Finance vs Economics – Top Differences and Career Paths

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friends today we are going to have a tutorial on Finance vs economics and
which one is better every student who is going in who is
about to offer finance or economics he always is in is in dilemma that which
one is better so we are going to talk about that over here see if you're an
aspiring student or are simply curious about the differences between the
finance or economics then this article or this tutorial will aid you in meeting
your curiosity see in simple terms economics and finance are just two sides
of one coin so if you want to succeed in finance you need to know economics as
well economics is more about finding the
equilibrium point of demand and supply understanding the average cost and
marginal cost finding differences between the fixed cost and variable cost
and many such theoretical concepts finance on the other hand is right
extension of this concepts does it's often being seen that people who have
made their mark in finance have often had economics as a background see more
scrutiny economics create the foundation on which the finance builds the house so
if you want to be finance professional you need to know the economics well to
understand the complexity and vastness of finance in this tutorial we
will look at each of this disciplines separately and then try to compare
between two so that you can make an informed decision in regards to your
career let's begin we'll start with the finance versus economics as a part of a
difference and let's see how we can go about with things so let's get at the
excel and we'll write over here as a point of comparison and over here as
finance and over here as economics so once we write this we can start with
1st is the branch that we are going to compare so in which branches it has been
divided so if you talk about finance it is divided into corporate finance
quantitative aptitude we are talking about finance over here
so it includes quantitative aptitude quantitative analysis accounting the
management accounts risk management financial analyst and fixed income and
derivatives but if you talk about economics then it includes
macroeconomics and microeconomics now let's see the second point of difference
that is known as your career option which is the career option which what
are the career option that you can offer in finance and economics in
finance you have investment banking corporate finance equity research
private equity risk management quantitative analysis project finance
and technical analysis but if you talk about economics as a part of this then
you have statisticians strategists risk management analysts operational research
analysts insurance underwriters and budget analysis the third is the part as
education what sort of education you require so if you talk about education
then you require bachelors in finance again in accountancy if we talk about
finance and you have economics mathematics MBA you have a lot of degree
like cfa frm PRM CFP SEMA CMA ACCA CP and so on and so forth but effect for
economics you have bachelor's degree in economics master's degree in economics
and PHD now the fourth is which are the top forms that are involved in this
without the top firms they are Blackstone Goldman Sachs in company
Morgan Stanley for finance I'm talking about Bank of America Merrill Lynch
credits worse Citibank Deutsche Bank HSBC UBS and JP
Morgan Chase and company but if you talk about economics mostly top firms that
hire economics graduate include the list of the top finance and business firms
additionally economists are hired by marketing HR retail e-commerce companies
now let's talk about the other point of difference like what is the work-life
balance so if we talk about work-life balance then in the first scenario
finance it depends on which sub-domain in finance you are working for
investment it's brutal a query research is still ok
by side analysts have a balance work life depending on the area you may have
to work around 10 to 18 hours a day but if we talk about economics then you have
a balance and much better than the financial analysts and work is not
urgent all the time de all the time of the here now let's talk about another
point of difference is the travel see if we talk about finance mostly they are
not required to travel much you can safely assume that 90% of the time is
spent on office okay and over here in economics also not much of travel is
required for economists let's see which are the key words which comes into
picture so I'll write key words so the key words over here are financial
modeling in finance financial modeling basics valuations M&A MPN NPV
that is net present value and IRR but if the key comics word in economics are
macroeconomics microeconomics GDP inflation fiscal policy exchange rate
currency crude commodities aggregate demand and supply real versus normal an
elasticity and saving and investing let's talk about the eighth point that
is the exit of for Trinities so let's talk about exit opportunities and we
have something over here see depending on the chosen area of interest there are
some amazing exit opportunities with the finance sector for example investment
bankers move into private equity or research side site in analyst moving
into buy said analyst profile let's talk about the other part as a part of
economics see they include exit opportunities as economic consultant
financial analyst statistician and actuals now let's see things in terms of
networking opportunities ok networking opportunities are is a major
thing for any business for any profession without that it's not
possible to grow see mostly work within the finance industry alumni network is
strong but not varied as found in the consulting but if we talk about
economics not much limited within the domain and alumni network is available
to you so let's see what is the outlook now so if
you talk about the outlook then job opportunities across finance domains
like like you to choose you need to learn financial statement analysis
financial modeling in valuations project finance quantitative finance risk
management investment analysis and many more but if we talk about the outlook on
economics huge demand of economists in the consulting firms private banks as
well as the public sector is been seen so finally let's look at the outlook
economics and finance are two different disciplines on the basis of the scope of
the work of course they are not interrelated and no matter what you
choose you would occasionally need to refer back to some parts of both these
subjects once in a while but they're different let's understand how different
they are in simple terms economics is a social science that helps in management
of goods and service subject to the production consumption and other factors
directly or indirectly affecting them basically there are only two types of
economics that you need to know microeconomics and macroeconomics if you
talk about microeconomics it talks about the single unit or a business and
macroeconomics deals with an industry as a whole there are huge amounts of
economists in the consulting firms private banks as well as formed except
up on the other hand finance is also a science of managing funds subject to
three main factors time risk involved in the transaction and liquidity so there
are many branches of finance and as you go deep in the subject you will realize
that there are more things to learn for example you would start with corporate
finance to have your fundamentals strong then depending on whichever field you
choose you need to learn financial analysis financial modeling and
valuations project finance quantitative finance risk management and portfolio
management investment analysis and many more so many people confuse finance with
accounting but finance is much worse than accounting to learn the
fundamentals of finance you need to have a basic understandings of accounting but
the scope of Finance is much more than accounting if you are good in maths and
logical reasoning you'd be able to make your mark in finance field now new ideas
are born out of two separate but different ideas so if you want to do
well in finance or economics it's better than you learn the basics of the others
for example if you decide to go for financial domain the
basic knowledge in economics will help you understand complex issues and you
will be able to connect to separate ideas and form concepts while stunning
on the other hand if you decide to go for economics it will definitely help
you if you know the fundamentals of finance even as an economic student you
will get to know the practical aspect of how forms work in real world now let's
understand the education that is required in finance versus economics so
if we talk about finance the world is of Education is vast but still there is a
basic structure you can follow if you want to enter into the world of
economics of finance let's talk about the economics first see being an
economist is a great profession of course there are some there are
basically there are basically some things you may dread like repertory
research depending more on theoretical dimensions then taking practical
approach however once you've become an economist you could your growth would be
dynamic and if you wish to learn and be a better economists top of the curve you
would get all the opportunities to do so but what you need to do to be Caramanica
to become an economist do you need to follow any basic structure the answer is
yes absolutely yes so now there are two things the first one the first thing you
need to decide what you want to become a top-notch economist or a professional so
a top-notch economist is like you are in in the league again and in organization
who looks at the profession to earn for his living so let's say you want to
become a top-notch professional so you need to earn your bachelor's degree in
economics where you will study business management and economics but to be a
top-notch or better to say top 10% of the economists in the world you need to
power of you need the power of knowledge so you need to go for the master degree
in economics as well which you will be able to and then finally it's better if
you earn a PhD as well once you are a PhD your opinions and judgment would be
valued much more than a passionate agree holder or a master degree holder so I'll
show you a chart that looks at the career requirements of an economist now
as you can see the career requirements the degree level bachelor degree
required most positions in the private sector sector and academia require a
graduate degree degree field is a can the experience is internships are really
helpful if you have any such sort of other skills that will be really good
the computer your spreadsheet software off the software and statistical you
know you need to be good with the MS Office the key skills math analytical
and writing skills the salary is close enough to the median of 95710 close enough to one $1,20,000 median of
all the economists now the finance professional is much diverse than
economics profile even many economics graduate often go for finance domain
because they feel that they want to explore more of the practical aspect of
the business then devising theoretical model so if we want to go in finance
domain what would be your education requirement let's have a look at the
diverse opportunities the basic thing about finance is that the first you have
to have your bachelor's degree it's always better if you complete your
bachelor's in finance accounting economics of mathematics this subjects
can be foundation for your future course of action so there are many options from
the merit of opportunities you need to decide which direction you want to go
now I'll tell you each and every one if you want to get into as if you want to
work as an investment a professional investment professional then in that
particular scenario if you want to go for investment profession the best thing
is to do is to go for CFA CFA exam will not only equip you to becoming an
investment professional but will also help you to become an expert in
investment analysis market analysis and in how to pick the right investment
opportunities for your plans now if you want to become a management professional
let's say if you don't want to be an investment professional but you want to
be a management professional then in that particular scenario you can also
choose to become a management professionals but right by doing MBA in
finance from a reputed college or university so if we can if we can start
pursue you and be a degree from a top-notch university you would be able
to get into Investment Banking profession or corporate finance of any
large corporations and after doing MBA you will become more of a business
professional then a core finance professional now if you want to give if
you were if you want to go to risk management as a risk management
professional then you can choose to go for frm exam CRM exam
erm that is energy risk management and many more the sort of risk management
courses like actuaries you can become a risk management professional within a
few years of constant learning and practice now if
you want to go as an accountant then in that particular scenario you can also
decide to go for CA that is chartered accountant CPA and or any other
accounting courses to become a public accountant or else you can join a
private bank as well so as a finance professional the opportunities are
endless the above are the most sought-after
and this are the courses students should choose the most you can also go for the
courses like CS that is company secretary ship Cost Accountant
management accountancy etc now what are the primary tasks and roles of in
finance and economics if we talk about the rules in finance and economics then
let's talk about the main responsibilities of an economist in
finance see the primary tire task of an economist is that even if it seems that
economists is mostly dealing with the theoretical jargons however she also
needs to analyze and interpret a huge sample of data let's look at the primary
task of the economist he 1st economist main work revolved around
around giving advice's to the various stakeholders in regards to economics
they also need to gather the data comprehend various sampling techniques
to conduct surveys and creating different economic metric now once
the forecasting is done they need to analyze and interpret the trends and
come to a conclusion of how the form strategy needs to be change if at all
and finally hurt you the duties the duties also includes writing various
technical and non-technical reports to send across to the top management so
that they can take proper actions towards changing product policy
sustainability of business and many such other factors so an economist also needs
to give Various presentation on on the research analysis and interpretation of
the top management executives so that they can make informed decision about
the business what are the primary duties of the finance professional let's
discuss that see now finance profession and profession is very very diverse and
as a student can choose different profession in each profession would have
different key tasks it is difficult to pinpoint
only few primary tasks for all of them so we will give like a brief overview of
the primary tasks of a financial management professional the primary
tasks may be different in case you may choose to go in any other finance domain
let's talk about the primary tasks of finance management profession the main
responsibilities the finance management professional is to
is to source the funds from the market it may be in the form of direct loan
from the financial institutions or conducting IPO if it is if it's the
first time or sending more shares to the existing and new shareholders or more
funds once the funds are arranged it's time to investing money in the business
so this is also a huge concern for finance management professional they
need to know exactly where to invest so that the business gets maximum ROI from
the investment so if the business makes profit how to distribute the profit if
at all or to plow back or for in reinvestment in the business should be
one of the most important duties of finance management professional finally
the finance management professional needs to needs to read report or present
his finding to the top management to get the approval so that he can go ahead and
carry out his primary responsibilities let's see the work/life balance in both
of them and let's see what is in one that work-life balance as you've already
discussed see usually the economists have a greater work/life balance as they
work acts as a support to management decision that does not mean that the
work of the economists is not important how it does not need to be urgent all
the time throughout the year in case of the finance professional if you talk
about then the work-life balance varies from the profession to profession for
example if you are an investment banking professional your work-life balance will
be none and your you won't get Vicens to rest and spend time with your families
even some days you need to spend overnight at offices to meet the
requirements of the clients on the other hand if you're an equity
research analyst you will achieve a good life work/life balance and you will also
get an Impala fortune to spend your weekends with your inner circle or work
pressure is usually much more lesser than investment liking professionals so
the work-life balance depends on which finance domain you pick as a profession
see you can see as an investment banking in the jobs now let's see the
compensation part if you see this is the most important thing because everyone is
always concerned regarding this particular thing if you see the
compensation then we'll have a look at the compensation of the economist and
finance professional according to the and an economics an economist
earns around close enough to one twenty one three fifty seven dollars for annum
as an average salary so you can understand the
the P is amazing let's have a glance of the chart and get an overall idea about
the compensation of an economist now if you see the median salary then in in
case of economists the median is $121,357 that we have already discussed if in the
lower end then the 10% side is 86 94 25% 100 072 to 751%gets around 148
748 and 90 percent around 173 686 so from the above chart it's clear that if
you can reach up to the top 10% of the curve as an economist you will earn
around 173 686 okay and now let's look at the compensation of the finance
management professional if Z the salary of the finance professional the median
is close enough to 84800 and you can see the salary
is between the median number seems to be really good the salaries above 100 K the
bonuses are good the profit sharing czar and you can see the total pay is about
128 in between 45 so from the above table chart it's clear that you know the
finance management professional earns around 484 thousand eight hundred per
annum on an average and it's just revolving around one dimension of the
compensation we will try to look at the different aspect of it and that that is
experience wise compensation let's have a look at that if you see over here this
is the pay by the experience level for the finance managers if the entry level
you're starting is close enough to 70 K and then it goes on and above as you
reach to the 5 to 10 years then you reach around 90 K as you go about if you
have experience of 10 to 20 years you reach around a hun100 K or close enough
to 100 K and then after on the late greater than 20 years of career then you
go down so let's make the final conclusion of Finance versus economics
see finance and economics are very different in terms of career skills exit
opportunities etc so typical economics graduate needs to complete masters and
PHD to get the excellent career opportunity however finance graduates
can complement the graduation by taking certification courses like cfa frm PRM
to boost the chances of climbing up in the finance career there are some how
focused on options economists however in finance there are broad varieties of
choices to choose from so opt one that interests you the most
so that's it for this particular topic if you have learned and enjoyed watching
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