Playing a team sport like football, as I do with my friends each week, is about finding the right balance between offensive and defensive play. Yes, some teams manage to dominate the game by focusing their efforts on a strong offensive strategy, but in almost all teams there must be a basic level of defence to ensure that the game is won.
Similarly if you are serious about growing your pennies, you need two strategies: an offensive plan to earn and grow your income, and a defensive one to protect your earnings from every-day spending.
Be the striker
Playing a strong offensive game, by making a conscious and sustained effort to grow your income as Rightly Knightly advocates, is an obvious way to grow your pennies. It can be a daunting prospect for many but for those with ambition and drive, it certainly is within reach and can be a success strategy for financial success. If you put in place a plan to develop a good income you have the potential to both spend and save more. It will make budgeting easier too as there will be more pennies to go around. Remember there’s only so much you can cut back or deprive yourself, but there’s not strictly a set limit to how much you can earn.
Increasing your income is the less talked-about side to personal finances but most people who have grown wealthy have not done so exclusively by making small chances to their lifestyle (like bringing their lunch from home into work each day for example). Rather, they have done so with strong career moves or through building successful businesses.
Like the football team with top strikers delivering goal after goal to win the game, sometimes a good offence is the best defence.
But fortunes can change quickly
You may have a good offence but having a great striker in the team is of little good if the opposition gets the ball and can run all the way through the field to score a goal, or your main striker breaks their metatarsal! Similarly, having a great income now is of little real use if every last penny trickles out of your hands towards the end of every month, or worse, you lose your income for any reason.
Being young, most of us have high hopes for the future but there’s a lot of things out of our control and without a good defence, any success in the offence part of your strategy could be lost. In the same way that you can’t tell how good a goal-keeper is until a player shoots at the goal, you can only truly judge a financial strategy by how it holds up in a time of trouble or crisis. How would yours hold up?
Setting Up a Defence
Some might think its overly cautious to build up a savings account with thousands of pounds for no obvious purpose. Many find it hard to save for any purpose let-alone a ‘what if’ scenario! But doing so is one of the most important things you can do. Start today.
The best sports related marketing phrase to live your life by: “Just do it”
Start putting away something, anything. Make it separate from your goal off paying off debt; separate from saving to buy a house or a car. Doing so might seem strange and might make your other savings goals seem painfully far away. You might think it better to pay off debt or save for something more tangible.
But having a separate ‘emergency’ fund is one of the best defensive plays you can make. In fact once it’s set up you can be even more aggressive in your offensive moves. A good defence strategy gives you options. It could give you the confidence to change the direction of your career or make you feel more comfortable taking on more risk when it comes to investing for a possible higher reward (more on investing on Magical Penny in the next few weeks and months).
Dominate the Game of Life
When it comes to the game of life in your 20s and 30s it’s less important whether you’re having a good game or currently down on your luck at the moment: It’s more important to have a vision of where you want to be. Have a think about your own strategy, look at your offensive and defensive plays and ask yourself if it’s working. Then start to put in place a new and improved strategy that works for you.
Remember, if you do this now it won’t matter so much if you’re currently winning or losing because the real winner is football your future self!
#1 Adam is not the best footballer in the world, nor even that good compared with most of his friends. But thankfully he’s a little better at being defensive with his spending so he can be can be confident and be on the offensive when it comes to growing his pennies over the long term. Are you?
#2 American readers: I’m talking about ‘soccer’ but I’m sure it applies to your ‘football’ too! I’m also aware of the confusion on the spelling of defence/defense -it’s all part of the fun of writing to an international audience!
Magical Penny is thrilled to be featured in 3 blog carnivals this week:
Carnival of Personal Finance
Magical Penny is also talking to young people about a concept called consumption smoothing. Hmm…I think I get it.
Best of Money Carnival
Magical Penny presents The Treadmill that Does Not Get You Fit (financially) – a neat entry from a new blog I just came across – check it out!
Festival of Frugality with my post Lifestyle inflation -the silent killer of dreams
A huge thanks to all the Carnival editors this week for including Magical Penny posts from hundreds of submissions. These carnivals are a great way to learn about different elements of personal finance from lots of different persepectives so I strongly encourage everyone to have a good read!