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CFO Archetype

As you read this, some of you may be thinking that you are not that financially or mathematically knowledgeable, so how can I be a CFO?  I have known CFO's of successful businesses that did not have a financial background.  The key to their success as a CFO is that they took charge of setting the road map for the company while knowing how to ask the right questions and relying on other's technical knowledge.  For your personal finance, it is setting up and taking charge of your road map and possibly supplementing this with the knowledgeable advice from financial professionals. 

The CFO role is about taking charge of one's financial future.  People get in trouble by letting others control their finances without taking an active oversight role.  Over the years, there have been many investors left in ruins when their financial advisor with total control of their assets decided to leave town in the middle of the night.  Also, there have been millionaires who spent all their money because they expected their financial advisor to warn them if their spending habits got out of hand while their financial advisor got paid by keeping them happy and did not want to get fired for saying "no more".  Thus, even if you do not have a financial background, it is important that you take control of your finances.

The qualities of a good CFO are:

  • Takes responsibility for one's financial future
  • Knows when to invest in future (e.g., training, education, etc.)
  • Ability to control current expenses and to watch the bottom line
  • Asks the right questions when given advise

Every CFO will have some traits of a penny pincher and spendthrift.  Controlling the day to day expenses is a delicate balance.  In order to save, there has to be some cost control (penny pinching) so that expenses are less than income.  And, there has to be some spendthrift in the CFO as well because all work and no play (spending for fun) can lead you to getting burnt out.

It is blending the two that is the key.  Yet, we more typically come from one of these two traits (penny pincher or spendthrift).  These traits are driven by our emotions.  To overcome these traits the first thing that you need to do is understand where you have acquired these traits from. 

Penny Pincher

Being a penny pincher was needed for those who lived through the Great Depression.  As time passes, this generation is having less of an influence on today's society.  We can see this by looking back to the 50's and 60's when most people only bought what they could afford.   Credit cards did not exist.  In comparison, today many people buy what they want and putting a sizable balance on their credit cards.  The difference between buying what one could afford to buying what one wants can be seen in the sizes of homes these days.  Even with smaller families, the size of an average home has increased significantly.    We have transformed from being a nation of savers to a nation of spenders.

Penny pinching can be good in moderation.  Yet, when taken to extreme it can manifest lack.  Some examples are:

  • If you avoid going to college because do not think you can afford school you will never get ahead in life because you are not investing in the future.  Studies have shown college graduates make significantly more than high school graduates even after adjusting for the cost of college. 
  • If you are saving just to become a millionaire (with less emphasis on saving for retirement), this may lead to an emotional savings problem.  To save to become a millionaire, may mean that you are saving to enhance your self-esteem.  Many are striving to become a millionaire because it sounds so appealing.   It is one thing to save for a rainy day or for retirement.  However, when you save as a sense of accomplishment it is a never ending cycle.  Because once you become a millionaire, then what?  Many millionaires then say they only feel prosperous if they have $5 million.  You will still feel the need to save to prove yourself to others.  The goal may then change to having a boat or a fancy convertible.  It is like the size of homes today.  Once you get a larger home say 3,000 square feet, you may feel good for a few months.  Then your neighbor buys a 4,000 square feet home and shows it off, guess how you will feel?  You well feel lack, no matter what you have, it is not enough.
  • If you are saving by cutting things out that you love (a good cup of coffee or a morning bagel), things that you love, you may feel resentful latter on for giving up so much.  It is a problem some people approaching retirement have.  They spent most of their time raising their family while giving up vacations and golf.  Then when their children leave their house, they fill this sense of lack and have extra money now that their children are gone.  They start going on vacations again and join the local country club.  Thus, go from being penny pinchers to spendthrifts without even realizing it or realizing if they need to ramp up their retirement savings.  If we feel deprived, this will only last so long before we boom-a-rang to the other side (overspending).  The key is to first see where your priorities are (good coffee, retirement, a nice car, etc.), then cut those with low priorities.  If you give up what you love to save a few pennies, you will end up resenting it later by sabotaging your saving plan.  You may not decide to totally give up your morning coffee to save a few dollars.  Yet, you may decide to cut back to buying it only twice a week in order to not feel deprived.
  • Cutting pennies may not be enough when you are spending thousands on a lifestyle that you can not afford (with expensive cars and homes).  Unfortunately, many who are living over the edge can only easy cut out many of life's simple pleasures (like a cup of coffee or occasional night out) instead of cutting expenses marginally on larger purchases (like car and home) before they were made.

Overall, being able to save a few pennies is better than spending on a whim.  Yet, it should be done in balance with spending and investing.


The spendthrift is one who spends money like there is no tomorrow.  Some prosperity teachers believe that prosperity centers around how deserving one feels, prosperity comes to those who feel deserving (which it does to a point).  This logic is over-stretched though.  It continues to say that  in order to feel deserving, one should spend at the level of what they feel they deserve (e.g., to be a millionaire, one should live like a millionaire).  This is where marketers focus their energy on.   They want you to feel that you deserve their product (e.g., the sports car).  Their motto live for today and tomorrow will take care of itself. 

As Americans, we have moved towards being spendthrifts at the time we complain that we can not make ends meet.  According to the Washington Post, the average size of houses in America has increased 55% to 2,330 square feet from 1970 to 2005.  In addition, 36 percent of home buyers under the age of 35 rank having a home theater as important or very important.  At the same time, many families feel the need to have two wage earners to survive in this world and wonder if they will have enough for their retirement. 

Yet, a spendthrift has its advantages.  A good CFO knows when to spend.  CFOs need to spend on good investments such as educating its workforce or spending money on a new business venture.  He also knows that if he cuts too much of the extras (in either pay, benefits and fringe benefits) that the workforce may revolt at him being too cheap and decide to leave.  In our personal life, it is getting an occasional spa treatment or a new set of golf clubs to treat ourselves (and avoid our internal revolt that may lead to a weekend spending spree). 

Lastly, what we focus on (may) will expand.  If we are continuously watching our pennies then our focus is on lack and our lack will expand.  Saving on the morning cup of coffee to cut a few cents may lead to resenting the job that does not pay enough for us to enjoy the simple pleasures of life.  This resentment will then grow to the point where we hate going to work and it will expand to not getting the next promotion or losing the job because the manager does not want to promote those who hate coming to work. 


The key with these archetypes is to balance the energy.  We need to save for our retirement.  And, along the way we need to have fun and enjoy the fruit of our labor.  Yet, if we live high on the hog now, the hog may be lean for retirement.  The key is to find out what you really need versus what you want.  In looking at your budget, how much of it is really a want?  Remember, is a house or a car a need or a want?  To some extent cars and houses are a need when we are talking about basics, but many have bought a bigger house or a nicer car making it more of a want.  Then be grateful for what you have and for what you are saving to have a comfortable retirement.

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