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Term Paper on
How to be a Great Money Manager
Setting Realistic Expectations
Managing your money is a skill to be learned, just like learning to play
softball or to work with a new word-processing program. As with any other skill,
money management takes practice, realistic expectations, and the example and
advice of those who have "been there and done that." This chapter is about
setting realistic expectations for your finances. Your path to financial
security and economic success starts here.
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Figuring Out What Your Goals Are
Perhaps you have a vague sense that you want to pay off your debts, start a
family, and be able to put your children through college, or start your own
business. None of these or any other goals will happen unless you make them
happen.
Setting financial goals is kind of like going grocery shopping: You go to the
store with a sense of what you need or want to buy, but the number of choices,
the sales, and the attractive displays may cause you to get sidetracked. Just as
a shopping list helps a shopper stay focused, a money-management list can help
you get off to a good start.
Take a minute to check off the items on the following money-management "shopping
list" that seem important to you. This shopping list can help you figure out
your financial goals.
• Spend less than I make
• Make good consumer choices
• Balance my checkbook
• Establish a good credit rating
• Know where to get good financial advice
• Save some money every time I get paid
• Work out a budget
• Curb my spending appetite
• Keep good records
• Use banking services
• Distinguish between short-term and long-term financial goals
• Spend enough time on money management
• Take personal responsibility for managing my money
• Pay my bills and taxes on time
How many items did you check? Chances are that you think you need to do all
these things. And you do. But you don't need to do everything at once. What you
need to do first are the basics. The basic approach to managing your money
starts with knowing your financial goals.
Forming Strategies for Success
1. Review your five-year plan. Add to that list of goals any even longer-term
goals that you have, such as saving for a child's college education or starting
your own business.
2. Decide what you consider to be your most important long-term financial goal
-- something you hope to accomplish in five years or longer. On a blank sheet of
paper, write down this goal and label it Goal A.
3. Write down what you consider to be your most important financial goal for the
next two to five years. This is a mid-term goal. Label it Goal B.
4. Write down what you consider to be your most important financial goal for
this year. This is a short-term goal. Label it Goal C.
5. Take another look at the money-management goals listed in Table 1-1. Write A,
B, or C next to each item that relates to one of your specific financial goals.
6. Make a chart that lists your most important short-term goal and the
money-management strategies that will help you accomplish it. Do the same for
your mid-term goal and your long-term goal.
7. Put your chart of A, B, and C goals and strategies on the refrigerator door
so that you're reminded of them every day. 1
Being a good manager is like putting a jigsaw puzzle together. The first time
you try to fit the pieces together, it takes a while to get everything to fit
smoothly. The second time you attempt to make the pieces fit, you are a little
more familiar with the pattern. Each time after that, it becomes more and more
natural to easily match everything together and have it all turn out right.
The pieces of the puzzle a manager has to put together are:
1. Advertising
2. Recruiting
3. Holding productive meetings
4. Motivating a person who is in an emotional or financial slump
5. Handling types of personalities they don’t relate to
6. Recruiting people that are happy on other jobs, but are ready for change.
All of these techniques combined together make a great manager2
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Money Managers: Overview
Each money manager has his own unique style. The key to being successful is to
have discipline, be broad-minded and be willing to admit defeat if an investment
goes against you. Many money managers buy and hold fixed income securities
including mortgaged-backs, corporate bonds, minis, agency securities and
asset-backed securities. Others focus on equities, including small stocks, large
caps and emerging market stocks.
Unfortunately, it is hard to get started in money management. It is particularly
hard to start working for the best money managers or a top mutual fund. Good
places to start are in bank trust departments, state and local pension funds and
in insurance companies. Many people cross over into money management after
getting years of experience on the sell side of the business in investment
banks. Perhaps one of the best ways to break in is on the marketing side.
Money Managers: Facts & Trends
Educate Yourself
If you are thinking of going into money management be sure to train yourself
well in fixed-income analysis and strategies. You are most likely to be employed
in a job analyzing bonds so be sure that you are familiar with measures of bond
price volatility, factors which affect bond prices, valuation of bonds
(especially with embedded options), yield curve strategies and institutional
details of the Treasury, agency, corporate, municipal, euro, mortgage-backed and
asset-backed markets.
Succeeding as a Money Manager is Challenging
The job requires a combination of intelligence, effort, intuition and discipline
to succeed in the long run. Most people lack the proper combination of these
traits.
Breaking in Tough
It is hard to break into the business of money management. A good place to start
is at a commercial bank in its trust department or at a state-run pension fund.
Insurance companies can also be a good starting point if you are a strong
student.3
The administrator is going to work with the auditor to prepare the year-end
financial statements and we thought it important that they have a good working
relationship," Cline says. "I don't think anything could replace talking to
other money managers that had gone through this same process," says Cline.
"Getting on the phone and spending, whether two minutes or 20 minutes with
another money manager that had gone through this, you can hopefully learn from
some of the roadblocks that they hit and avoid those when you're trying to go
through the same thing."4 Being a successful manager requires more than just
skills; you also need attitude, and a positive one at that. There isn't much
point in trying to motivate people, communicate with others or make decisions if
you lack one of the most important weapons for survival."5
Endnotes
1. Managing Your Money, “Chapter 1: Setting Realistic Expectations”, 2000-2002
by Wiley Publishing, Inc.
2. Hopkins, Tom, “Ten Characteristics of a Great Manager”, (1996)
3. “Money Management: Overview”, http://www.careers-in-finance.com/mm.htm
4. Harrison, Brendan, “Offshore Odyssey”, Vault Magazine, July/August 2002,
5. Manager e-books, “Be Positive”, Rob Hopcott's ©1999 – 2002, http://www.hopcottebooks.com/ebooks/manager.html
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