What your Golf game can teach you about investing
As a financial advisor, I spent a lot of my day indoors. Either sitting at a desk or a conference table. However, every once in a while, I get a chance to support a local charity and play in a golf outing, or even skip out of the office early to play a quick nine before I head back home. Here in the Midwest, we only have a few good months for the golf season. So, as I’m taking advantage of the sunshine while we have it, it has me thinking: How can golf help with money management? In this article, I’ll outline a couple of points that I believe can put some perspective on financial planning.
Defining a Goal
In simple terms, the goal in the game of golf is to get the little ball in the little hole hundreds of yards away with as few strokes as possible. When developing a financial plan, defining your goal could be starting a business, saving for retirement, paying for college, or buying a house. In any case, we need to define a goal to understand the rules of the game. The distance from your current position to the goal, which we measure as time in a financial plan (referred to as your time horizon), will help us determine which clubs you are playing with.
Long Game
Here we are teeing off. You’re just getting started toward your goal, and this is the farthest point from the end result. At this stage, you need to cover as much ground as efficiently as possible. You may be the kind of person to play it safe and just hit a mid-range club that you know you can get on the fairway, or you may be brave and dust off that driver that sometimes you hit like a pro and sometimes slice into the woods. Your club selection here can be translated into your investment risk tolerance. In either case, because of the distance from the tee box to the green, you can afford to take some risk (relative to your own personal tolerance). After all, no one is hitting their putter between the tees.
Mid Game
So, you’ve had your drive, and you gained some distance toward the hole. Even if you ended up in the rough, that’s ok because you have some time to get back on the fairway. Investing is the same way; even if you get a little sideways, the right decisions can get you back on track. Now it’s time to get serious. You only have a few more swings if you want to sink your putt for par. Funding your financial goals on time is no different. You’re no longer the spry 20-something who just enrolled in their first 401 (k). Nope, now you are in your peak earning years and starting to think about what retirement really looks like. Now is a good time to take an assessment of your current lifestyle, what your savings are doing for you, and if there is anywhere you can improve or plan better. Personally, I’d recommend hiring a ‘caddy’ to help with this.
The Approach
You are so close you can taste it! This is what separates the pros from the amateurs. If you can chip this bad boy within a couple of feet from the flag, then you’re just one putt away from the sweet, sweet clatter the ball makes when it drops in the hole. With regard to your financial plan, this is the time to make sure all of your ducks are in a row. How much income can your savings support? Do you have any pension income to account for? What does social security look like? What bills can you pay off while you’re still working? If you get this right, then you set yourself up for success.
Short Game
Congratulations, you’ve made it to the green! You’ve most likely learned some things about yourself on this journey, and now it’s time to take your newly gained wisdom and apply it yourself. You might as well pull the pin because you’re not messing around anymore. You carefully read the speed and slope of the green, line up your putt, and…tap it in. Nice work! You knew that this was not the appropriate place to take risks. You need to be sure that this last stroke gets you to the hole. When you get ready to pull the pin on retirement, you want to have as much confidence in your financial plan as you did in your putt.
Understand that this game didn’t start 18 inches from the cup. The decisions you made as soon as you teed up your ball set you on a course for success or failure. Where golf and financial planning differ is that once you hit your last stroke on a hole, you pick up and move on, but your financial plan continues to change and adapt. Ongoing review of your financial plan is crucial to increasing the odds that you don’t outlive your money, and hiring a qualified financial planner helps make it so you can spend more time on the links and less time worrying about your money.
Written by Justin Meyer
View related content at the links below:
https://fsgmichigan.com/blog/the-importance-of-financial-literacy-and-its-influence-on-our-lives
https://fsgmichigan.com/blog/how-financial-advisors-are-paid-and-why-it-matters
https://fsgmichigan.com/vlog/educational-moment-do-you-need-a-financial-advocate