Baseball, Money, and How to Consistently Score
Did the article’s title entice you to read this? You’re probably thinking “consistently score” is some sexual innuendo, and knowing me, you’d be correct. But, alas, I’ve misled you. Today “consistently scoring” is simply a reference to winning with money. Get your mind out of the gutter! You can get “scoring” tips from the next issue of Cosmo or go talk to my friends at the bar. They’ve got all kinds of terrible advice.
Ahhh yes, the sweet smells of spring are in the air! As a New England kid, I was raised to love the Red Sox and recognize the reporting of pitchers and catchers to MLB Spring Training as the first true sign of winter’s end. Of course, we’d always get another three snow storms before that came to fruition, but nonetheless Spring Training is a sign of warmer days ahead. When I think about the start of the baseball season, it instantly boosts my mood and stirs up those nostalgic memories. Despite its declining popularity, I love baseball. It’s a beautiful game filled with a million life lessons. Everything you need to know about life, you can learn in baseball.
I know baseball has been used as a metaphor for life in countless ways, but I’m going to use this tired cliche once again! I’m an unoriginal hack! I’ll try to give it a new spin if possible. So here goes: The game of baseball is a lot like your personal finances.
Yes, it’s true. The game of baseball is a money metaphor. Here’s a few examples:
Swinging For The Fences
I love when people ask me for “hot stock tips” or what penny stock could make them an overnight millionaire. My answer is almost always a sarcastic, “If I knew, I probably wouldn’t tell you.” The truth is no one can guess what company is going to have overnight success. Most new companies fail. Trying to pick “hot stocks” or penny stocks is like a batter swinging for the fences. He’s probably going to strike out more times than not. He’ll most likely hit a pop up, slam his bat in anger, and claim he was “this close to hitting a home run.”
The reality is, you can’t try to hit home runs in the stock market. Be a singles hitter. Warren Buffet is a singles hitter. He picks the right pitches to swing at. He’s patient, he knows most pitches (opportunities) are out of his sweet spot, and he’s just trying to get on base.
The people swinging for the fences might get lucky and smack one out of the park every now and again, but they won’t do it consistently enough to make their approach viable. They’ll claim they can duplicate results, but they probably just got lucky and soon enough they’ll be riding the bench.
Baseball teams often try to do what’s called “manufacturing runs”. Generally speaking, this means getting players on base, advancing the runners, and doing what’s necessary to get them to score. This often involves bunting, sacrifice flies, trying to hit to one side of the field or another, all in the name of progressing the guy on base closer to home.
Your investment and personal finance strategy should look a lot like this. Do what’s necessary to make progress toward your goal. This will involve a lot of “small ball”, like contributing a percentage of your salary to a retirement plan, building your emergency fund, and diversifying your portfolio. Small steps strung together to achieve a larger goal over time.
Investing in index funds over the course of several years is a better way to win at the investing game than swinging for the fences with a penny stock.
Winning Each Inning
Winning each inning is my way of saying you should set short-term goals and achieve those first and foremost. As you complete short-term goals (i.e. winning the inning), you’ll be making significant process toward winning the entire game (your long-term goals). So focus on the inning you’re in. Pretty soon it’ll be the bottom of the 9th and you’ll be glad you manufactured those runs back in the third and fourth innings. The cushion your earlier efforts will provide later in the game are immensely valuable. Also, by the time I get to the “ninth inning” the world will likely be on fire and I’ll be forced to pay for a one-way ticket to those new Trappist-1 planets. I’m guessing that’s how my “game” ends.
We can’t always be the one up to bat! We’ve got to play defense, too! Defense in baseball means positioning yourself according to where you think the hitter is likely to hit the ball. You may have to shift to the left or right. The pitcher may try to throw a curve or changeup and this will affect where the ball will travel if contact is made.
Dealing with money is a lot like this. You’ve got to position yourself appropriately. This may mean shifting your investments over time as you get closer to retirement to mitigate risk. Building an emergency fund and your cash savings to an appropriate amount is also an excellent form of defense. Don’t forget life and health insurance either! Be sure your loved ones are taken care of should a baseball hit you in the eye socket. Side note: I use this example because I once hit my Dad really hard in the eye socket with a softball. He was in so much pain he ran around our entire block. I sprinted inside to get my mom and when we came back outside, my Dad was nowhere to be found. Eventually, he came home with one hell of a black eye and perhaps a bruised ego. I, to this day, feel so bad about it, but I can’t help but chuckle thinking about him sprinting around the neighborhood holding his eye. Sorry, Pops!
Offense is fun and all (think making money and watching your investments grow), but defense (savings, insurance, estate planning) is what’s going to win championships.
Spending Money On The Ice Cream Helmet
Baseball games are long, as is the journey to building wealth. It’s okay to buy a couple of beers and the ice cream helmet during the game. You have to enjoy your time in the ballpark. Moderation is key though. If you eat too much ice cream, you’ll throw up. If you drink too much beer, you’ll also throw up, and likely end up in a fight. Savor the experience, make memories, but don’t be an overindulgent asshole.
Happy baseball season, happy spring, go Red Sox.