Sometimes It’s Okay to Punt

October 06, 2014

Football season is an exciting time of year as fall has officially arrived and even the hot and humid southern states get some relief. Personally speaking, I am a college football person. Although I may be an unbiased financial educator, there is admittedly a great deal of bias when it comes to my allegiance to certain colleges and universities on the football field. You will likely hear screams of “Roll Tide,” “Go Tigers” (the orange ones from Clemson in the Palmetto State), and occasionally “Go Wildcats” (K-State- I have to support my grad school) if you are in my neighborhood on a typical college football weekend. (Yes, similar to my investment portfolio, I like to maintain a diversified portfolio of schools to support but also have the documents to prove that I am not a fair-weather fan of the first two programs on my list.)

One of the most exciting moments of a football game occurs when time is running off the clock and your team is faced with a critical decision on fourth down. Go for it and risk turning the ball over to the opposition on your side of the field or punt and rely on your defense to get a stop? I don’t envy coaches because they have to make these types of snap decision with the crowd trying to sway their decision and everyone watching the game on TV suddenly possessing expertise in managing a team. Don’t try to tell a true football fanatic that “it’s just a game” when your team’s ability to win is on the line!

Sometimes we are faced with similar decisions in our financial lives with more than just a game on the line. When it comes to making these tough decisions in the moment with our money, there are emotions flying all over the place and let’s face it. Not everyone is confident in managing personal finances in the first place.

Recently, I met with a young couple who shared a story of a difficult financial decision that they made regarding a home purchase. They had been saving for months, accumulated a healthy down payment of more than 10% of the purchase price, maintained excellent credit scores, and even qualified for more house than the $300k mortgage they were approved for at the time. This couple had already submitted an offer to purchase and they were just a few weeks away from owning their first home together.

In the spirit of football season, the clock was ticking on this important financial decision that had lasting ramifications on their financial future. Much to the disappointment of their realtor and the property owners, there was one major problem that popped up prior to closing. They weren’t ready for such a major commitment.

While some people would argue that this revelation should have occurred prior to even beginning the home buying process, I commend this couple for hitting the brakes and re-evaluating their financial goals as a couple. Sometimes the pressure of difficult financial decision can lead us to act impulsively and stay the course without stepping back for a second, regrouping, and asking a few critical questions of ourselves. In this young couple’s case, they asked themselves the following:

• Even though we qualify in the eyes of some financial institution for a $300k plus mortgage, does this debt obligation fit our short and long-term financial plan?
• How will this major purchase impact our ability to save for other goals such as retirement?
• Is sacrificing the ability to use extra cash flow for experiences such as travel and entertainment worth becoming homeowners?
• Do we really even have a financial plan?

Perhaps it was the last question that inspired this couple to call a timeout on a financial decision they had been saving over a year for. I admired the courage they displayed backing out of such a crucial financial commitment. Yes, they may have lost some earnest money in the process but in the long run, they will benefit from the realization that they needed to establish a financial plan before they could genuinely feel confident purchasing a home. I have no doubt they will be ready to purchase a home in another year or so when they have strengthened other aspects of their financial life plan. (A few top ranked college football teams could have used their poise under pressure as it was upset city this past weekend on the college gridiron!)

If the clock is ticking on an important financial decision in your life, you may benefit from taking a step back a reassessing your overall game plan. Sometimes you may take decisive actions and go for it. Other times, the best move is to just step back and punt.