When It Comes To Financial Planning, Listen To Joe Maddon: Do Simple Better

October 02, 2017

It’s that time of year – Major League Baseball playoffs are scheduled to start later this week and the city of Chicago (myself included) is starting to get worked up about the possibility of our beloved Cubbies repeating as World Series Champions. It has me thinking about one of Joe Maddon‘s famous phrases.

If you are a fan of baseball, you probably know that Joe is the Cubs’ manager, but if you are not familiar with Joe, that’s OK – just stay with me here. Joe is a quirky guy — he brings exotic animals into the team’s club house and has the players dress in pajamas when going on long road trips.

Despite all his shenanigans, there is one thing about Joe that has always stuck out to me. One of the phrases that Joe consistently uses to keep his players in the right frame of mind is, “Do Simple Better.” Think about that — he is working with the best ball players in the world and his message to them is not “take more batting practice” or “watch out for the curve ball on a 1-2 pitch,” but rather to focus on the basics.

It turns out this philosophy can also help you improve your financial well-being. Here’s how.

Saving

Do simple: Establish your savings goals by writing them down and putting a plan in place to save for them each month. Whether it’s saving for emergencies, college, vacations or retirement, if you have a written plan on how to get there, chances are much better that you will make it.

Do simple better: Set up a different savings account for each goal, and have money automatically transferred each month from your checking account or paycheck to these accounts. You may be thinking that you are already doing this with your 401(k) by having a certain percentage deducted from each paycheck – that’s awesome, but consider taking it a step further and enrolling in your plan’s automatic rate escalator.

Investing

Do simple: One thing that all great investors have in common is that they have a grasp on the fundamentals. To apply that to your investment strategy, determine what your time horizon and tolerance for risk are for each goal. From there you can choose the appropriate asset allocation, or mix of cash to stocks to bonds. Studies have shown that asset allocation has a larger effect on investment return than any other variable.

Do simple better: Take this risk tolerance quiz to identify your ideal asset allocation for different savings goals. Then, invest accordingly. Also, rebalance your investments at least once per year. This will keep you in line with your initial allocation strategy and force you to buy low and sell high!

Communicating

Do simple: If your finances are intertwined with a spouse or partner, consider improving your communication by having regular meetings to discuss your finances. This is not a “finger pointing” session, but rather a time to ensure the left hand knows what the right is doing. My wife and I have recently made it a point to sit down every two weeks to review our finances, and it has relieved a good deal of financial stress.

Do simple better: Hold this meeting at a time when you are both relaxed and not preoccupied with anything else. We do ours on Sunday evenings, when it’s quiet and we’re not worried about getting to work or taking the kids to their activities. Also, make the meeting enjoyable – perhaps bring a bottle of wine to the table!

One more thing – hold each other accountable during the meeting. For months, if not years, my wife and I have “discussed” calling our cell phone provider to see if we could save some money with more efficient plan. With the nudge of our bi-weekly meeting, we finally did it, and are now saving over $1,000 a year!

Take Action

This is what it’s all about. On paper, the ability to save, invest and communicate seems, well, simple. It’s up to you to set up those automatic transfers, invest per your risk tolerance and meet with your accountability partner. You will then understand the power of “doing simple better!”

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The Art Of Financial Trade-Offs: What Do You Value Most?

September 01, 2017

Last week, I found myself debating the best course of action for watching “The Money Fight” between Conor McGregor and Floyd Mayweather (spoiler alert: Mayweather won, to no one’s surprise). I’m a big fan of mixed martial arts (MMA), but for those who aren’t as into it, the appeal of the fight was that the biggest star in MMA (Conor McGregor) accepted a challenge from the biggest star in boxing (Floyd Mayweather) to go head to head in a boxing match, for what turned out to be Mayweather’s 50th win and last fight of his undefeated career.

I’m not a Mayweather fan (mostly because he glorifies a lifestyle of excessive spending, which is OK if you’ve earned $1 billion in your career like he has, but not great advice for most of his fans), so I was rooting for McGregor to win by early knockout. Despite the odds being stacked heavily in Mayweather’s favor, both men stood to win several million dollars.

In the fight world, this is a big deal. And, for me, it presented a challenge of how I wanted to watch the match — a challenge of both finances and fun. I had a few options here:

  1. Stay home and buy the pay-per-view at ~$100.
    Pros:
    – Watch in my PJ pants and eat/drink whatever I want.
    – Ability to adjust the volume to be whatever I need it to be.
    – No line at the restroom or waiting for a drink.
    Cons:
    – Unless I invited friends over and they brought food or beverages or chipped in for the PPV cost, this could be my most expensive option.
    – If something spectacular happens, there is no crowd yelling, which is part of the joy of watching with a crowd.
  2. Head out to a local pub that is showing the fight.
    Pros:
    – I can control the cost by limiting the number of cocktails and food I consume.
    – The bigger the crowd, the more entertaining the “oohs” and “aahs” and “OHMYGOD’s!” are.
    Cons:
    – It would be very crowded, so may be tough to get a table.
    – I’ve gone to watch big fights before and never gotten a table, and standing at the bar all night isn’t my favorite activity.
    – It could be a long night, so chances are that I would order food and a few beverages that could raise the cost close to the PPV cost.
  3. Skip the fight and read a good book, catch the highlights online the next day.
    Pros:
     – I get to read a classic and check it off my list.
    – It could be a nice, quiet night and I probably wouldn’t stay up till 1AM.
    Cons:
    – I wouldn’t get to experience the adrenaline rush and joy that I get when I see a great night of fights (although I find boxing incredibly boring after a decade-plus of watching MMA).

Making the trade-off

The trade-offs I had to make here, and that you probably face at times, had to do with several factors:

  • Cost vs. experience
  • How to spend discretionary dollars
  • Evaluating “needs vs. wants”
  • Probably a few others

At times, budgetary concerns are the deciding factor; other times, the fun and experience factor is what decides it. What I had to do in this situation was determine what my end goal was and then set a spending limit for my choice.

What I decided

I went with a hybrid of immersing myself in the experience while trying to limit my spending: I ended up going to a local pub with some friends, but first I made dinner for the kids and myself at home. That way I didn’t run up a big tab at the pub on food, but still got to see the fight without spending $100+.

I’m curious – how do others make this type of trade-off? I’d love if you would share your thoughts with me on Facebook or via Twitter.

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