Now that March Madness has ended and we crowned a champion in college basketball, teams will begin their off-season While this might include a few weeks off to rest and recover, many players will be hitting the gym to start preparing for next year. We as spectators only see the games. We don’t see all of the hard work that is done behind the scenes. As a result, a seasonal sport, such as basketball, really spans the course of an entire year.
Our financial life is the same. We just can’t pay attention to our spending six months out of the year and expect to meet all of our financial goals and dreams. Because of this, I am listing a few observations I took from watching all of the games during March Madness and applying them to our finances to help keep you motivated.
Every year, lower seeded teams knock off higher seeded teams. This year’s surprise team was Florida Gulf Coast, which knocked off Georgetown and San Diego State. Unfortunately, their run ended there. But every year, we find other upsets. What can this teach us about our finances? That the unexpected does happen. As a result, we need to have adequate insurance coverage should we get into an accident or have a healthy sized emergency fund should the hot water heater go and we need to replace it. We never know when we might need the emergency fund or insurance, but it’s important to have because life happens and sometimes, it’s costly.
Long-shots Rarely Pay Off
As I pointed out with Florida Gulf Coast, the long-shots rarely make it to the championship game and win it all. The last time this happened in college basketball was 1985 and Villanova. That was close to 30 years ago! This relates to finance in that risky investments rarely pay off, so don’t bother wasting your time or money investing in them. If you find yourself needing to invest in them, do so in a “play” investment account. This is an account that has a small sum of money that you are comfortable with losing it all. It should not factor in your long-term planning and you should not have a play account until you are in good financial shape.
The Best Adapt
Throughout the tournament, teams face all sorts of different challenges. One game it could be a pesky defense, the next a hot three point shooting team. In order to survive and advance, they must adapt or they are going home. You have to adapt to changing market conditions. The stocks market is going to rise and it’s going to fall. It’s also going to go sideways sometimes for a while. The key to roll with the punches. You can’t be jumping in and out of the market all of the time. You need to develop a long-term plan and stick with it. If the market is dropping and you can’t handle it, turn the TV off and focus on something else. In time, the short-time volatility will pass.
Focus on One Game
In order to survive and advance, you have to focus on the game you are playing. You can’t win today if you are focused on the game you have on Sunday. The same goes with personal finance. You can’t get out of debt if you are focusing on buying a house. Pick one financial goal and put your focus there. The more you focus on one goal at a time the quicker you will reach that goal.
These are just a few observations that I saw from March Madness and I am sure there are plenty more.
Readers, do you know of any other analogies from March Madness that you can apply to your finances?