Want to learn about financial management? You might have to pay more than you think.

Want to learn financial management? You might have to put in more effort than you imagine.

Self-Introduction

Let me first introduce myself. My family conditions are quite good. My mother is a very hardworking woman. I started from scratch and built a small-scale company, then through this company, achieved financial freedom (actually, the previous generation’s limited vision meant that their financial freedom… often meant sudden wealth).

I have a background in economics, but later felt that economics itself was too theoretical. After completing my economics degree, I added a business degree (about a year and a half). Choosing to study business was partly due to my interest (accounting and finance are much more interesting than mainstream economics), and partly to provide my parents with a new perspective for their decisions. (Don’t let them make foolish mistakes!) To ensure that the fruits of their labor can provide them with a secure life in the future.

The above information is disclosed for everyone’s reference in decision-making. The content below is only a suggestion. Also, if you find any parts inappropriate, feel free to point them out, and I will discuss with you. If deemed reasonable, I will make modifications. If you have better ideas, I am also open to discussion, and if I agree, I will update the main text accordingly.

Part Two: Preface and Guide

I personally believe that financial management is a very, very serious matter. Your wealth is the market return of all your past efforts, constantly fluctuating in the market. The market is a fair place; the more serious you are, the more returns you can get. Especially in China, the quality of wealth managers varies greatly, and before professional ethics are fully established (not sure if there is a strict wealth management structure similar to CFA standards domestically, welcome viewers to provide information), it’s advisable to spend no less than half a year (yes, I estimated, it might be longer, but not shorter) of your spare time to learn some basic skills and tools. (Note: This is not something you can master just by reading before bed!) Only then can you have a basic control over your resources.

Of course, if you truly dedicate half a year or more of your spare time to learning about financial management, the gains will far exceed your input. To motivate everyone, I list below the major benefits I can think of.

From micro to macro, understanding the behavior of this world will be much more meaningful for you. Why has the price of Coca-Cola not changed much over the years, while housing prices have increased several times? What’s the difference between buying stocks and gambling? Why did Chinese people start speculating in stocks around 2007, then shift to buying houses around 2010, and by 2013, the economy suddenly slowed down while everyone was doing online credit? What are PE, VC, and what are they used for? What is the purpose of Premier Li Keqiang’s speeches? Why can Alibaba’s opening market cap be higher than Facebook? What is an IPO?

These knowledge points might not be clear within half a year. But at least, you will find clues and tools to understand these questions, and continuously strengthen your understanding and application of these tools throughout your life. Ultimately, you will be able to independently explore the causal relationships behind economic phenomena. (I think this benefit alone is already quite substantial… but there’s more…)

You will gain a completely new perspective on thinking about problems. Most of the theoretical foundations of economics and business studies are based on the rational human hypothesis. After learning economics, you will master a new way to examine yourself and the behavior of society.

Why do people trade? Why does division of labor occur? Why do idioms say “from Nanjing to Beijing, those who buy are not as smart as those who sell”? How are prices of goods determined? (If your answer is the labor theory of value, congratulations, you need further study.)

How important is this kind of thinking? (I can’t find the exact source of this survey report now, welcome those who know to supplement.) During my study abroad, a teacher once cited a research result: graduates from economics departments initially did not have the highest salaries. But after ten years (if I remember correctly), economics graduates had the highest average annual salary increase. And after ten years, they still had the highest salaries.

More possibilities.

Personally, this knowledge might produce wonderful chemical reactions with your existing knowledge structure. Economics is about studying human decision-making, and business is the result of market economic development. Both are everywhere in life. When economics and business skills are added to your toolkit, you can integrate them into other disciplinary thinking methods and your own values, generating new perspectives on viewing problems.

In terms of relationships with others, skills in economics/business are a kind of severely under-supplied social skill, and many who possess these skills have their own interests, which can make outsiders distrustful. Therefore, if you master such skills, you will be quite popular among friends and elders.

4. For your assets, learning this knowledge may not bring much extra income. But you will learn how to avoid scams, reduce unnecessary individual risks, and prevent basic mistakes. For example, avoiding high-interest loans or usury. At the same time, you can gradually develop a financial plan suited to yourself, taking the first step toward financial freedom.

In my view, financial management is not about choosing the highest-yielding financial product. It is about constructing an asset portfolio that fits your actual situation. Everyone has their own circumstances, facing different problems, with different needs for money and timing. Therefore, you need to learn to develop your own financial plan. If you find the benefits above motivating, then perhaps you won’t be so afraid of the following content.

Part Three: Principles of Learning

1. First, I want to emphasize again that learning financial management must be a systematic mastery of several entry-level tools. No laziness or shortcuts are allowed, or they will come back to haunt your future decisions. The so-called financial literacy education, and books like Rich Dad Poor Dad, Lang Xianping, or even Mao Yushi (I read his books in high school, which sparked my interest in economics), are just small articles, not the core content to learn. Learning a trick or two, don’t expect to master a master; on the contrary, taking shortcuts and tricks can lead to incomplete internal skills and even go astray.

2. The learning method should be as traditional as possible. Generally, the introductory courses of a discipline (e.g., Principles of Economics) provide content that is largely free of academic disputes. You can treat these theories as axioms or the foundation stones of a discipline, and absorb them without discrimination—at least during the learning phase. You can think of yourself as studying for a high school or university entrance exam:

Attend classes, read textbooks, do exercises, then take quizzes until you reach passing levels. During the process, try to use what you learn to explain phenomena around you. For selecting learning materials, it is strongly recommended to choose classic textbooks used by major universities, written by Western scholars (and accompanying practice books). Although these textbooks are often thick enough to be used as self-defense tools, the lifelong benefits from reading them are worth the effort. Don’t be afraid of difficulty.

3. If your English proficiency is good, I strongly recommend reading original English textbooks. If your English is still a bit weak, consider reading bilingual versions. The advantage of Chinese translations is ease of reading, but they may lose some of the original’s essence, and many precise descriptions require reading the original English texts.

If reading textbooks alone makes learning somewhat dull, you can choose some open courses. There are many online courses from top universities. Based on my experience studying abroad, strictly completing online courses, including assignments and reviews, and then reviewing the content, is not much different from face-to-face classes.

Part Four: Sequence of Learning

My suggestion is to follow the order: basic economics, basic accounting, basic finance, then financial markets. After completing this sequence, you can tailor your next steps based on your interests and needs. The reasons are related to my personal experience; welcome discussion:

Basic Economics: Recommended as the first subject to learn, to lay a solid methodological foundation for subsequent courses. Many assumptions and theories in economics run through accounting and finance. Also, economics helps you establish the concept of markets, and once this concept is formed and applied proficiently, it can effectively reduce difficulties in business studies. Therefore, I strongly suggest economics as the first course.

Personal experience: During my first year in university, I read Mankiw’s Principles of Economics three times—twice the original (the book with the cover image), once the translated version, plus Samuelson’s Chinese edition. At that time, in our first year, we only studied political economy, and the main textbook was Gao Hongye’s book… (Fortunately, current students are no longer in this situation).

This major learning experience laid a good foundation for my subsequent four and a half years of study and my insights after entering society. After toughing out the basics of economics, I developed the habit of integrating what I learned with practical situations. I continuously reinforced and consolidated my knowledge through practice. I managed to make economics a habit and a tool for analyzing problems.

Because of this, when I faced the choice of career in my senior year, I decisively gave up a master’s/honorary degree in economics and turned to business. The mathematical and physical aspects of economics, in my view, are a kind of self-destructive behavior. And I don’t have strong mathematical talent… ( Of course, the latter is the main reason )

Basic Accounting: Recommended as the second subject because accounting is the language of business decisions and economic analysis. Finance is the blood of economic operation, and accounting is the language recording economic activities. Accounting should faithfully record and reflect the operational behaviors of enterprises. Lying with numbers requires some technical skills.

After learning accounting, you will have a clear understanding of many ratios, such as debt repayment ratios, capital structure, operational efficiency, profitability, and cash flow. You will also be able to see through many lies and better understand the real operation of an industry or enterprise. After gaining a deeper understanding of accounting, studying finance will no longer be just a numbers game but a real activity involving specific people.

Personal experience: In my senior year, I encountered the course Corporate Finance. My accounting foundation was very weak at that time, and I suffered a lot in this course. I also found that many financial information needs to be extracted from financial statements. Without systematic accounting knowledge, finance is like an unreadable book to me—I could only imitate others’ tricks, unable to understand the actual content.

The experience of studying Corporate Finance changed my subsequent decision. After this course, I started learning accounting and made an unprecedented decision in my senior year to pursue another bachelor’s degree in business (finance, accounting) to better understand the business world. Looking back, this decision truly helped me find my interest, and the skills learned during that year and a half are very useful. (My mother once lamented, “That year and a half of books was truly worth it!”)

Thanks to the instructor JASON HALL of Corporate Finance, though he might not remember me.

Finance Introduction Course: Only after solidly mastering economics and accounting do I recommend everyone start learning finance. And finance should be learned step by step, starting from basic courses:

Begin with fundamental concepts: the time value of money, PV and FV, cash flow concepts. Then move on to risk, market risk, non-market risk, asset attributes (liquidity, risk, return, maturity), etc. Each concept must be understood clearly and applied broadly. These are the language of finance, and they will appear repeatedly. Mastering these concepts precisely and applying skillfully will help clear the next learning hurdles.

Personal experience: In finance, I regret not having taken a more comprehensive initial finance course, which led to a somewhat fragmented understanding of finance. This was especially evident in the Corporate Finance course, where the selection of yields depends on the asset’s attributes and composition. I spent a whole year studying this, and I still haven’t fully understood it. That’s why I emphasize a step-by-step approach.

Financial Markets Course: Congratulations, at this point, you finally start learning about financial products directly. Again, after completing the basic courses and mastering all concepts, you can begin this step.

I suggest you study related content in financial markets. The financial products you purchase are mostly covered in this course. You will find that Chinese banks’ “wealth management products” are quite diverse and varied. But they all promote one thing—“yield.”

Actually, this is quite similar to the recent trend of “1799”… Chinese users seem to only recognize price…

If you carefully study these levels, I believe you can responsibly plan your finances according to your life. The following study plan and decisions should be more tailored to your personal situation. For example, your main income source, future expenses, assets on hand, liabilities, market conditions of assets and liabilities, and even the macroeconomic situation of the banking industry—all could be within your financial planning considerations.

By then, you probably won’t choose the “best financial product,” but rather the “most suitable for you.”

Life is the same principle~

Additional note: In university, I know that courses like Financial Markets are typically second-year courses, while other courses are first-year courses, and the order of first-year courses can be flexible. This sequence is just my personal suggestion, and I welcome everyone’s feedback.

Part Five: Learning Resources

When I wrote the learning sequence, I considered existing online resources because I believe that most readers who want to establish a corresponding knowledge structure will find it very difficult to do so solely through offline (university, library) resources. Based on my understanding of Chinese universities, some courses might even mislead you. (I once hated econometrics so much that I thought it was just a pile of formulas.) I hope this article can provide a practical and reliable way for those wanting to acquire financial skills.

Therefore, I will also include some recommended books and resources. Some I have studied myself, others I have not touched at all. For resources I haven’t used, I will still note my reasons for recommendation for your reference.

Again, all materials in the list that have English versions should be used in English. If your ability is limited, bilingual reading is better than pure Chinese. The quality of Chinese translations is often concerning, and they may omit important content.

Also, I encourage purchasing authentic textbooks. Sometimes, only a solid book can help you focus on learning. My initial motivation for studying Principles of Economics was the expensive textbook fee (the Asian edition, over 460 RMB), but now it seems to be the best investment of my life.

One’s most valuable asset is ultimately time.

Finally, I welcome everyone to suggest excellent textbooks and open courses. After review, I may add them to this list. The list begins:

1. Basic Economics Course:

Textbook:

Principles of Economics (《经济学原理》) by N. Gregory Mankiw(N. Gregory Mankiw)

This is the most familiar material in my entire list, available in both English and Chinese. Very classic, accessible economics textbook, engaging and easy to understand. It is the most popular introductory economics textbook. Its copyright and sales have set Guinness World Records.

“Like a teacher sitting at your desk, explaining economic phenomena.”

Online Courses:

I haven’t found a suitable online course that uses Principles of Economics as the main textbook.

The more complete online courses (macro and microeconomics) are:

Stanford University’s open course:

Principles of Economics Econ-1

And from the University of California, Irvine (starting October 4, 2014, this course will be the 2014 version):

The Power of Microeconomics: Economic Principles in the Real World (Coursera)

The Power of Macroeconomics: Economic Principles in the Real World (Coursera)

2. Basic Accounting

Tutorials:

I haven’t systematically studied first-year accounting courses; I started directly from the second class. So this book is one I chose based on good online reviews and popularity among university students.

Fundamental Accounting Principles / John J. Wild

Open Course:

Wharton School’s: Introduction to Financial Accounting (Coursera)

This is the only online accounting course available for now, with no alternatives.

The difficulty level is between first and second year. For those interested in learning accounting, please persevere—this is a threshold. Once past the initial lessons, the rest will be easier.

I have personally studied the first few lessons of this course in my spare time. The quality is quite good. Be patient and think deeply.

3. Basic Finance:

As mentioned earlier, I haven’t systematically studied first-year finance courses. The recommended book is a well-known textbook, authored by someone with very deep theoretical background (one of the founders of option pricing models, Nobel laureate).

Financial Economics / Zvi Bodie

This book is somewhat esoteric, but if you have studied economics and accounting seriously, the concepts will be much easier. There is only one online course option (I haven’t taken it myself, but it has good reviews):

Introduction to Finance (Coursera) from the University of Michigan Ross School of Business.

2. Financial Markets

I only recommend open courses here because I have seriously completed this course, and the textbook is very classic. If you are determined, you can study the open course while reading the textbook as per the course setup. I believe you will benefit greatly.

Financial Markets by Robert Shiller (Open Yale Courses, 2011)

The Chinese subtitles version seems to be from Yale’s open course in 2008: Financial Markets.

This course has 21 lessons. It is very worthwhile—provides a detailed and accessible introduction to financial markets. Shiller is a Nobel laureate, but what attracted me more was his analysis of market irrational exuberance.

After thoroughly studying this course, you will have a clear and comprehensive understanding of various financial products, VC, PE, IPO, real estate, options, swaps, bonds, trusts, leasing… and how to truly assess the attributes of an asset and whether it fits into your investment portfolio.

Only by doing this can you be considered “financially managed.”

Additionally, I highly recommend James G. Skeggs’ The Future of Investors and Stocks: Long-term Investing, as well as Peter Lynch’s three books: One Up On Wall Street, Learn to Earn, and Beating the Street (start from the first). These books have greatly influenced my investment philosophy.

Part Six: Conclusion

This is a long journey, isn’t it?

So I say, at least half a year or more of spare time is needed. That’s my view of the truth of learning financial management.

But to achieve financial independence and freedom, and to establish a truly personal financial plan, there are no shortcuts. After all, this is a lifelong skill. Like sports, health management, marriage, career planning, and nurturing the next generation—how much you invest, how much you get in return. If you have ideas or questions, feel free to communicate with me. ( **$BLUM **