Defense, not offense, makes you wealthy

There is a rather barbaric sport in the United States, known as American football.

This is quite different from the rest-of-the-world’s counterpart, which is simply known as football (and which we here in the USA have renamed as “soccer”). But you don’t need to be a sports fanatic to follow the forthcoming analogy, and naming schemes are not important now.

In American football, there is a very popular saying: “Offense wins games, but defense wins championships.”

To clarify: there are two sets of players. The offense’s objective is to score points. The defense’s objective is to prevent the other team from scoring points. At the end of the game, whoever has the most points wins the game.

You don’t have to be a sports afficionado to see the two are related. Financially speaking, the purpose of offense is to make money, and the purpose of defense is to avoid losing money. And so…

Offense makes you famous, but defense makes you wealthy.

Think about it. How many highly-paid entertainment stars (in sports, movies and music) flame out and declare bankruptcy? Mike Tyson, Kim Basinger and MC Hammer each made a fortune, spent a fortune, and were left with nothing.

Some statistics suggest that one-third of lottery winners declare bankruptcy after hitting their winnings.

Why does this happen? Because most of the headlines are given to financial offense. Except for a handful of personal finance magazines, little if any attention is given to the virtue of keeping money. In fact, scam artists mock and ridicule the notion of saving and investing, with such quippy lines delivered to an audience such as, “How is your 401(k) doing lately? (audience laughter)”

I cannot tell you how many successful entrepreneurs I have known, who are already good at making money, in fact lots of it. And their eyes are still hungry to acquire more. It’s this rabid race against time, completely made up, and usually pertaining to moving from the 90th percentile of affluence to the 99th percentile of affluence. The problem with this is that even the 99th percentile of affluence will not satisfy, and usually such 99th percentile people reach such places through a gift of fate, more than a ruthless and unbalanced competitiveness to get to the top.

In other words… “Pigs get slaughtered.” – Jim Cramer

The financial Peter Principle

In management, there is a term called the Peter Principle, which is defined by promoting a person just beyond their level of competency. When such a person is recognized to have reached their own Peter Principle level, then (in theory) this will be recognized and such person will cease being promoted further.

In personal finance, if after receiving a gift you demonstrate that you are incapable of handling such a gift responsibly, the world around you will notice. And, that world around you will cease giving you such gifts in the future; it will send them elsewhere.

Do you know where your financial Peter Principle line is drawn?

On the other hand, if you demonstrate to the world around you that you are capable of handling an increase in finances, then you are (to use a car analogy) shifting into a higher gear, and will be able to handle an increased volume not only financially but also in life. The two very much go hand-in-hand.

You MUST focus on defense

Money comes, and money goes. But if you are prepared when money comes, with a well thought out plan, then when such money inevitably does arrive, you will execute your plan like clockwork, and what you’ll find is that more and more money will gravitate toward you. Because you already have the inner knowing, and demonstrated track record, of being a good custodian.

By demonstrating mastery and responsibility, not to mention a quiet confidence that does not need to brag to the world, you literally become a magnet for more money to enter into your life.

“For unto whomsoever much is given, of him shall be much required.”—Luke 12:48

During your life, you will have gifts. You will have opportunities. And, if you dishonor those gifts and opportunities by squandering them, you will have regrets.

Play defense.

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