“So Carlos, what do you think about when you step up to the tee on a par 5?”
I recently got this question from a friend and I gave him an off the top of my head answer. While the first thing that comes to mind is “often said in jest,” it is also often the best answer. My response was “Blah, Blah, Next Shot Counts.” You may be asking what this has to do with money, and if you don’t understand golf you might be lost, so let me explain.
Wait, What Does Golf Have to Do With Money?
A par 5 is the easiest hole relative to par for an accomplished player. It is a hole where the accomplished player should take 5 shots to hit it from the tee into the hole. The way a 5 is scored on the hole has a typical sequence where the player hits their tee shot – The first “Blah,” then their second shot. The second “Blah” and then hits their third shot as close as possible to the hole – next shot counts. The first “Blah” means the golfer allows for a large margin of error. If they hit it slightly to the right or left or long or not as long doesn’t really matter because they can recover on their second shot.
What they can’t do on their first shot is bring danger or penalty into the equation because the first shot is simply a set up for the second shot. The second shot or second “Blah” is very similar to the first Blah. It is simply a set up for the third shot. While the first and second shot are important and essential, they are not the critical component to success. The shot that counts, the third shot is the one that really matters. It’s the one that really makes a difference and all accomplished players focus on this one, just a little bit more than then first two.
So what does this have to do with money? The similarity is as follows: Blah, Blah, Next Shot Counts is to golf as personal finance, personal finance, investment skill is to money. Yet, what’s alarming when it comes to wealth creation is that people think the only thing that matters is personal finance. They don’t focus on what matters. Without a focus on what really counts – Investment skill – it’s no surprise that people end up with a, “Blah, Blah, Blah” portfolio.
Where Checklists Fail
Why do you suppose this happens? The answer is surprisingly simple and why I chose the title of this tale to deal with financial checklists. People love checklists of all kinds because they want to feel a sense of accomplishment. Unfortunately, not all checklists are alike. An improperly weighted checklist is a sure path to failure because they encourage people to take shortcuts. Financial checklists are seldom useful as anything other than reminders. Financial checklists don’t focus the appropriate amount of time or effort on the difficulty of the task and the importance of the task.
Here’s a typical checklist; take out the trash, feed the dog, paint the house. When you look at this list, you instinctively know that the first Blah-take out the trash doesn’t require much effort and neither does the second Blah. However, unless you are prepared to do a very sloppy job of painting the house, the third item requires considerable effort. It is the same with money.
Let me give you a money example. You will often get a note from your purveyor of financial services or from a leading magazine that tells you ways to “prepare for the holidays” or a “year- end checklist” or a “what to do at tax time.” These checklists should serve as reminders but our minds don’t think that way. Our minds want to assign an equal weighting to each of the items on the list. It is why we see ridiculous lists that say check your credit rating, review your life insurance needs and examine your investment plan. Excuse me!
So, What Should You Do?
The writer of these lists is no friend of yours. Here is what the list should say, spend 10 minutes checking your credit score, 10 minutes checking your life insurance requirements and 10 months educating yourself about investing. Why doesn’t it say this? Once again, the answer is simple – investment skill is difficult to achieve for you as well as for the writer of these checklists.
A great tale to accompany this is A Martini Tale. If this tale doesn’t get the point across then a different perspective might help. What you must remember and the reason for this tale is to remind you to focus your attention where it matters – investment skill. If you do, then your wealth creation and retention journey will be a success. Don’t fall victim to Blah, Blah, Blah. Focus on Blah, Blah, Next Shot Counts.