It’s that time of the year again when everyone’s got IPL on their minds. And why not? It’s a grand festival of cricket in a country where the sport is nothing short of a religion. But did you know, amidst all the fast-paced matches, star-studded lineups, and nail-biting finishes, the Indian Premier League can teach us about financial planning? That’s right! IPL’s got plenty of sound financial advice for us all! So strap on your pads, grab your bat, and take guard, because in this blog, we’re going to take a look at five things IPL can teach us about financial planning! Game on!
1. Set Clear Financial Goals
The best IPL teams are always driven by goals, whether they are as short-term as getting a key batsman out early or limiting the opposition to a specific total, or as long-term as winning the IPL trophy. These goals lay down the foundation of their overall plan, and they give the players direction and purpose. Similarly, one’s financial planning journey is driven by financial goals. Whether you want to save money for a vacation next year, or you want to invest for a peaceful retirement in thirty years, goals are what give you direction and keep you motivated.
Setting these goals gives your overall financial planning a purpose, so one must pay special attention to laying down a solid framework. This is done by SMART goal setting. SMART goal setting means setting goals that are Specific, Measurable, Attainable, Relevant, and Time-bound.
Let’s understand what this means exactly.
- Specific: Your financial goals should be defined clearly.
- Measurable: Your financial goals should allow you to track your progress towards them.
- Attainable: Your goals must be realistic and within your reach. You should take into account factors such as your financial situation, time constraints, and skills when setting goals.
- Relevant: Your goals should be relevant to your needs and must align with your overall financial plan.
- Time-bound: Your goals should have a deadline to hold you accountable. A specific timeframe keeps one motivated and focused.
For example, if someone says, “My goal is to save money”, they aren’t being very specific. There is no metric that can help them track their goal, and there is no timeline attached. A SMARTer way of thinking could be “My goal is to save Rs. 15,000 every month for the next 12 months for a downpayment on a new car” This clearly defines why the money is being saved, how much needs to be saved, and how long it will take to achieve the desired result. Staying realistic is important as unrealistic goals are also demotivating and can lead to disappointment. So like an IPL team has a goal in mind with every ball they bowl, have your financial goal in mind with every financial move you make.
Also Read: Financial Advice for Young Adults
2. Develop a Detailed Financial Plan
In the IPL, the winning formula is often teamwork. Every aspect of the team matters – from the coaching staff to the batsmen, the bowlers, and the fielders. If only the bowlers perform well and the batsmen fail to score runs or the fielders drop catches, the chances of winning would go down. So performing well in just a few aspects is not enough. Similarly, a financial plan must include various aspects to be truly effective, such as emergency planning, investing, reducing tax burden, risk planning, budgeting, and debt management.
Each of these aspects has a specific role to play and they work hand-in-hand to guide your financial future. The importance of a holistic financial planning approach cannot be underestimated. A financial consultant can be your coach, and help you create a diversified investment portfolio, or retirement plan, get comprehensive insurance coverage, build an emergency fund, draw up a budget, minimise tax liabilities, and much more.
Every team is unique, with their strengths and weaknesses. Their game plan depends on playing to their strengths, minimising their weaknesses, and exploiting the weaknesses of the opposition. And it works just like that in financial planning! Every individual has unique financial circumstances, goals, and risk tolerances.
An effective financial plan capitalises on your strengths, while also addressing your weaknesses, which could be debt or lack of an emergency fund. Just as an IPL team makes a strategy to exploit the weaknesses of their opponents, a well-made investment plan can help you identify new opportunities and leverage market conditions to your advantage.
3. Leverage Resources Wisely
Even before the tournament starts, each IPL team is given a budget to buy players and build their squad at the IPL auction. They must stay within this budget and identify the best players possible through scouting to build a balanced squad of low-cost value players and expensive big hitters. Just like an IPL team, our resources are limited. We have a limited income, and thus limited savings to work with.
We have to make the most of our income by creating a realistic budget, prioritising savings, and making a plan that allocates our resources towards achieving our financial goals in the most efficient way possible. Just like IPL team scouts find hidden gems for cheap, like Suryakumar Yadav and Rinku Singh, we should also seek out undervalued opportunities in the financial market to get more bang for our buck.
A very important factor to consider when maximising the efficiency of our limited resources is asset allocation. Every team has a mix of batsmen, bowlers, all-rounders, and a wicketkeeper. If a team has an imbalance in their lineup, they will likely struggle and lose. Similarly, our investment portfolio must be balanced. It should be diversified across different assets such as stocks, bonds, real estate, gold, and mutual funds to not only optimise returns but also manage risk. With a well-balanced portfolio, we can maximise our chances of achieving our financial goals.
A bowler studies the pitch to get an idea about the little cracks and variations in it. With that information, he can guess how the ball will behave and adjust his pitch, spin, length, swing, and bounce to turn the tide in his favour. You too can study the pitch, that is, the market, and analyse trends, patterns, and fluctuations to understand dynamics to anticipate potential opportunities or risks. Then, you can tailor your strategy accordingly.
Taking full advantage of limited resources and information available can truly turn the tide in one’s favour, in both IPL and financial planning. Here’s another example: The batting team always tries to take full advantage of the powerplay because of the fielding restrictions. A captain always lets his best bowlers complete their four over spells. A team always plays the maximum number of foreign players allowed. In these cases, the teams are trying to get the most out of restrictive situations.
Similarly, one should make full use of the various exemptions, deductions, and benefits given in the Income Tax Act, and minimise their tax liabilities legally. This can help you make the most out of the annual tax-paying obligation. With proper tax planning, you can save more, invest more, and realise your financial dreams faster, without the fear of litigation.
Another similarity is player protection and backup plans. Players always wear protective gear such as helmets, pads, and guards to protect themselves from nasty deliveries. A health insurance policy acts as a protective measure for you, as it provides coverage for medical expenses in the case of hospitalisation due to sickness or injury. Also, if an important player gets injured, he is replaced by another. This protects the team’s structure and allows them to stay competitive. While an individual cannot be replaced in case of an unfortunate event, having an insurance policy can provide a form of financial replacement. It can provide financial stability to a family in the case of the main breadwinner’s untimely death and maintain the family’s financial stability.
Also Read: Smart Investment Moves From Powerplay in Cricket!
4. Monitor Progress Regularly
An IPL team’s job doesn’t end after the match. They always review what happened in the match. Whether they win or lose they analyse players’ performances, injuries, team strategies, and opponent tactics to figure out how they can improve and refine their game plan for future matches. Similarly, you should also regularly review your financial decisions, investment performance, and progress towards financial goals to make sure you are on track and make adjustments wherever necessary.
Even in an ongoing match teams get strategic timeouts where they discuss their current performance, assess the situation, chat with coaches, and make changes. For example, if two or three wickets fall in quick succession the coach will recommend focusing on building a partnership, even at the cost of a slow run rate. In financial planning, one can also face such destabilising conditions that force a strategic time out. You might encounter unexpected challenges such as market fluctuations that demand your immediate attention. During such times, it’s important to pause, reassess your financial strategy, and consult with your coach – the financial planner.
Before a match, a team closely monitors external factors like weather conditions and developments in rival teams. They predict conditions like when dew will fall, which affects playing situations and the strategies for both batting and bowling. They also monitor the form of rival team players and stay updated on any news related to their opposition. These forecasts and predictions allow teams to make informed decisions during the match and adjust their tactics accordingly.
Similarly, one should always monitor external factors such as interest rates, market trends, new policies, and geopolitical events that can influence investment performance. With some solid research and expert help you can anticipate changes in market conditions. Doing so makes your decisions more informed and hence, increases your chances of success.
5. Adapt and Evolve
Conditions don’t need to always be in your favour. Most of your success hinges on how well you adapt to adverse circumstances. Take the weather for example. A team cannot control when it rains, how much humidity there is, when the dew will fall, or how strong the wind is blowing. However, what they can control is how they respond to these conditions. Does a team losing a coin toss automatically mean they will lose the game? Of course not. Changing to accommodate adversity is how one evolves. This also holds in the world of finance. One must always be ready to adapt to changing market conditions. The road to achieving your long-term financial goals is filled with unexpected challenges and obstacles. These can be unavoidable sometimes and can potentially throw you off the track. That’s why you should always have a financial safety net in the form of an emergency fund.
An emergency fund is a reserve of cash worth six months of your living expenses, which allows you to weather unexpected expenses without derailing your monthly budget or your long-term financial goals. It prevents you from falling under the heavy burden of debt and provides peace of mind and financial security during unforeseen times such as job loss or medical emergencies.
Teams also evaluate their own performances with metrics such as strike rate, average, economy rate, and bowling average, and change things up when they are not working, like by changing the batting order or trying a different opening combination. When you are investing you have to also look at different metrics like monthly savings, return on investment, volatility, and diversification, and adjust your investment strategy accordingly.
Your approach to finances should also be flexible.
Does a good team play the same way against every opponent? No. A team changes its tactics to beat different teams. In a similar vein, you need to adapt your strategies based on your unique circumstances, financial goals, and market conditions. What works for you in one investment situation may not work in another. By keeping yourself open you will also welcome new opportunities and be better equipped to go through changing economic landscapes.
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Conclusion
These are just some things the Indian Premier League can teach us about financial planning. If you look closely, you will find that the similarities between the two are aplenty. Individuals just starting out their financial journey can feel a bit overwhelmed, but it is as they say, “Take one game at a time.” That’s how a team wins IPL, they focus on the now while staying mindful of the overarching goal.
When a good team loses, do the players dwell on the loss? No. They form a hurdle and discuss what went wrong. Good players learn from their mistakes and bounce back stronger. So stay focused on the present, and don’t let your past mistakes get you down. Trust that with discipline, dedication, and perseverance, you’ll achieve financial success one step at a time!
