Slam Dunk Personal Finance Tips From the NBA
Are you a basketball junkie? Did you know that a lot of the steps that lead to success on the hardwood also lead to success with your money?
Yep, it's true.
In fact, here are five lessons you can learn from the court that apply to your finances. (See also: How to Save Money on Live Sporting Events)
1. Develop Your Offensive Game
In basketball, you can score a variety of ways — a dazzling dunk, a long three-pointer, or a skillful free throw — just to name a few. And no matter the method, scoring is necessary to win.
In personal finance, offense deals with your ability to make money. And just as in basketball, you can do this in more than one way. This could be through a traditional nine to five job, building your own business, or even both — working a day job while having a side-hustle.
Just as the great players work on all parts of the game, you should also develop multiple ways to make money. That's because the more sources of income you have, the less vulnerable you'll be if one of them dries up. So if you ever got fired from your day job, you don't need to worry quite as much about paying your bills as someone who never developed a side-hustle. (See also: 5 Ways to Make Extra Income Online)
2. Play Defense, Too
Offense may be glamorous and show up on the highlights, but ultimately, defense wins championships. In personal finance, defense deals with your ability to keep your cost of living down and spend less than you make. (See also: How to Spend Less on Everything)
The concept is simple: If you keep your costs lower than your income, and make more than you spend, you win!
In personal finance, debt and a high-consumption lifestyle are your opponents keeping you from winning it all. So get out of debt, stay out of debt, and control your costs.
3. Listen to Your Coach
One common trait among all of the great players is that they listened to their coaches. These people are students of the game who know how to win at the highest level. For instance, both Michael Jordan (six championships) and Kobe Bryant (five championships) both won with Phil Jackson as their leader. Coincidence?
Similarly, in personal finance, there are people who know how to win with money. And they're more than willing to teach you how to do the same.
Here are two of them:
- If you're in debt, Dave Ramsey is one of the best when it comes to motivating you to get out. Read his playbook: "The Total Money Makeover"
- If you want to automate your finances and build wealth effortlessly, Ramit Sethi can show you how. Read his playbook: "I Will Teach You To Be Rich"
4. Call Timeouts
In the game, timeouts are called when you're making mistakes or letting the opponent get the best of you. They're necessary to assess where you are, regroup, and make adjustments so that you win in the end.
You should do the same thing with your personal finances. Maybe you've allowed your electricity bill rise little by little over the past four months. Or perhaps you've spent more than you wanted to with an impulse buy. (See also: Simple Ways to Stop Impulse Buys)
What would a financial timeout look like? Well, there are two things that you should come out of your timeout with: A spending plan, and a net worth statement.
Your Spending Plan
A spending plan is also known as a budget. It lets you know how much money you're bringing in and defines how much money you're willing to give up as expenses. It's a shorter-term view that leads into the next view. There are lots of tools available online to help you do this, but why not start with building a budget in five minutes?
Your Net Worth
A net worth statement tracks the value of everything you own overall, as well as everything you owe. It's a higher-level picture that'll show you how close you are to reaching your ultimate financial goal — for instance, becoming a millionaire.
The calculation is simple: Total Assets - Total Liabilities = Net Worth. Here's a handy net worth calculator to help you figure it out.
5. Play for the Championship
Every season, teams play for one goal — the NBA championship. Individual stats don't matter. Records don't matter.
Similarly, money is just a tool. Budgeting is just a means to an end. How much you make isn't the most important goal in life.
This is where things get a bit philosophical.
What's your end goal? What are you working toward?
Just enough to be able to spend more quality time with your friends and family? Travel all around the world? Donate to a cause or charity that's close to your heart?
Once you define your goal, you'll find it easier stay focused on what you need to do to get there.
Has the NBA taught you anything about managing your money? Please share your slam-dunks in comments!