THE CONCEPT OF RISK
Personality Types and Leadership – Part 3
Saving vs Investment
In all of the financial counseling sessions I’ve conducted; and, in all of the personal finances classes I’ve taught, the subject of saving inevitably comes up. While discussing the importance of “saving for a rainy day”, one class participant asked me to explain the difference between saving and investing for the future.
Both involve deferred consumption … not spending money today so that it is available for use at some unspecified time in the future. So, what does differentiate one from the other? I believe that the distinction is found in two things … where the money is kept and the amount of time that is expected to elapse before the money will be used.
Saving
Let’s talk about time as it relates to where we keep our money. Saving usually implies that the money will be needed in a relatively short period of time; for example, saving money for a new refrigerator or for a new set of tires for the car. Both examples imply that the money will be needed relatively soon, possibly within the next year or so. Since the money will be needed soon, it must be kept where it can be accessed quickly and easily; it must be a liquid asset. Since it will be needed soon, the saver cannot take risks that might lead to less money being available than will be needed; the asset cannot be subject to possible depreciation. For these reasons, some assets are far more suitable for savings than other assets.
Cash is certainly an asset that can be kept in a variety of locations. It can be kept in grandma’s old sugar bowl or under the mattress. Unfortunately, these carry the risk that the funds may be stolen since neither location is secure; and, sadly, there is no way these funds can grow since they earn no interest.
Suitable places to keep savings include savings accounts, money market funds, and certificates of deposit (CD’s) at their local bank or credit union. All three are low risk; i.e., the value of the account cannot go down. All three pay interest with CD’s paying a somewhat higher interest rate in return for the depositor’s promise to leave the money untouched for a specific period of time. All three are designed for the short-term storage of money. This is why they are good for saving.
Investing
Investing, by its nature, carries risk … the chance that the value of the asset might decrease … risk that there may not be enough money when it is needed. There are many kinds of risk which will be discussed in another article. For now, suffice it to say that the risk of loss makes many investments unsuitable for short-term financial needs.
Investments such as stocks, bonds, mutual funds, real estate, and real estate investment trusts (aka REIT’s) are much better suited to long-term financial goals.
Personality Types and Leadership – Part 2
If you are like most people, you’ve either met or heard of someone who just seems to attract others like a light bulb attracts moths at night. He or she is seen as being warm, approachable, magnetic. When there is work to be done, this person leads others into it with excitement and enthusiasm. COREMAP® calls these people Entertainers.
Entertainer Personalities as Leaders
Just as the Commander Personality brings specific skills to a leadership position, Entertainers bring skills that make people want to follow them; and makes the follower feel special for having chosen to follow this leader. To separate themselves from the not-so-great, GREAT Entertainer-Leaders are:
- Great Communicators – By their very nature, Entertainer Personalities have the ability to communicate their thoughts, their vision of the future, in clear and vivid terms. For these leaders, words are not merely “words” … they are tools that bring their experiences and vision to life … when properly put together and sequenced, they change mere music into the soundtrack of a dream come to life. For this person, the sky is not simply blue; it is a cerulean blue so bright that it hurts your eyes to look at it for any length of time.
- Good Listeners – This seems highly improbable since Entertainer Personalities love to talk! But, the fact is that great Entertainer-Leaders have learned that taking time to listen attracts followers; and, that having listened, they will be asked to provide feedback … they will be asked to talk and their audience will be eagerly awaiting their every word.
- Interpersonal Skills – Entertainer Personalities love to be the center of attention. Great Entertainer-Leaders take the time to interact with their followers and make themselves available … to have an “open-door” policy that is backed up with a welcoming, receptive attitude. Great Entertainer-Leaders have learned that to have an audience that is fully engaged with them, they must give their audience their undivided attention. When they are with you, they are with you; nothing and no one is permitted to interrupt or distract.
- Optimistic – No one’s life is free from adversity. The great Entertainer-Leader though has learned to find the silver lining in any cloud.
There are no road blocks to progress. Rather, these temporary obstacles are viewed as opportunities to be innovative; challenges that empower each of us to demonstrate how we can rise up to the challenge and create solutions. Great Entertainer-Leaders use this optimism to inspire those around them to accomplish things that the followers have never thought possible. - Create a “Fun” Environment – For the Entertainer Personality, life is to be enjoyed and lived to the fullest. The Entertainer-Leader knows that no one wants to slave away in a work environment that is dull, boring, and the days blur into a monotonous week in which nothing distinguishes one day from another. Consequently, the Entertainer-Leader is going to create an environment in which not only are organizational objectives attained, the wants and needs of each individual are going to be fulfilled as well … an environment that is upbeat, positive, and contains occasional surprises that make each team member smile and eager to see what the coming day will bring.
In Part 1, I stated that Ray was a Commander-Leader. He also had a lot of the Entertainer-Leader in him, too. Whether it was a sales contest that made each salesperson want to make one more cold call; or, an end of the day “sale-a-bration” in which everyone returned to the office after their last evening appointment for pizza, he was always finding ways to make working feel like play. He even found ways to make weekly sales meetings fun.
Anyone who has attended more than a couple of sales meetings knows that they usually follow a template that says, “I know you’ve sold something in the past but that is the past … go sell something today.” Ray’s sales meetings were different. He found ways to make them fun. While I did not witness this one first hand, one of his greatest sales meetings was held right around Halloween.
He had a casket delivered to the office and set up in the meeting room. Just before it was time for people to arrive for the weekly meeting, he laid down in that casket, folded his arms across his chest and closed his eyes. When the sales people arrived, they were ushered into the meeting room by his secretary who simply told them to sit down and wait quietly for the service to begin. They found Ray lying in the coffin and heard organ music playing softly. When everyone was present, his secretary closed the door letting him know it was time to start the sales meeting. While everyone sat there wondering what was going on, he suddenly sat up, climbed out of the casket, slapped his hands together and cried out, “Now that I have your attention … Now that you’ve thought about the permanence of death … NOW we’re going to talk about the miracle of life insurance!” When the meeting ended, everyone of those sales people walked out with a smile on their face, eager to share the miracle of life insurance with a prospective client. Obviously, Ray did not do this for every sales meeting; but, you can be assured that every member of his sales team looked forward to each meeting, wondering if today was going to be the day he grabbed their attention in a new and unusual way.
NEXT: Organizer Personalities as Leaders