two liters of water every day along with fresh fruits, raw green vegetables and high-fiber, well-cooked, hygienic food on time. A balanced diet supplies all the necessary nutrients to your body to keep you active the whole day. Reduce your alcohol and caffeine intake levels. Don’t be a chain smoker, and try to avoid such things as much as possible. I’ve never touched cigarette or alcohol in my life nor will I ever. I take caffeine once in a year.

Learning finance is an ongoing process. We need to make a diligent effort every day. The five points, that I have highlighted today, are my perspective, and can be totally different for another individual. So, try to experiment, explore different methods and find out what works best for you. There is no “one size fits all” method.

And yes, don’t forget to give a pat on your back once you have done a good job!


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