What golf and finance have in common and why not everyone is good at golf or with their finances – Alonso Rodriguez Segarra CFP®

For all of us who play golf as a non-professional, it has happened to us that we go to the driving range to practice. And we feel that our swing is perfect. We hit the ball wonderfully, we feel like we are going to be the new Tiger Wood or Scottie Scheffler. But without knowing what to do with our feet.

Then we go to the course to play and we begin to realize that we are not hitting the ball as well as we did on the driving range. And the double bogeys begin to appear along with those three putts.

The same thing happens with personal finances. Many people think and feel that they know what they should do to optimize their personal finances. But then mistakes begin to occur that lead to a score. And even a balance different from the one you wanted to achieve.

Just as not everyone can break the record of having a score below 80 or know what it is like to make several birdies in a single round, the same happens with the generation of wealth.

The reasons why not everyone is good at golf are very similar to why not everyone achieves the level of wealth they desire.

1.- Patience and your investment portfolio

There is no doubt that when we see the golf swing of one of the great professionals, we get the feeling that it is as if it were a simple process. Since it looks perfectly fluid. But what we do not see is the number of days and effort that is behind those swings.

Which are not developed overnight, nor by watching a series of classes on YouTube. Much less because one of your friends gave you a suggestion.

The same thing happens with investment portfolios. You have to give it time and magic or short-term solutions really don’t exist.

There are many people these days who claim to have the formula for generating high returns and in a guaranteed way or they tell you that they will tell you which stock they are investing in so that you too can become a millionaire.

2.- Emotional control

Few things are more frustrating than playing poorly in a round of golf. You feel that you are doing everything right, but nothing goes the way you want it to. And the ball goes precisely where you don’t want it to go.

So the first reaction is to see what you are doing and take control. Thinking that maybe if you moved your hips faster or changed the angle of your swing you will be able to improve it.

The same thing happens with the stock markets in those moments where your investments begin to lose value. Because perhaps a recession is coming or inflation begins to rise. So you feel that you have to take control and do something to improve it.

Not realizing that in the case of the investment portfolio, if you have a good recipe to start with, the fundamental thing is to respect your recipe and follow the path.

Remembering that in investments, those who lose money are those who cannot manage their emotions. And they make bad decisions at the worst times.

3.- The importance of Diversification and your Golf Bag

Can you imagine that you are going to play 18 holes but you only have to use the Drive because it is the one that goes the furthest and generates the most excitement? And we take out of your bag all your irons, woods, hybrids and the Putt.

And also, I would tell you “don’t worry, you will have the club that gives the best performance and you will be able to cover the greatest distance”

After the first shot you would realize that you are in trouble. When your ball has perhaps ended up in a bunker and you have to try to get it out with your drive.

The same goes for your investments, your retirement plans, your Health Saving Accounts, your children’s or grandchildren’s 529 plans, and your Donor Advisor Fund, to name a few.

As you can see, they are different accounts with completely different objectives. Just like each of the golf clubs in your suitcase. While it is true, you may feel that there is not much difference between one particular iron and the other.

Just like what happens between your Traditional 401K account and a Traditional IRA. Each of them has different contribution amounts and fulfills its function.

This example is seen even more clearly when you are going to build the recipe for your investment portfolio. You want it to have American stocks. As well as non-American stocks, corporate bonds such as government bonds, among many other assets.

So, when you look at your golf bag, remember that your portfolio should look the same too. Maybe there is an asset that you think is not so good today. But you leave it there like this iron that you don’t use as much but you know it is there when you need it and you have to save the ball.

4.- Every golf course was made with a Plan as well as Financial Plans

Imagine that I invite you to a new golf course that has just opened and that everyone is talking about. Because it was created with a totally innovative concept.

On this course when you go out nobody knows how many holes you have, you don’t know when you leave the Tee if it is a Par 3 or a Par 5, but you simply have to go out and do your best and keep playing, not even being necessary to count how many strokes you hit because you don’t know how much you have to do on each hole.

Of course very few would want to play on a course like this one because there is no goal, we don’t know which hole we started on, or how much we have to do or when it ends.

This is how many people manage their finances. They don’t have a clear written financial plan where they know where they need to go. What path they will take to get there. What resources they will use to reach their retirement goal, their children’s education, or their emergency fund.

Those who do have a financial plan can really control how their score is going. If they are behind on their goal, how much is left and what they need to do before they run out of time.

Because golf is, in many ways, like life. It has a finite time and there will come a time when the 18 holes are simply over. And those who did do their homework will be able to calmly enjoy a nice retirement with their friends on the 19th hole.

5.- You hire golf instructors by the hour, why not hire Financial Planners by the hour?

Can you imagine getting a golf instructor who tells you: my fees are based on the time you play regardless of whether I accompany you to the golf course or if you go out to play alone? And if your score is bad? “I will charge you anyway. And by the way, if your score is very good I will charge you an additional commission.”

In addition, this golf instructor may forget to mention that he receives commissions when selling you golf equipment that you could buy for a substantially lower price but he will sell it to you at a much higher price to earn that commission.

That is what happens today with many investment advisors who offer you financial products. Where they receive high commissions in some cases contrary to fiduciary criteria. Without knowing if that product is really the best for you. And where clearly, a conflict of interest can arise.

So, isn’t it much better to pay your Certified Financial Planner the same way you pay your Golf teacher? Which is simply by the hour, knowing that he is providing you with a service and you are paying for his expertise. So that he can tell you what you are not doing well and what is the strategy would be to solve it.

It is precisely there where copying this same methodology is where the Financial Planning by the Hour service was born. Where clients pay is for the time they need, to validate what they should continue to optimize with respect to their finances, and their tax planning.