On February 4th, 2018 the Twin Cities will host the 52nd Super Bowl at US Bank Stadium. Regardless of who wins that day, there is a lot that can be learned from teams and players that are at the top of their game.
Following are 5 financial planning lessons you can learn from a Super Bowl champion.
Define your goals and develop a plan to reach them. I have never played team sports. So I don’t know exactly what a coach tells his team at the beginning of the season. But I am pretty sure, he doesn’t say, “Just work hard and we’ll see what happens”.
More likely, he says something like “OK, our ultimate goal is to win the Super Bowl, but first we have to make it to the playoffs. So, here’s what we are going to do…”
A good coach has a goal and a plan to reach that goal.
A college education can cost $100,000 or more these days. To live off your savings in retirement, plan on saving $1,000,000 or more.
Those are big numbers and big goals. To reach them you will need a plan.
According to Henriette Anne Klauser, author of Write It Down and Make It Happen, writing down your goals is the first step towards defining what you want and making it happen in your life. Even a simple financial plan that includes written goals and specific action steps to reach those goals increases your odds of success greatly.
How much do you need to set aside for retirement each month? What return do you need on those dollars? What’s the best way to pay for college and save for retirement?
Whatever your goals may be, write them down, develop an action plan to meet them, and review your progress regularly.
A strong defense is critical. They say the best offense is a good defense. In football, you can score all the points you want, but if the other team scores one more, you lose. Without a strong defense, winning is much more difficult.
That’s true not only in sports, but with your financial plans as well.
Fortunately, your financial goals aren’t quite that cut and dried. If your goal is to save $1,000,000 for retirement and you come up with $999,999, I think you will be OK.
Nevertheless, what plan do you have for when the stock market goes down or an investment goes sour? What’s your plan when you or your spouse get injured or sick or worse? What defensive strategies do you have in place to make sure your financial plan stays in tact and that your ability to reach your goals isn’t wiped out forever.
Develop a strong defense for your financial plan by making sure you have the right amount and right type of insurance, creating an asset allocation strategy that will survive the next market crash, and having adequate cash reserves to handle the next emergency that comes your way.
You have to take some risk. A football team can’t run the ball all the time. Sometimes they have to put the ball in the air and hope (maybe even pray) their guy catches it.
Bank CDs, money market mutual funds, short-term bonds, guaranteed investment accounts all have their place in a diversified investment portfolio, but if you want to reach your long-term financial goals you are eventually going to have to put the ball in the air. For most of us, that means investing in the stock market.
The risk in stocks can be dramatic. An individual stock can lose 100% of its value. Even a broadly diversified stock mutual fund or index can lose half of its value or more. Nevertheless, stocks or stock mutual funds are an important part of your long-term investment plan. Without them your chances of making it to the end zone are unlikely.
Assess your risk tolerance, review your investing time horizon and consider using riskier asset classes like stocks for at least a portion of your investment plan.
Reframe your thinking. Every year brings a fresh start to the new sports season. Some teams believe they will end the season as champions. Others simply hope to make the playoffs. The difference between success and failure often comes down to how you think and the messages that you tell yourself.
I wonder how many people fail to go to college because they believed or were told (wrongly) that they weren’t good enough or that they couldn’t afford it.
Have you ever cashed out your investments because you thought the system was rigged or that the government was out to take your money?
Likewise, how many of us have told ourselves that we will never be able to retire?
Maybe you have never experienced these ideas, but I know plenty who have.
Reframing how you think makes the impossible seem possible, and increases the likelihood of reaching your goals. Michael Hyatt, NY Times best selling author of the book, Your Best Year Ever suggests replacing limiting beliefs with liberating truths.
For example, a limiting belief would be “I will never be able to retire (so why try?).” A liberating truth would be, “If I pay off my debts and consistently save 10% or more of my income, I will be able to meet my needs in retirement”.
Another limiting belief: “The stock market is rigged.” A liberating truth: “I can’t control the market, but stocks have the best chance of giving me the returns I need to reach my goals.”
What are your limiting beliefs? How can you reframe them to become liberating truths? Reframe your thinking and set yourself up for big wins in your financial life.
Pay attention in the second half. Football games are often won or lost in the second half, sometimes even the final seconds of the game. Putting points on the board is only half the battle. To win you also need to hang on to your lead and make smart choices until the clock runs out.
Accumulating assets to meet your college and retirement goals is the first half of your financial game. Real success is often found in what I call “the second half of the game”. Minimizing taxes, making smart beneficiary choices for your retirement plans, and ensuring the proper transfer of your estate after you die is just as important (maybe more so) than accumulating a large account balance.
Accumulating $1 million in your 401k is a major accomplishment, but if you lose half of it to income taxes when you die or if you if your children lose their inheritance because you never updated your will and trust documents, what took you a lifetime to accumulate can become a lot less meaningful in a hurry.
Likewise, getting straight A’s and perfect score on the ACT are fantastic accomplishments. But if your student chooses a school that offers no merit-based financial aid, you could spend $100,000 or more on unnecessary college expenses.
Review your will and trust documents, update your retirement plan beneficiary designations, be tax efficient with your retirement savings, and find colleges that are a good financial fit for you and your student.
Smart financial moves now will help ensure that you reach your financial goals and experience the thrill of victory, not the agony of defeat.