What can you learn about money from March Madness? You can take a lesson from most experiences in life if you sit back and observe long enough; the NCAA basketball tournament is no exception.  I shared a few things I learned in my series on personal finance lessons for sports fans:

Ignore the Analyst’s Hype 

Just like the analyst hype from CNBC the posturing on who to choose for your bracket reaches a fever pitch starting on selection Sunday.  Everyone suddenly becomes an expert with advice on which teams to choose.

Truth is no one really knows who’s going to come out winners and who’s going to end up losers, just like the stock market.  Take advice from the media and your neighbors with a grain of salt.  Base your bracket picks and your stock picks on your own research and your own system of evaluating and choosing based on fundamentals and ignore the analyst hype.

One Game at a Time

Basketball teams win championships one game at a time; similarly, you can achieve financial success one goal at a time.  Set big goals for yourself but focus on reaching one goal at a time, don’t get overwhelmed by the task of achieving it all at once.

Practice Makes Perfect

Greatness begins off the court.  All great players and teams have to start from somewhere and practice, practice, practice to become great.

It’s no different with your personal finances. We all start with the same basic knowledge of money; you have to “practice” by learning about personal finance and putting in the time to research the concepts and strategies.

Pay Attention to the Details

Small things like diving on loose balls and boxing out can make a big difference in big games.  It’s no different in personal finance, a lot of small changes can add up to a lot of money saved or earned, so pay attention to the details.

Diversify to Win

Teams that rely on one or two big stars have a really hard time outperforming and winning the tournament.  It’s the same with your investment portfolio.  If you have one great investment carrying your performance returns and has a bad month, year, or 5 years then your portfolio is shot. 

On the other hand, if you have a balanced “team” of investments with strengths in different areas and a deep bench then you have a much better chance of achieving positive performance consistently. Diversify to win.

Rock Chalk Jayhawk!  I wrote last month about how setting big goals is the way to become successful.  Two of the great teams I mentioned in that article went head to head tonight, the Kansas Jayhawks and the North Carolina Tarheels.  After two halves of basketball and two huge momentum swings the Jayhawks came out on top to advance to the NCAA championship game.

As a Kansas fan, I was definitely pleased with the outcome but I couldn’t help but feel bad for Tyler Hansbrough.  The downside to setting huge goals and giving your all like that guy does is that you want it so badly, when the cards don’t fall your way it can be a devastating blow.  Of course I’d rather give my all and fall short of my dreams than not try at all.

Congratulations to Kansas on their victory and kudos for dreaming big and working their butts off!  Good luck in the final game.

Several years ago, I filled out my first NCAA tournament bracket.  It may be hard to believe but I had never completed one before that so I had no idea what I was doing.

Rather than making random picks based on mascots or team colors, I did some research.  I took notes during the expert’s predictions on Selection Sunday and then scoured the internet to compile a spreadsheet with all the stats I could find on each team in the tournament.

I stayed up all night matching stat for stat and slowly advancing teams one at a time through the bracket. I wish I had kept that piece of paper because I picked every game correct from the Elite 8 on!  When Uconn won the championship game I moved into first place and won the office pool of several hundred dollars.  Wow, my first year and I had won.  I couldn’t wait until March Madness rolled around again.

The next two years I followed the same formula, including even more stats, spending even more time analyzing the teams, and filling out multiple brackets to cover all my bases. Needless to say my picks were miserable failures and I probably spent $50 buying entries in various office pools.

After that second year, I decided to hang up my spreadsheet and watch the games for fun instead of profit.  I was spending too much time and money pursuing another win and chances were I’d never replicate my initial success.  It was fun while it lasted and the money helped pay our tax bill that year.  I guess I should have just retired then and there and gone out on top!

There’s a lot we can learn about personal finance strategies from the world of sports. Last year during the college basketball tournament season I ran a series called Personal Finance for Sports fans where I took a look at some of the money lessons we can learn from the NCAA basketball tournament. Check out the articles, you can have a little fun while reading about personal finance!

• Diversification is Key
• Ignore the Analysts & the Hype
• Plan for Success
• Greatness Begins & Games are Won Off the Court
• Little Things Make a Big Difference in the Big Dance

Those that aspire for success are the ones that achieve it, I’ll give you an example.

For all of you non basketball fans, March is a big month for college hoops.  Weeks, months, and years of anticipation & preparation come to a head for hundreds of players & coaches in the NCAA basketball tournament.

The winner of the tournament is crowned the best team in the country, a legacy the players and coaches will cherish for the rest of their lives.  The important lesson to be learned from this tournament originates long before the tip off of the big game.

Always Have Big Goals
At the beginning of every season, players and coaches set personal and team goals.  What’s impressive to me, and what I think we can all learn from, is the way that the top teams set expectations for their season. If you look at teams like Kansas, Duke, and North Carolina, their goal every year is to win the national championship.  I don’t know if it’s stated in team meetings or talked about between players but the hope & expectation is always there. 

Take Baby Steps
Certainly, teams have to take the season one game at a time, but I’d bet that National title is always somewhere in the back of their mind.  Each game matters, win enough of them and they’ll be conference champs.  Win the conference tournament to get a good seed in the NCAA tournament and then on to the big dance.  Taking it one step at a time but always having that big goal in mind.

Decide to Work Hard
Granted, the teams I’m talking about have a long history of success and have the talent and experience to base their expectations & hopes on.  But just like you and me, they all had to start somewhere.  I’m sure each of those players put in uncountable hours of practice & dedication to put them in a place where they could be on one of those teams and maybe one day play for the championship.

Challenge Yourself
What I get out of this is to set my goals high.  Each day I need to aspire to high levels of success.  Whether it’s personal finance, career development, fitness, or starting my own business I have to expect the best from myself.  Even if my aspirations seem unreachable I need to commit to them.  Then I’ll have to find ways of making those goals a reality.

How can you have the best player in college basketball on your team and still lose your conference championship? Just ask the Texas Longhorns.

Star Power Fades
In the final game of the Big 12 tournament, Kevin Durant laid it on the Kansas Jayhawks in the first half. He shot the lights out and at one point Kansas’s 20 point deficit seemed to be insurmountable. However the tide turned for one main reason, the mighty Durant ran out of wind in the second half. Despite 37 points and 10 rebounds from their star player, the Longhorns fell to the Jayhawks and lost the championship.

Diversification Wins in the End
Why did Kansas come out on top? Diversification. The have a multitude of skilled players that all contributed in their own way to the victory. The importance of diversification is no different for your investment portfolio than it is for a sports team.

Just like the Longhorns rode Durant’s success in the first half, you can rely on the outstanding returns of a single investment to grow your holdings by 20, 30, or 60% in a year. However, the second half will inevitably come for that investment and it will stop performing at that level. History has shown that over time it’s not a matter of if but rather when an investment will turn south.

How can we win like Kansas? Invest in a balance of various industries and different assets classes. Although spreading our money out over the broader market will reduce the potential reward it will also cut down on the potential risk. Instead of one super star investment, divvy your money up among solid performers and you’re more likely to come out ahead in the long run.

Check out the other articles in the series Personal Finance for Sports Fans

How many times have you heard an ESPN announcer make a comment about a play that won’t show up on the stats sheet? Diving on a loose ball to force a tie-up or making an extra pass that results in an easy basket are examples of little things that can make a big difference in the NCAA tournament.

Win One Possession at a Time
Every team needs skilled players to help them win games but it’s not just the NBA range three pointer or the monster blocks that bring victory during March Madness. Basics such as boxing out, making free throws, and avoiding silly fouls are all little things that add up over the course of 40 minutes. Since basketball games are won a single possession at a time, these little things are more obvious and frequently get praise from guys like Dick Vitale, Jay Bilas, or Digger Phelps.

Be Money Smart & Cut Down the Nets
Paying attention to details can bring you financial success as well. Not everyone can be a money superstar and earn an enormous salary but if you do the little things right you’ll come out ahead in the end.

Play good offense by regularly saving or investing and the power of compounding growth will work its magic over time. There are countless ways to put up a good financial defense. Follow the time-tested play of spending less than you earn and this full court press will keep your balance sheet in the black.

Think of the rush you get when your team wins a cliffhanger to advance to the Sweet Sixteen. You might not feel that way every time you save or invest a little money but I’m pretty sure you’ll celebrate down the road when your net worth gives you the freedom to make the choices you want in life.

Check out the other articles in the series Personal Finance for Sports Fans

What do you love most about college basketball in March? Is it the buzzer beating 3 point shot or the steal followed by the monster dunk? While we get to enjoy these displays of talent on the court in the NCAA tournament, the thing that makes them possible is untold hours of preparation off the court.

Practice Makes Perfect
Whether it’s off-season, pre-season, in season, or post-season good athletes are always on a training regimen, preparing for what comes next. We don’t see them getting up at the crack of dawn to workout or nursing an injury through a brutal pre-season but without that preparation, they wouldn’t be as good as they are. Tiger Woods is a good example of the adage practice makes perfect. His endless and intense practice gives him the edge he needs to sink that amazing putt or hit that beautiful drive.

Skills to Pay the Bills
Our personal finance skills are no different than Tiger’s golfing skills. We have to learn the fundamentals of managing our money and practice regularly to have success. Some people try to bypass this path to success by taking part in the latest get rich quick scheme. If you sit back and think about it from a sports fan point of view, you realize how ridiculous get rich quick plans can be. Expecting to start up an investing or business program today and make thousands of dollars in your first week is as silly as someone thinking they can walk onto the basketball court and play like Kevin Durant or hop behind the wheel of a car and drive like Dale Earnhardt Jr.

All great athletes had to start somewhere. Think of the first time that Wayne Gretzky picked up a hockey stick or Michael Jordan touched a basketball. They weren’t great yet but that was the start of their journey. You may feel clueless when it comes to personal finance but if you don’t take that first step towards learning how to manage your money, you’ll never be a financial superstar.

Check out the other articles in the series Personal Finance for Sports Fans

Setting Goals for Success
How do basketball teams win championships? Many of them sit down together at the beginning of the season and come up with a shared goal. For some, it’s to win the conference championship. Some teams set their sites on making it to the NCAA tournament and others pick the lofty goal of winning the whole thing.

These teams use the motivation of this goal to drive them to prepare and play harder than everyone else. Some of the teams that advanced to the NCAA tournament this year did so by winning games that appeared to be lost. Even though they were exhausted or outmatched they never gave up and willed their way to victory.

Success in personal finance also begins with setting your goals. First decide what you want out of life, and then determine what your finances need to look like to get you there. Meeting your goals won’t always be easy but if you have a driving reason to achieve them you won’t give up.

Use Milestones to Your Advantage
While every basketball team would love to win a national championship any coach will tell you the first step is to win your first game. Then win your second, then your third. As a Kansas Jayhawk fan, I’ve seen the danger of looking too far down the road over the last two years as they lost to both Bradley and Bucknell in the first round of March Madness. A lack of focus on the current task can doom your future goal to failure.

The Jayhawks have done a pretty good job of taking things one step at a time this season. First they became regular season champs with the best record in the Big 12 and then they won the conference tournament. We’ll see what the remainder of March holds for them.

Whether your goal is to get out of credit card debt or to build a million dollar portfolio, you have to do it one dollar at a time. Either task can prove to be a long road. Make the journey easier by breaking it up into bite size chunks called milestones. Set small, achievable milestones with short time frames such as a day or a week. As you achieve these goals your confidence and momentum will grow. When you have a bad day, don’t be discouraged, instead look back over all of your triumphs and they will surely outweigh the recent downturn.

Think about Lance Armstrong. He didn’t ride the whole Tour de France in one day. He won it one stage at a time. Some days he wore the yellow jersey, some days he crashed and burned. If Armstrong could win the Tour de France seven different times by taking it one stage at a time, surely we can pay off our debt or build our net worth taking the same approach.

Check out the other articles in the series Personal Finance for Sports Fans

Which would you rather do, watch sports or learn about personal finances? What if I told you that you could do both! There are good personal finance lessons to be found in the many exciting games of the upcoming NCAA Men’s basketball tournament. This is the first in a series of posts that will cover some of these lessons.

Ignore the Analysts
As selection Sunday approached, everyone had their opinion about who would make it into the big dance and who would miss out. Any coach would tell you the only way to guarantee a spot in the tournament is to keep winning. They tell their players to ignore the noise and focus on their game.

There are always going to be analysts who speculate about interest rates, oil prices, foreign wars, and unemployment. They debate whether it will be a bear market or a bull market, an up year or a down year. The basic principles of personal finance tell us to block out this noise and stick to the basics. The only way to guarantee long-term financial success is to spend less than you earn, start saving & investing early, and insure your health and assets.

Ignore the Hype
When you’re a low seed squaring off against a high seed you tend to be pretty nervous. Your opponent has been built up in the media all year long; there is a ton of hype surrounding the team’s players, coach, history, record, etc. The best way to lose the game is to listen to the media and buy into the hype. If the lower seed can block out the noise, stick to the basics, and play their heart out they may have a chance of coming out on top.

In the world of finance there’s always some revolutionary new company or new product that the media falls in love with. The CEO will be on the cover of Business Week, the company’s IPO will rocket out of the gate, and everyone will be sure they’re going to make a killing off of the stock.

The best thing you can do is ignore the hype about the company and stick with regular investments into a diversified portfolio. If the media hype is convincing and you decide you have to buy into the company, do it as part of your overall portfolio. I’m one of the people that just bought on hype in the dot com bubble and I won’t make that mistake again. I encourage you to avoid it as well.