It's football season, and I'm a huge football fan. The fresh-cut grass, the high school game under the lights, college football and game day pageantry and traditions, and the sounds of the NFL. All bring about fond memories. But, top of mind with many is the malaise in the economy. Some might have cut back on their finances and won't be attending their beloved college game days this season. So let's see what football can teach us about personal finances that we can use this season to get us back into the stands next year.
The first lesson: Training is important. In football, the off-season is spent in the weight room and on the treadmill, building up stamina and strength and it is spent in the film room studying. Obtaining financial training is also important to maintaining a good financial position. One of the frustrations as a parent of students in public high schools in Ohio (where I am located) is the lack of mandated personal financial education for high school students. Many graduate without any concept of how to manage a checking account, how to balance a checkbook, and the responsibilities of credit.
One of the biggest financial mistakes I see, as a person who has been in the banking industry for almost 30 years, is the money wasted by accountholders every day on overdraft fees. Understand how checks clear through your financial institution. All financial institutions must provide consumers with their policies for available funds. Do not assume that a check deposited today will be available for you to draw upon tomorrow. Also, make sure to balance your checking account every month. Mistakes are made clearing items and, while they are usually a few pennies, I have had my own personal deposits cleared to the wrong account. Financial crime is rampant, but if you do not review your statement every month, it becomes increasingly difficult to catch the criminals in the act. Actions involving credit and debit cards require almost immediate notification in order to get the full support of the card issuer and in order to minimize debit card losses too. And finally, there is so much media available today, financial literacy can be gained by watching business television and public television, through reliable websites, and from personal finance-themed magazines.
The second lesson: Offense wins games, defense wins championships. In football, offense is what sells the tickets and what makes games full of excitement and activity. But, when it comes down the final seconds, it is often the defense that manages to keep the opponent out of the end zone to preserve the victory. In the case of your personal finances, aggressive investment in the stock market, for example, might earn you a sizeable return, but when the stock market falls, you can lose everything you invested. The stock market always has down days. When it comes to making investments, it is important to not invest the money you need for living expenses. Keep at least three months (and many suggest six months) of your monthly earnings in savings. If you lose your job, have the liquidity necessary to make your house payment, your car payment, and to pay your bills. Have money available in case you have a health crisis and have money available to pay your yearly out-of-pocket if you have health insurance. Maintain the state-required insurance for your car '" if you have an accident, you will spend far more than the premium you skipped. Insure your home up to its current replacement cost. Mitigate your risks with insurance and with savings.
The third lesson: Each opponent needs a separate game plan. As an alumna of The Ohio State University, Woody Hayes coached for years. His game plans were week in and week out, three yards in a cloud of dust. He dared his opponent to stop the run. In today's era of college football parity, every team has talent. Teams will still operate their offense and defense around what they do best, but every coach studies the opponent in order to stop what they do best and try to determine what the opponent might do on both sides of the ball. It becomes a chess game. When it comes to your personal finances, it is possible to envision a number of economic scenarios and design a financial scheme to adapt to a number of economic conditions and opportunities. For example, if you think interest rates might have hit a bottom, it makes sense to consider financing a new home or refinancing an existing home. To make sure that you are prepared to take advantage of interest rates, monitor your credit rating, complete home improvement projects, and pay off excess debts. If you believe there will be inflation in the next 2, 3, even 5 years, review your investment portfolio and keep an eye on traditional hedges against inflation '" things like gold come to mind but there are ETF options, bonds, and mutual funds with specific investment strategies to offset certain market conditions.
The fourth lesson: Coaching matters. When the game plan is not working in a football game, coaches make adjustments and corrections and even change personnel. The coach who makes the best adjustments at half time and even during the game itself can still end up with the come-from-behind victory. When investment decisions are not working, seek to learn why and learn about other options. It is frustrating when I see friends I know who continue to make the same bad decisions month after month. For example, friends and family who carry balances on their credit cards. I coached my college-age daughter the first time I saw that she had not paid her credit card off in full by doing quick back-of-the-napkin math, showing her how much more she had just paid for that have-to-have-it outfit. The "I bought it on sale" excuse does not fly when you pay more in monthly credit card interest than you saved on the sale outfit in the first place.
The final lesson: Teamwork. One of the lessons learned in team sports is that no single player can win a game, and no single player ever loses a game. Sure, a player can make a key error at a costly point in the game, but the fact the game score was so close in the first place is not because of that single player. Football is a team game, particularly because all eleven guys on the field for your team had better know the play called, execute the play, and play their position to the fullest when that whistle blows or your team could lose, even if they have the edge in talent.
When it comes to your personal finances, it is important to call upon a team of experts. A simple will is important for protecting your family and your finances should something happen to you or your spouse. Consult an attorney. Yes, there are basic wills on line, but be sure to include health care powers of attorney, death decision-making, and consider estate planning. The proper level of insurance is important and a periodic review of coverage is important in case the improbable happens to your home or in case you are in an accident. Will you be able to rebuild your home? Do you have the right coverage for your car, your boat, your apartment and do you have the liquid financial resources to pay your deductible? Consult an insurance agent and comparison shop for the best rates. Do you have the time to manage your stock portfolio or do you select your 401K investments every January and then ignore your account for the rest of the year? Consider a financial planner. Some employers make free financial planning available to their staff. A single session with a financial planner can also be affordable. If your portfolio is too large for you to actively manage, consider hiring a financial professional. Do you need to save for college for your child(ren)? Consider the financial planner, but also consider a visit your child's high school or your local college financial aid office. College counselors can give you great insight into college costs '" a reality check-up, if you will. And, their advice is free.
Football is my favorite time of the year, and I fully believe that team sports provide wonderful lessons. Consider all that football can teach you about your personal finances. The five lessons I have included will help you manage your finances in this complicated economy. And team sports may teach you many more lessons too.
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