Sports are a big part of American culture and American life. I enjoy watching sports myself, either on television or attending a live game.
My favorite sport to watch today is American football. In particular, I enjoy watching the National Football League (NFL). It is the most popular sport to watch in the United States today.
67% of all U.S. household with a television in use tuned into the Super Bowl earlier this year between the Los Angeles Rams and the New England Patriots. Now that is what I call reach.
The NFL is currently in pre-season. It is time to brush up on draft picks for my fantasy football team.
To my wife’s chagrin, when the regular NFL season starts, I am usually out of commission for a good part of Sunday glued to my television watching the Sunday football games.
A majority of American kids grow up playing sports. 75 percent of boys in the United States and 69 percent of girls participate in organized and team sports according to a 2008 report conducted by the Women’s Sports Foundation.
Many schools focus on athletic achievements in addition to academic accomplishments in American high schools.
College sport is a billion dollar business with some colleges pulling in 9 figures in sports revenue.
There are many benefits to sports from developing healthier youths to team building to instilling a communal feeling amongst fans.
The Sport Of Personal Finance
Wouldn’t it be great if personal finance received as much love as sports in America?
Imagine a world where over 70% of the children talk about the power of compound interest or the difference between an equity and a bond for a couple of hours each day after school for 3 days a week.
Unfortunately, that is not the case. It is very telling of the state of Americans’ focus on personal finance when only 40% of Americans can cover an unexpected $1,000 expense.
But, there are a lot of similarities between sports and personal finance. There are many things in common between sports and personal finance. There is a reason why I named this site the Sport of Money.
If you grew up playing sports or currently follow sports, review the similarities below. Hopefully, you can grow to enjoy personal finance as well.
Just Like Sports, Personal Finance Is Measurable
A .350 batting average in baseball, a 92% free three percentage in basketball or a 70% completion percentage in football, those numbers paint a picture of how well the player is doing.
You can tell if a player is performing well or struggling because sports are measurable. Statistics of player performance tell the story.
Personal finance is the same way. You can come up with the batting average equivalent on how many positive money making investments you’ve made vs. the ones that didn’t pay off. Hopefully, that average is better than .500.
There are numerous measures you can keep track of in personal finance: dollars earned this year, amount saved on a monthly basis, annual returns and total returns on your investments, returns by assets, cash flows, how long it takes to invest your cash, monthly spending, etc.
If you want to do well in personal finance, start tracking the important performance metrics for you. You can then set measurement targets to help you improve your personal financial situation along the way.
It is establishing goals and then adjusting your actions and behaviors to reach them.
Treat it similar to how a golfer wants to lower her score by 2 strokes. She will spend a lot of time thinking about how that can be accomplished, and then practice to make it happen.
This can apply to your personal finance as well.
There Is Score Keeping In Sports So That You Know Who Is Winning And Who Is Losing. The Same Is True For Personal Finance.
One can tell which team or person is winning the game or won because there is score keeping.
The New York Yankees blanked the Boston Red Sox with a final score of 8 to 0. Tiger Woods won the Masters with a final score of 12 under.
There is a definitive team that won and a team that loss after each game because of the final score.
There is also score keeping in personal finance, especially if you try to achieve financial independence. The score to keep in order to achieve financial independence is your passive income number.
You want your passive income number to be greater than your living expenses. If the passive income number is greater than the living expenses, then you are winning the game. If the expenses are greater, then you are behind in the game.
Once your passive income can generate enough cash flow to cover your living expenses forever, then you have won the game.
Just like sports, you can also keep score in personal finance to determine if you are winning or losing.
In Sports, One Needs To Lay The Foundation, Practice A Lot and Need Time To Be Good. The Same Can Be Said For Personal Finance.
No one is born knowing how to swing a club, skate on ice or backhand a tennis racket. It takes great practice, effort, and time to get to be good at a sport.
No one is born knowing about personal finance: how to earn money, what to do with money, budgeting, investing or risk management. It will take time to get educated. Then comes the practice and effort on applying what you have learned.
For instance, if you want to do well in rental property investing, then research how to source and purchase rental properties. Understand the pros and cons and the level of work involved.
But reading alone won’t be useful. It’s the same reason why basketball players take shots after shots at the free throw line during practice. Reading about how to throw a basketball into the hoop won’t make anyone a better free throw player.
You need to then put it into practice and take action. Actually go out and source a property, buy it and deal with being a landlord firsthand. You will learn more from doing than from all the reading in the world.
A person I know built a real estate empire of over 30 properties. But he did not do it overnight.
This also means that it will take time for you to be good at personal finance.
In Sports, People Play To Win And Competition Is Fierce. In Personal Finance, Many People Want To Make Money And The Competition Is Fierce.
There is only 1 winner in the US Open tennis match, 1 winner in the Masters, 1 Super Bowl champion and one World Series winner in a given year.
Many people or team try to be the one to win it all and competition is fierce. In order to win, you have to outlast, out work and out play all others striving for the same thing.
The same can be said in the personal finance world. When you search for investment deals, there are many people on the hunt as well.
You will face stiff competition if the investment is a good deal when you can get good value for the cost. People are consistently looking for good deals.
There are professional money managers consistently searching for good investments. There are professional real estate investors looking for a great real estate deal. Those people do nothing all day but to focus on sourcing and making a buck on their investments.
In order for you to come out ahead, you also need to either put in more work (get educated, run analyses of investments, and then execute), move faster, are willing to invest in areas others have no interest in or are smarter than everyone else.
That is a tough ask but, just like in sports, if you want to win, you need to put in the effort and beat all the competition.
In Sports And Personal Finance, In Order To Succeed, One Need To Be Flexible
Conditions are always changing in a game. That is the reason why a quarterback who can read a defense at the line of scrimmage and can audible to the highest percentage best play is so valuable (and also so hard to find).
In order to be successful in sports, an athlete needs to be flexible, not only physically but mentally. The athlete needs to know how to adapt to a changing situation such as changing of the wind in a golf tournament, dealing with a mid-game adjustment in defensive scheme in an NBA game, or playing with a shadow over half the court in Wimbledon.
In personal finance, flexibility can lead to success as well. The financial markets are constantly changing. What might work in the past might no longer apply today.
That is why flexibility is so important in order to do well in personal finance. Investing in a CD back in the 1980’s might result in a 10% return, but those days are long gone.
If you still want to obtain a 10% return, you will need to look into other asset classes.
Also, when looking at real estate investment, you have to be flexible in working with the seller on a number of different items including what do to with current tenants, needed renovation, dealing with code violations and other aspects of a deal.
No One Can Win Alone In Sports, Same Goes For Personal Finance
Obviously, in a team sport, no one can win it alone. But maybe less obvious to some, the same applies for a sport where it is a team of 1 competing to win it all such as in tennis, golf or track.
There are technical coaches who help out with techniques and pointers on how to improve the swing for a golfer or the backhand of a tennis professional or how to explode out of the block for a track runner.
Don’t forget the nutritionist, medical professionals to help with minor sores and injuries, weight and conditioning coaches, and practice partners.
There are a lot of people athletes depend on for their success.
In order to be successful in personal finance, there are also a lot of professionals you can go to for help and to advance your financial standing.
There are professional money managers who can help with managing your assets. Mortgage brokers can help with obtaining cheaper financing. Tax accountants can provide sound tax strategies to help keep more of your money in your pocket.
Just know that similar to a player in sports, many people are needed to be successful in doing well financially.
When The Game Is In Hand, Protect The Lead And Don’t Do Anything Stupid To Lose It
If you are up 28 to 3 in the Super Bowl with one and a half quarters left in the game to go, such as the situation in Super Bowl 51, when Atlanta was beating New England by that score in the third quarter, you have to protect the lead and don’t do anything stupid to lose the game.
Atlanta should have been more conservative in their plays, run the ball more to burn out the clock, and do everything to prevent a turnover. However, Atlanta didn’t do that. They continued to be aggressive in their play and that cost them the Super Bowl.
Not only did Atlanta not show any flexibility in their game play and continued with their aggressive offensive playing style even when the game was firmly in hand, they weren’t mindful enough to protect the lead and took an unnecessary sack and an interception to lose the game.
The same can be said for your investment in personal finance. Once you have won the game and have achieved financial independence (FI), there is no need to continue to take unnecessary risk with your investment portfolio.
The key once you are FI or rich is capital preservation. Do not lose the money already earned and accumulated. There is nothing worse than to spend 10 years building up your nest egg and then 1 or 2 bad years of poor investment decision in wiping all that away.
Once you have achieved your financial plans, protect your assets and don’t do anything stupid to lose them.
To The Audience: Do you agree there are a lot of similarities between sports and personal finance? Are there any other similarities I might be missing? Why are people so interested in sports in America but not so much in personal finance?
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Many people work hard to better their physical and mental health. What about their financial health?
I started this blog back in 2019 to help people better their financial health as well.
My financial journey began with tens of thousands in student loan debt. Over the span of 20 years, I am close to achieving financial independence.
I truly believe anyone can get to strong financial health. Hopefully, this blog can help you on your financial journey to greater wealth and financial independence.
You can read more about me here.
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I do agree that there is a lot of similarities between sports and finance.
One way it differs though is in personal finance we can all be winners if we choose to (I define winning in this arena as having enough money where you can retire without diminished lifestyle). It takes a lot of hard upfront work to get there (high savings rate is the big one) but if everyone can do that then multiple wins are possible.
Right – in personal finance, it is not a winner-take-all scenario.
Great post! I, too, am a super-fan of NFL football. Now that I’m 52, I’m not sure why, but I can’t deny it. I really enjoy watching. It’s kinda silly when you super-analyze what you’re watching, though.
I have only one slight disagreement with you on this post. While training and practicing are SUPER important, and you 100% can improve from where you’re at, I *do* believe some people are born with un-explainable natural talent. And in the same light, some people are born “natural savers”. They see money a bit differently. The “light comes on” a bit quicker for some than others, and some never seem to see it.
I have an interesting money situation going on with my wife’s sister (SIL) and my mother-in-law (MIL). My MIL’s financial life is on fire (in a bad way), and my SIL doesn’t see it. We’ve been REALLY pushing my MIL to save all she can for next 5 years (she’ll be 70)… she has 35K in savings. No, not 350K, and definitely not 3.5M… 35K (ie. practically nothing). My SIL, who we’ve had many “savings” conversations with thinks we’re being too hard on MIL, and we should let her “live a little”. Now my wife understands the financial emergency my MIL is in, but her sister really seems to be oblivious. And my MIL also doesn’t really see the emergency she’s in… she recently asked if she could take some money out of that 35K savings to take a small vacation. (sigh)
So, no, I’m not sure people can learn. In the same way that I’ve seen my own mental blocks towards some subjects, I think some people may not be capable of seeing money issues even when it’s dire. I think this may be the subject of my next post!
I do believe there are natural propensity of some people to be savers, no different than some people are better suited for basketball because of their height. But “natural talent” can only take one so far without the training and practice. With the right education, training and practice, even non-natural savers can save a lot.
Not all 7 footers are NBA caliber basketball players. On the flip side, just because someone is 5’3″ doesn’t mean the person couldn’t spend 14 years playing in the NBA (Muggsy Bogues).