Saturday, July 05, 2008

An Analogy Between Sports And Personal Finance

Since retiring in my forties in 2007, I've been taking up some new sports activities.

Most of my life, I have played competitive match play sports such as baseball, football or tennis, where one plays directly against an opponent. In match play sports, the objective is to defeat an opponent. I have found winning can often hinges on using on my strengths or taking advantage of an opponent's weaknesses.

Now that I'm older, it's harder to participate in direct competition sports. As a result, I'm taking up sports such as golf, weightlifting and exercise (e.g. yoga or aerobics). In these sports, the opponent is typically a course, weight or personal goal, and not a person.

For example, golf is usually played as stroke play, where the lowest score for the course wins, versus trying to win each individual hole and the best of 18. Even when I play in a group, I feel I am competing against my previous score versus my partners. In these types of sports, my enjoyment increases as I get better. Thus, I focus on improving my skills, even taking lessons, to do better in the absolute.

Similarly, personal finance strategies can also be versus others or an absolute goal. An approach is to directly compete against others, as in tennis or football, and compare wealth. Sometimes this may mean acquiring more to signal wealth and worrying about looking poor.

On the other hand, striving for a personal financial target, e.g. $1 million net worth, is more like the game of golf, where one is playing against the course, an absolute target. Winning is achieving the target. Improving skills to get closer to a personal target is better than just beating an opponent. This has been my lifelong approach to personal finance.

Although I've preferred playing direct competition in sports, I've typically focused on absolute targets in personal finance. Hopefully, reapplying my financial strategies to my new sports of golf, weightlifting and yoga will improve my skills and enjoyment in these areas.

Disclosure: I have historically been a below average golfer. In over 25 years, my best scores were in the mid 50s for a round of nine holes. However, after six years of not playing, I recently shot 95 and 98 for an 18 hole round, breaking 100 for the first time ever.

For more on Reflections and Musings, check back every Saturday for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2008 Achievement Catalyst, LLC

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