The Street has a list of ten money lessons from March Madness that includes some really good points. I thought I'd highlight some and comment on them. Here's the first one:
4. Defense Is as Important as Offense
While offense is the exciting part of the game, defense is just as important to winning. A team with great offense but no defense won't last long in the tournament. Great defense can also make huge contributions to winning games by creating more offensive opportunities.
Creating wealth and investing it is the offense of personal finances, while protecting that wealth is the defense. Getting the proper insurance and creating an emergency fund are just as important to your financial health as creating the wealth in the first place.
The old saying goes that "offense wins games, defense wins championships." And it's true in money management as well. I've discussed this before in My Wife and I Make a Great Super Bowl Team.
And while insurance and emergency funds are important, The Street misses out on the biggest and best defensive step to help grow your net worth: controlling your spending. In fact, if you can play good enough defense in this area, you can improve your financial situation even if you don't play very good offense. Need examples? See Generating a Great Net Worth on a Small Income and How to Get Rich on $20k a Year.
6. It's Little Mistakes That Kill
More often, small mistakes made over the entirety of a game, rather than a single big mistake, will cause a loss. Teams spend hours working on fundamentals to prevent those little mistakes from happening. While a team with a lack of mistakes won't be noticed in a game, those teams that make a lot will be and will usually be found on the losing side.
It's just as important to work on the fundamentals of personal finance such as earning more than your spend, not wasting money on things you don't need and investing money for the future. Learning to work on those fundamentals day in and day out is essential to building quality finances.
This is really the key to success in personal finance in my opinion. Do the basics day in and day out for years and years. If you do this and are consistent at it, you'll become well off in the long term.
On the other hand, even small mistakes can derail your success.
10. Staying Calm Wins Games
March Madness games come with a lot of pressure. They are played over national TV with the best teams across the nation. For a team to win, it must learn how to respond to the pressure without panic and keep to its game strategy.
The same is true with personal finances. There will always be times when things go unexpectedly, and you will be under pressure to change from your game plan.
Having the patience and being able to remain calm when others would normally panic and make mistakes will not only help you survive these situations, it may even show you opportunities to improve your finances.
Boy, there's no better advice than this today. Those people who stay calm with their investments and their real estate holdings will likely emerge from the economic troubles our country is having with STRONGER finances than they had going into it.
I agree about "the little mistakes". Continually making little mistakes, wasting little amounts, etc, all adds up to one big problem eventually. And the advice about staying calm is right on. Keep a level head so you can actually use it to think in times of need.
Tim
Posted by: Tim | April 03, 2008 at 02:46 PM