The Curious Similarities Between Golf and Managing Personal Finances
April 11, 2012Greg is on vacation this week so this blog contribution is provided by Scott M. Spann, CFP®, EA, one of our Resident Financial Planners at Financial Finesse.
Living in the coastal region of South Carolina (affectionately referred to as the “low country”) provides residents like me and our frequent visitors with an abundance of recreational, entertainment and cultural opportunities. I guess that is why our coastal communities like Hilton Head, Charleston, and Myrtle Beach remain popular retirement and vacation destinations for those seeking changes in “latitude” later in life. Walks on the beach, arts festivals, historic tours, boating, kayaking, fishing, and reading a book while lying in a hammock are just a few of the leisure options that I try to take advantage of as much as possible whenever there is downtime. But when the azaleas and dogwood trees start to bloom and the sports world shifts its attention just up the road to Augusta, Georgia for the Masters Tournament like it did last week – golf occupies a significant portion of the leisure section of my brain.
With a busy work schedule, two incredible kids (a.k.a. “the monsters”), and research and writing obligations there isn’t too much time in my life for golf these days. Still, while daydreaming about hitting the golf links for what Mark Twain referred to as “a good walk spoiled,” it dawned on me that the game of golf has many parallels to managing our personal finances.
Goal Setting: My primary goals are simple when I play golf these days: have fun, enjoy being outside, respect the game and its rules, and don’t hurt anyone (including myself) or damage any property with errant shots! I used to play to a 5 handicap when I was a card carrying member of the “DINK” society (Dual Income No Kids). My goal during those days when I played regularly was generally to try and shoot in the 70’s. Not pro material but not too shabby either. Now since I only play about 5-6 rounds a year, I am just trying to shoot in the mid- 80’s. Priorities change and I have adjusted my expectations to the reality that I shouldn’t expect to immediately return to my previous form. However, it is essential in golf (or any other important endeavor) to set realistic goals. This is especially true with managing our personal finances.
It is important to set “SMART” and realistic goals across all areas of our life experience (not just financial). This makes the financial part of our lives more relevant and is the first step on the path to success. If we focus too much on numbers and rates of return, we lose sight of the things that matter most. At the same time I want my golf scores to go down, I want to see my net worth go up. Are setbacks going to occur? Of course they will. Whether the obstacles are lakes, creeks, sand, or my unorthodox swing – there are potential setbacks around every corner of the golf course. The best approach is to prepare for them and minimize their effects. The same is true with managing personal finances. Whether the potential obstacles are taxes, inflation, economic uncertainty, health care costs, or paying for my kid’s college education while balancing the need to save for retirement – there are ways to prepare for obstacles without letting them paralyze you with fear.
Rewards: As frustrating as the game of golf can be to both beginners and veterans of the game, it does come with some rewards to make up for all the lost balls and broken clubs. For one, it is a great way to get outside and enjoy exercising (especially if you decide to walk the course like I do), nature, the sound of the ball rattling around the bottom of the cup after a perfectly aligned putt, the camaraderie of spending time with friends after a round, or signing a card knowing you just reached a personal best.
Managing our personal finances should also include some built-in rewards for progress. Unfortunately, it is very easy to focus on big picture concerns with money. Am I saving enough for retirement? How soon can I pay off my credit card debt? Do I have enough life insurance? How much will it cost to send my kids to college? Long-term goals are essential. However, they take time to achieve and sometimes it helps to have a little reinforcement along the way. Besides, financial planning is not just a future oriented process. It is a way to make sure that we are making the most of our financial resources today. So next time you take the time to review your family’s personal spending plan (a.k.a. “budget”) or pay off a credit card balance in full, be sure to reward yourself a little.
Track your progress over time: Golfers can track their progress using a handicapping system or by simply saving old scorecards. Looking back at my recent lack of progress as a golfer, I realize that I will not get back to the good old days of golf anytime soon but over time and with some practice, it is a real possibility. The hardest part about improving in anything is the realization that time and patience is required. Whenever I do decide to start taking my golf game seriously again, it will be important for me to track my scores and see how I am progressing over time. When taking financial life goals seriously, proper tracking is also required. Goals should never be set and forgotten.
Here are some suggestions to track your financial progress:
- Track your net worth on an ongoing basis using a financial organizer.
- Review your investment portfolio and track how your investments are doing in comparison to appropriate benchmarks.
- Review your risk tolerance on a regular basis and as your life goals or circumstances change.
- Re-balance your investments on a regular basis.
- If you are working on paying off debt, make sure you are getting there the quickest way possible by using a DebtBlaster calculation.
- Check your credit history. Order a free credit report from www.annualcreditreport.com or use services such as www.creditkarma.com .
Practice, Patience, and Persistence: Golf is similar to financial planning in that they both require practice, patience, and persistence. Of course, they can both be frustrating at times. But with the right attitude, consistent routines of good habits, and proper guidance from coaches, a path to success can be established. Perhaps the biggest similarity between the game of golf and our financial lives is the need for practice and effective routines. The best golfers develop their swings and mental toughness with a never-ending process of hitting balls on a range and they use strength and training programs to support their swing development. As our financial lives develop, we too need to develop routines and discipline to help simplify how we manage our money. From routine budgeting and paying ourselves first to automatic savings programs and debt reduction strategies, it is possible to simplify our financial lives by creating habits. We might not always get things right the first time, but just like weekend golfers get an occasional “mulligan” from their buddies, we should all take advantage of a second chance to get our personal finances in order – no matter how far off the beaten path we may have ventured.