Every four years or so, I briefly fantasize about dedicating my life to becoming an Olympian. When I was younger, I could imagine myself competing in something like track. Today, the options are far more limited. Fencing could be a possibility, because as a parent, I have become a relative expert in things such as counterattacks and disengagement. But I am kidding myself when I think about my Olympic potential. To be an Olympian, I would first have to think like an Olympian.
What are some of the traits that Olympians have that would be useful in financial planning? Olympians are clear about what success represents. The goal of making it to Beijing this year for dedicated athletes was "SMART" -- specific, measurable, attainable, realistic, timely.
Have you determined what your objectives are? Saving for college is easy to fit into the SMART system. You can estimate costs, you know the time horizon, you can start saving early.
Most of life's goals are not that definable. Retirement involves replacing not only earnings, but things such as community, connections and purpose. If you only focus on the financial, you may have enough assets but not achieve significance. Success in life is multifaceted. Every financial decision you make has a social context.
Olympians understand ups and downs and how to track progress. Every Olympic athlete has had to stare down disappointment and overcome it. When you look at your investment statement in this difficult market, are you constantly comparing it with the highest it ever was? If you had taken on more risk than you had realized, your high point was never real. If you had taken appropriate risk, then recognize your portfolio would never have reached those highs had you not been invested and it certainly won't return to them by putting it in cash.
Your financial progress is measured by your asset allocation, the percentage of your income that you dedicate to savings, your ability to spend appropriately on the things that matter the most to you and your ability to have money serve its appropriate role in your life rather than allowing it to take over your life.
You inevitably will go through periods where work is difficult, markets are problematic and you have regrets about things that you should or should not have done. Your resilience is what matters.
An Olympian balances technical expertise with emotional strength. Athletes know that, no matter how skilled they are in their sport, they still have to manage their emotions. In his book, "How Doctors Think," Dr. Jerome Groopman writes: "Cognition and emotion are inseparable."
