Adventures in Personal Finance

I love the Olympics so it was just a matter of time before I started seeing parallels between downhill skiing and personal finance. No, really. A lot of the qualities that make these astounding athletes so successful would translate into financial success as well. Let’s take a look at a few Olympic sports and see how it compares to money management.

Downhill skiing: Feels like the stock market to me. A lot of ups and downs. And if you don’t know what you’re doing, you’ll end up in a heap at the bottom of the hill. The successful skiers know what they can and can’t do. They’re fearless and push themselves to the edge. But long hours of training give them the knowledge they need to make the best decisions when it comes to risk-taking. 

Take-away: If you play the stock market, train hard. No, this doesn’t mean getting on the slopes. It means studying the markets, reading the Wall Street Journal, and staying on top of economic trends. There will be ups and downs, and if you can’t handle the risk, put your investment money elsewhere.

Figure skating: This feels a little like reading the fine print on your credit cards’ disclosure statements or making sure you balance your checking account. This is a very detail-oriented sport. The skaters lose points for things I can’t even see when they’re skating. But when I see it in slow motion–and the announcer tells me what to look for–I see it.

Take-away: If you don’t pay attention to the details, you’re going to lose money and you won’t even know it right away. For example, if you’re being charged inactivity fees on your credit cards and you don’t know it, you’re giving your money away. Pay attention to the details of your financial life and you’ll prevent a lot of wasted dollars.

Curling: Feels like an IRA to me. Curling is like the Olympic version of your favorite restaurant’s combination platter. I see traces of pool, shuffle board, hockey, and marbles (the stones they use remind me of giant marbles). The games are long and it takes a long attention span plus skill to win.

Take-away: Building your retirement takes a long time. And if you don’t keep paying attention and notice trends, your IRA might lose value. Not that everyone could’ve salvaged their IRAs in the recent economic meltdown, but paying attention to the market over the long haul can help you make better decisions about where to put your stone, um, money.

It’s that time of year that brings either joy or sadness to a baseball fan’s heart. Joy if your team is heading toward the playoffs, sadness if you’re already out of contention. I’m a huge baseball fan (Atlanta Braves) and lately I’ve been thinking about the similarities between baseball and money management. Oh, and just for the record, my Braves recent swoon in the wild card hunt is not indicative of my money management skills. Just sayin’.

Okay, here are 6 ways that I think personal finance is a whole lot like baseball:

1. Grand slams are rare. Isn’t it great when your team scores four runs with one swing of the bat? It’s also great when you win the lottery. Or when you have stock in a private company that goes public and your net worth triples. But counting on the lottery or on a big return from one investment isn’t a good strategy. Play every inning with sound fundamentals and don’t wait for that one big hit–or financial windfall.
2. String together enough hits and you’ll score some runs. If you don’t get the improbable grand slam, you just need to keep getting hits. Put together several hits in an inning and you start scoring.  Successfully saving money happens when you’ show self-discipline over time. You consistently save and spend wisely. Don’t wait until you’re 70 to try and get some hits, er, save some money.
3. Striking out isn’t the end of the world. Striking out is better than hitting into a double play, right? You’ll have some hits and you’ll have some misses. This is especially true if you tend to be adventurous with your investments.  Brooding about what could’ve been is a waste of energy. And it distracts you from thinking about what your next steps are if you need to recover from a financial loss.
4. Sacrifice flies are a part of the game. A player is sometimes asked to hit a sacrifice fly to get a runner over to the next base or to score the runner from third. The player makes an out, but it’s done for the good of the team. Sacrificing some funds for the good of others is sometimes necessary. Maybe a family member is having a health crisis and you need to help out. Or your child picked an expensive, private college (yep, I have experience with this one). There are times when unbudgeted items take away some of your savings. But when you make a sacrifice, you’re creating good karma. Yeah, self-discipline is important, but good financial karma rocks, too.
5. Curve balls are hard to hit. Many a major-league career has been stymied by the player’s inability to hit a breaking ball. If you’re a pitcher, developing a nasty curve is a huge advantage. When it comes to managing your money, use what you know to your advantage. And if there’s something about your finances that you don’t understand, make sure you learn it. It sounds corny, but knowledge and expertise make you financially empowered.
6. The season is a marathon, not a sprint. Baseball seasons are 162 games long. To succeed, it takes a lot of stamina, self-discipline, and focus. The team that has talent and stays focused is a team that makes it to the playoffs. Investments such as IRAs, or even the stock market, are marathons, too. Heck, putting money in your 529 plan takes a long-term viewpoint. Stay the course and by the time you get to retirement, you’ll be in good shape.