Are you here searching for the answer – Is Financial Modeling hard?
Is it, or is it not?
Chances are, you are tired from long ‘Google-ing’ sessions on financial modeling.
You have had long discussions and research on how financial modeling is ‘the real deal skill‘ in the market. It is already a lot of work. So you thought, ‘Why not crosscheck it with a simple question on the internet’?
You go on typing these words on the keyboard—
“Is Financial Modeling Hard?”
The answer: Yes, financial modeling can be challenging. But here is the catch. It will only turn out to be more if you continue to see it from a fearful stance. Else, it is just another monster sitting under your bed.
And under the bed, monsters are not real. These mental mirages disappear as soon as you bravely point your flashlight.
Key Takeaways- Is Financial Modeling Hard?
- Navigating the difficulty level of financial modeling.
- Debunking some perceived myths and finding the actual challenges.
- Tips that can make financial modeling easier for you: Harnessing the power of step-by-step process.
- The importance of a strong foundation in financial modeling
- Includes a secret ingredient that makes financial modeling 10X easier (keep reading to know)
- The winning edge of reality-based case studies
- A short discussion on the most under-rated skill of financial modeling: Communication
Is Financial Modeling Hard? How Difficult Is It?
Instead of saying ‘difficult, financial modeling is challenging.
Do they not mean the same thing?
Well, they do not. ‘Challenging’ creates a scope of ‘Yes, we can still conquer this’ attitude. The word ‘difficult’ sketches a very morbid picture, like it is impossible to harness this skill. It leaves this learning task to only supernatural-gifted individuals in our minds.
See how a simple exchange of words that sounds too similar can change the entire approach?
That said, ‘how challenging financial modeling will be’ will differ for each of you, as each of you might have a different set of skills. Some of you may already have a good skill set to advance in financial modeling. In contrast, the rest of you might have a vague understanding of the concept.
Hence, the challenges of financial modeling for each of you would vary.
Regardless of all, my guilty pleasure—internet surfing has brought notice to many misconceptions surrounding the learning process of financial models.
I felt obliged to separate the myths from the actual challenges.
Debunking the Myths of – Is Financial Modeling Hard?
#1. You need to have advanced mathematical knowledge.
Yes, you need to have good numbers and analytical skills, but advanced mathematics is optional.
#2. Financial models are always complex.
Not all financial models are complex. The basic ones are easier to ace. Once you have a good grasp on the foundations of financial modeling, it seems like it could be more ‘unsolvable. ‘
#3. Learning financial modeling takes too long.
It only takes months to learn financial modeling. Not too long. Do you not believe it? You can browse through this guide.
#4. Learning financial modeling is an expensive business.
If by ‘expensive’ you mean adding exclusive value-enriched lessons that help you in the natural market landscape, then it may be one. It is just how you choose to see things.
Otherwise, honestly, most online financial modeling courses will not break the bank. They are substantially accessible.
Like the one, I reviewed earlier, Breaking Into Wall Street (BIWS) Core Financial Modeling is an absolute must-grab opportunity for those who are seeking to pursue investment banking, corporate finance, or other high-position finance roles.
Challenges that Do Matter in Financial Modeling
#1. Weaving analytical skills with soft skills
Okay, here is the deal. Finding someone great with numbers and people skills is asking for too much.
In financial modeling, you are not just crunching numbers; you are also the storyteller. Imagine presenting to a room full of stakeholders-
That is the real challenge.
Confession time: Even I stumbled over words at the start. But here is my secret—practice, practice, and more practice. It gets easier, I promise!
#2. Ability to work with both forward and backward calculations
Another tricky thing about financial models that you may have to face sometimes (only when you are working with data from scratch) is being able to deduce the accurate history and project multiple futures with the help of numerical insights.
#3. Making the model flexible for multiple data and situations
Fine-tuning the model can prove to be a tricky and time-intensive process. Subjects like scenario analysis and sensitivity analysis require you to perform multiple tests on the model to ensure adaptability for its future users.
Let me describe these in brief for better understanding:
3.1 Scenario Analysis
Examines how a financial model performs under different possible future situations or scenarios.
For example:
Imagine planning your suitcase for different weather conditions before stepping out on a world tour. You might think of different outfits that could accommodate different weather conditions in each country.
3.2 Sensitivity Analysis
Looks at how changes in one variable (like interest rates, sales, or costs) impact the overall outcome of the financial model.
For example:
It is like playing with the perfect amount of ingredients to stir the perfect irresistible cinnamon hot chocolate—Too sugary? Too spicy? Too chocolaty? Yum!
#4. The evolutionary nature of financial modeling
Like all things, learning financial modeling is a dynamic process. You will need to be up to date about the latest software or improvements related to the subject.
Step-by-Step Process to Make Financial Modeling Easier
Focus your spotlight on ‘financial modeling.’ Now, assess it with scrutiny and divide it into sections.
The minute you disassemble the huge monster-looking concept of financial modeling into parts, you will eventually realize you were sweating out for no reason. Soon, it will all begin to look accessible and achievable. I have done this for you below:
Step1: Strengthen your foundational knowledge
A valuable piece of advice from my math professor that has stuck with me to this date:
“Avadhut, if you get your basics right, you will breeze through most problems with ease. A strong foundation is the key to unlocking solutions effortlessly.'”
And that, my friend, is true not only for math but any subject you take forward. Even financial modeling.
Be thorough with the founding concepts of analytical financial modeling like:
- Fundamentals of Accounting
- Basic mathematical proficiency in calculations and analysis
- Learning financial concepts and terminology
- Data analysis skills
- Improving logical reasoning and problem-solving abilities
- Good command of advanced Excel
Here, I have only mentioned the basics. If you wish to study this in-depth (I promise it will all look much easier), you can browse through my 6-step action-oriented guide on learning financial modeling.
No matter how complex the financial model is, these core fundamental skills are the only factors that impact its functioning framework.
Step 2: Harness is the secret ingredient that makes the learning process 10X easier
I will not beat around the bush further. Discipline is the secret catalyst to make your learning process efficient.
A habit that will be an ultimate game-changer in genuinely mastering the otherwise challenging seeming financial modeling like a breeze.
Step 3: Practice on reality-based case studies
Here is a pro tip
Explore reality-based case studies and business scenarios.
Trust me, there is nothing like hands-on experience with actual data and case study papers. It is not just practice; it is getting cozy with the real deal.
When you have tackled the complexities businesses face, it is like having a winning edge. Suddenly, challenges become less of a threat and more like a game waiting for you to solve.
Because of this, the courses offered by BIWS take care of this aspect. The following are some of the tailored courses with enriched case studies for each industry:
- BIWS Estate Financial Modeling Course
- Core Financial Modeling (for all industries)
- Bank and Financial Institutional Modeling
- Excel and VBA for Investement Banking
Step 4: Get used to mirror conversations
Visualize this
Look in the mirror and see your boss, colleague, and stakeholder staring back at you. Now, speak to them daily. Get comfortable explaining those complex ideas.
Make it more coherent; what wordings and what analogy can make things easier to understand?
It is best if you make it a routine, or you could also sign up for public-speaking groups like Toastmasters if you are still determining if you will put up with this practice. This practice can prevent all those nervous jitters because your brain subconsciously believes you have done this 100 times before (even if it was in front of the mirror).
Many finance pros miss out on their full potential because they need to pay more attention to the power of communication.
My Exclusive Insights For You
I am hoping my guide has made you feel less apprehensive about financial modeling.
I hope after reading this guide, you got absolute clarity on- Is Financial Modeling hard?
As my readers, here is a gem of advice that my own experience has taught me:
By coupling ‘discipline’ with some streamlined structure, you can achieve so much more than you believe. Since financial modeling is a structured analysis, a similar approach needs to be taken during the whole learning process.
My recommendation? Keep it steady, slow, and straightforward.
The best way to do it is to sign up for a financial modeling course.
Just as the under-the-bed monsters dissolve into mere illusions when met with bravery, financial modeling complexities diminish when you bravely navigate the learning process.
And if you need any guidance, I am always right here. Comment to reach out.
