March Madness Money Lessons

March Madness Money Lessons

march madness finance
march madness finance

The NCAA Men’s and Women’s Basketball Tournament – the pinnacle of the sport – is upon us. This three-week long tournament attracts attention far beyond the alumni of the respective schools. For reference, the 2022 men’s championship game between Kansas and UNC captured the attention of 17 million TV viewers. And for many sports fans (myself included), the tournament is the only reason to ever tune in to TNT or TruTV.

You may be wondering, “What does all of this have to do with my financial plan?” The spectacle of March Madness presents several themes to its viewers that can be universally applied. The experience is emotional for both players and fans; spectators are often captivated by Cinderella stories; and teams often overcome short-term obstacles by committing to a clear strategy and focusing on the big picture. Here are a few lessons that March Madness teaches us about the financial planning process.

The beauty of March Madness is that no one knows what will happen. The odds of correctly guessing the outcomes of all 67 games is 1 in 9.2 quintillion. If you know a little about basketball, your odds improve to 1 in 120.2 billion. (Still not great.) When you build your bracket, you might correctly guess this year’s Cinderella story (like when the #15-seeded Saint Peter’s University Peacocks upset the #2 seed Kentucky Wildcats, AND the #7 seed Murray State Racers, AND the #3 seed Purdue Boilermakers this year), but that alone won’t carry you to victory. The true key to a successful bracket comes from a focus on the later stages of the tournament and recognizing that very few Cinderella teams go on to win it all.

The same can be said for your investment philosophy. There are tens of thousands of publicly traded companies in the world, and it is virtually impossible to pick a winner every single year. Your portfolio might be buoyed by the stellar performance of a particular company or asset class, but it is a fallacy to believe that this performance will persist indefinitely. That is why a wise investor understands that the key to achieving your goals is not to pick the next hot stock, but to diversify and keep your eyes focused on your long-term goals.

Lesson #2: Control What You Can Control

Basketball games are won and lost at the free throw line. Free throws are meant to be the easiest shot in basketball – they are uncontested and are shot from close range straight on to the basket. It’s no surprise, then, that coaches place an emphasis on preparing each of their players for crucial moments when free throws could win them the game. One missed free throw could shift the momentum of a game or allow an opponent one last chance at a buzzer-beater.

In your financial life, there are easy things that you can control to protect yourself against the things you can’t. Two key elements are making sure that you are properly insured and getting an estate plan in place. Proper insurance coverage protects your financial plan from catastrophe and allows you to shift your attention from what worries you to what inspires you. An estate plan allows you to clearly establish your legacy, leaving little room for entitled heirs to change the outcome at the buzzer. A good financial planner will review these areas with you and help you control what you can control.

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Lesson #3: Recognize That Things Can Get Emotional

In many cases, the most iconic March Madness stories are not about the outcome of the games, but rather about the players, families, coaches, and fans. Recall Sister Jean of Loyola-Chicago in 2018, Jack Blankenship’s face at Alabama games in 2012, or Kevin Ware’s devastating injury at Louisville in 2013 and subsequent return to the NCAA Tournament with Georgia State in 2015. The joy, the drama, and the anguish are all part of what makes March Madness special.

As Dick Wagner once said, “Money is the most powerful and pervasive secular force on the planet.” It would be incomplete to describe money without talking about the emotions that are tied to it. And no financial plan would be complete without first understanding your hopes, fears, values, and dreams. The success of your financial plan will most likely come down to your values and preferences and not the dollar amount in your bank account.

Though not a basketball movie, there is a quote from Friday Night Lights that captures the role that emotions play, both in sports and in your financial life:

“It took me a long time to realize that there ain’t much difference between winnin’ and losin’, except for how the outside world treats you. But inside you, it’s about all the same.” – Coach Gary Gaines

As we like to say at Yeske Buie, “It’s about the size of your life, not the size of your wallet®.”

Lesson #4: Trust and Commit to Your Game Plan for the Long Run

Most teams enter the NCAA Tournament with a clear identity about their style of play and the role that each player contributes to the team. The most successful teams stick to that identity and execute to perfection. There are certainly adjustments – intentional substitutions, timeouts, and trick plays – that allow teams to survive and advance in the tournament. But a unified commitment to a team’s game plan is the recipe for success in the NCAA Tournament, especially in the face of adversity.

With your financial plan at Yeske Buie, every strategy is chosen with purpose and is intended to withstand all sorts of situations. And one of your financial planner’s roles is to remind you of the resilience built into your plan so that short-term volatility does not dissuade you from trusting your long-term plan. As Dave likes to say, “The only way to reduce volatility in your portfolio is to look less often.” Committing to your plan for the long run can bring peace of mind, but it takes trust in the strategies you’ve implemented and the adjustments that you make along the way.

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Lesson #5: Basketball Is a Team Sport, As Is Your Financial Plan

Individual basketball games may be won by a brilliant performance, but no team has won the NCAA Tournament on the back of its star player alone. Often, the most well-rounded teams are the most successful. Take the 2021 national championship game between Baylor and Gonzaga, for example. Gonzaga, led by their star guard Jalen Suggs, simply could not keep up with the well-rounded, defensively-minded Baylor team. When a team is cohesive and a plan is executed well, victory is all but assured.

This philosophy takes hold in your financial life in two ways. First, the totality of your financial picture must be considered when drafting your financial plan. While your investment portfolio may be the engine that drives your financial plan, you need your taxes, cash flow, risk management, and estate planning to work in concert for your plan to actually go anywhere. Second, you don’t need just a financial planner, but other financial professionals (such as an accountant and an attorney) as well. When each individual plays his or her role and communicates with one another, it removes that responsibility from your plate, affords you greater trust in the overall plan, and allows you to focus on what matters most to you.

Finally, keep in mind the value of a great coach. It is easy to get into the weeds when thinking about strategies or techniques to optimize your financial life. Having a trusted financial professional by your side allows you to step back and see the bigger picture, much like coaches do during practice and on the sidelines, drawing up plays and offering guidance to bolster their team’s confidence even in the face of adversity.

In Conclusion…

The NCAA Tournament consists of 67 games over three weeks, and once a champion is crowned, the world moves on. Your financial plan, on the other hand, has no deadline. Planning for the future involves not only your life but the lives of the people and causes you care about most. It is important to take every opportunity to understand the strengths and weaknesses of your financial picture, and we at Yeske Buie are here any time to help you do exactly that. In the meantime, enjoy the madness!