Since it’s college football season, I have been thinking about a metaphor for money. Becoming rich can be described as a game, with both offense and defense.
Offense is income or revenue. High earners are like a high-scoring offense, throwing for 400+ yards per game, rushing for 200+ ypg, and putting up 65+ points on their opponents in front of cheering alumni and a raucous student section.
If we are not yet earning what we would like to, we can focus on and improve our offensive strategies. To improve our offense, we can increase our earning potential through certifications and degrees; we can take second jobs, consulting gigs, or side hustles. We can always be looking for ways to score more points and bust one out in the open field.
Defense is expenses, including debt payments and taxes. Good defenses contain the running game, pressure the quarterback consistently, and never allow big plays into the secondary. Frugal living, prudent investing, and minimizing tax-liabilities would be hallmarks of a strong defense.
Many high earners give up too many yards and points per game simply by increasing their expenses and leading a fancier lifestyle. This ‘lifestyle creep’ can come in many forms: leasing cars, financing or purchasing high-end furniture and appliances, buying boats or RVs, etc.
High earners who give up a lot of points on defense may think that it’s okay to do so, since they are very strong on offense. The problem with that mentality is that victory is really all about the margin.
If you think that a last-minute, skin-of-the-teeth, hail-Mary pass to win is fun to watch in football, you are right. However, in finance, this scenario is analogous to someone hoping to win the lottery or hoping that a relative leaves them a load of money on which to retire.
A team playing-from-behind in football may relate to someone living beyond their means their whole lives, with the hope that at 65 years old, some government entity or third-party will step in at the last second, so that they might be able to retire. Sometimes there is a last second victory, many times there is not.
How much better would it be, and how much less stress would you have, if instead, your offense put up 50+ points on your opponent in the first half, AND held your opponent to 10 or less. That would free you up to sit your starting quarterback in the 3rd and 4th quarters (stop working second jobs or side hustles, go down to part-time work, or retire completely and stop working for money all together). You would keep your first-string defense in the whole game (not living a high-consumer lifestyle and minimizing tax liabilities), thereby allowing a comfortable margin of victory at the end.
Victory is all about the margin. If you have a high-powered offense, that is great. But in finance, as in football, defense wins championships.