THIS POST MAY CONTAIN AFFILIATE LINKS. PLEASE READ MY DISCLOSURE FOR MORE INFO.
Growing up, the dream was to become a millionaire. My friends and I would say that we would attain that status by becoming professional athletes. It seemed easy enough. Whether it was baseball, basketball, or even football, we desired the lifestyles of the rich and famous.
I still remember as a sophomore in high school, playing baseball in a prestigious tournament. My coach pulled me aside to compliment me on how I was playing. As my inflated ego caused me to jump to thoughts of pro-ball, my coach promptly informed me about how much work it would take to become a professional athlete. It was like he could read my mind.
He said that once the season ends, that is when the real work actually begins. The off-season should be characterized by effort and devotion to training.
Up until that point, off-season in one sport meant on-season in another for me. I had always been a multi-sport athlete. I thought that once I achieved professional athlete status, then I would focus in on that one sport. Little did I know that I needed to fully commit myself to one sport in order to really thrive in it. Off- season provides the opportunity to become an even better athlete during the next season.
So what does this have to do with finances and becoming a millionaire?
I’ve come across too many people who look for a get-rich-quick formula to wealth. If you think that you will roll out of bed and magically wake up a millionaire, you are sorely mistaken.
The best way that I know to become a millionaire is by following some of the same tips that professional athletes live by.
Set Your Goals
Athletes train with very specific goals in mind in order to be the best. For example, LeBron James sets specific goals that he wants to master each off-season. Whether that’s improving his free-throw shot, shooting better with his non-dominant hand, or even dribbling the basketball better, his goals are specific, and he usually masters them.
Similarly, when you are trying to increase your net-worth and finances, you need to set specific goals along the way. If you want to reach FIRE by the age of 40, you need to come up with a detailed plan of how you will get there.
Break down these goals into smaller, tangible goals along the way. For instance, you can decide to pay off a specific credit card, increase your 401(k) contributions, or even increase your savings rate.
Think about the Olympic swimmer, Michael Phelps. He is the most decorated Olympian in history, having amassed 28 medals, 23 of which are gold. In order to achieve so many medals, Michael had to prepare well.
He and his coach created a clear plan for Phelps to obtain his goals by enforcing daily goals. During his training, Phelps said that all he did was “swim, eat and sleep.” He was laser-focused on what he needed to do in order to reach the goals that he had laid out.
In the same regard, we as CEOs of our own finances should take a singular approach with our money. We need to set up goals for ourselves and build a succinct plan in order to be the best stewards of our money.
So many high-earning professionals struggle to keep and grow their portfolio because they lack the know-how. Some choose to operate in ignorance and continue a pattern of the same mistakes over and over again. This drives me crazy.
It is reminiscent of the athlete who has so much talent but lacks discipline. I always thought that I was a pretty decent baseball player, but there were some guys who didn’t even belong on the same field as me. They were bigger and better. However, while they were dominant, some lacked the discipline to improve themselves and thus, ended up on the same field.
I recently finished reading the book, Play Their Hearts Out. It portrays a disheartening look into how certain AAU basketball coaches treated their basketball players. One of the main characters in the book is a stand-out 10-year-old named Demetrius. In fact, he is one of the best 10-year-olds in the nation. By the time he is 14 years old, he’s the #1 player within his age group. However, he eventually begins to rest on his laurels. By the time he is a high school senior, he is no longer ranked in the top 200 players for his age group.
In the same way, we must avoid complacency with our finances. We need to continue to make wise decisions, as it is all too easy over time to backslide over time.
Determine what you value in life. Then, apply the money that you save towards appreciate assets, like the stock market, instead of depreciating assets, like cars.
Time to Cross-Train
According to Dr. Dennis Cardone, DO, chief of primary care sports medicine at NYU Langone Health, “If you do the same workout every day or very regularly, eventually you’ll start to develop overuse problems. That means the tendons, soft tissue, and bones can start to get overworked and develop some damage or degeneration.”
This is why cross-training is so important. Otherwise, an athlete risks becoming too one dimensional in their sport. It reminds me of the guys at the gym who solely work their upper body and don’t put anytime in their lower body. Their little chicken legs, in comparison to their muscular top portion, are comical to me.
When I first delved into personal finance, I was a stock market junky. I kept up with its activity on a daily basis. I was always looking to buy or sell. When the company Nvidia first came out, I bought it and then sold it for a quick buck. If you look at what Nvidia has done since it first IPO’d, you will see that I could have made a ton more money than a measly $1 per share.
Because I was so focused on the stock market, I neglected to learn other areas of finance. For years, I assumed that I had the right insurance coverages for my homes and cars. Little did I know that I was overpaying in certain areas. Even worse, I knew little to nothing in the areas of life insurance and estate planning.
I had overworked one area of my personal finance journey and neglected other parts that were vitally important.
Pay Attention to Your Lifestyle Habits
Athletes have some of the most finely tuned bodies in the world. They have to keep their diet and sleep at optimum operation.
In regards to diet, Dr. Tim Miller, director of the Endurance Medicine Program at The Ohio State University Wexner Medical Center, believes, “It’s important to fuel your body appropriately. That means making sure you replace enough of your protein.”
Furthermore, in the realm of sleep, Dr. Cardone asserts, ”If you talk to Olympic athletes, most will say they’re getting 10 hours of sleep per night. For most of us who are working and have lives, we may be lucky to get six hours. But sleep is really important for recovery and a sound mind.”
In the same way, it is imperative that we pay attention to our lifestyle habits in terms of our finances. Did you know that if you exercise, you are more likely to earn more money?
In addition, sleep can affect your finances. In fact, getting enough sleep is crucial to maximizing your income.
Challenge Your Finances
Successful athletes always push themselves past their comfort zones. Similarly, we should set financial goals that stretch ourselves and even make us uncomfortable. By doing that, we can experience greater results. As I recently reported, I’ve been able to save 65% of my take-home pay for the last couple of years. This year my goal is to push that to 70%. Sure, 5% may not seem like much in the grand scheme of things, but keep reading…
As you can see in the chart below, even an additional 1% per year can add up over time. It can help produce a great retirement amount versus a good one. The blue bars show an annual return of 6%, which essentially serves as the baseline. The red bars assume the same savings rate of 6% at the age of 22 with an annual growth of 1%, until a maximum of 50% at the age of 66. You can also check out my post on increasing your savings rate for a more thorough explanation of the chart.
A common practice used in Olympic training is to shock or challenge one’s body at the end of the work out. When you think you have done the best that you can, you may be surprised to find out that you may be able to work even harder.
Personal Finance is Personal for a Reason
All athletes come in various shapes and sizes. Some are small and petite like Olympic gymnast Simone Biles. Others are tall and large like basketball player LeBron James. Each one plays to their strengths.
In the same way, we are all in different financial situations. We have different belief and value systems when it comes to spending, saving, and everything in between. The point is: we are all wired differently when it comes to personal finance. What works for one person may not be right for someone else. Play to your strengths within personal finance and then maximize your finances.