At time of year, in offices and living rooms across the country, men and women are studying NFL statistics from last season preparing to draft their fantasy football teams. Many people who play fantasy football fall into the trap of picking players that they know or like from their favorite teams. These casual players may have short-term success based on how their favorite team does in a particular game or year.
However, any fantasy football team manager who wants to win consistently and regularly, will spend time looking at the stats for players and teams from the previous year as well as rankings, forecasts and matchups for the coming season. This analysis is necessary to pick a winning team. This process of detailed analysis of past and forecast future performance is much like that done by any good financial advisor. (For more, see: Financial Planning: It's About More Than Money.)
The Financial Process
The Certified Financial Planning Board of Standards (CFP Board) breaks down the financial process as a six part process. The easiest way to remember the process is with the following acronym: EGADIM. This stands for:
- Establish a goal for the process.
- Gather data.
- Analyze the data.
- Develop a plan.
- Implement the plan.
- Monitor the plan.
To successful fantasy football team managers this process should sound rather familiar. The goal, of course, is simple in fantasy football: win the league whether by record or cumulative points. In financial planning the goals may be more complex. However, a good financial plan will break the goal into achievable sub goals just as a fantasy team manager may have a plan for rushing or passing or defense to achieve the overall goal.
Much like in sports, there are many sources of data needed in creating a financial plan. Investors today have more sources of information than ever before to find the data needed to be a smart and informed player in their financial planning. (For more, see: Starting Early With Financial Planning.)
Once you have accumulated this data, you may feel overwhelmed. However, here is where the idea of breaking the data down into areas just like you did with your goals will be important. While one fantasy coach may want to focus on touchdown to interception ratio in picking a quarterback, another may want to focus on the yards and completion percentages. Similarly, you may want to focus on earnings reports, return on investment or even cash flow reports to find the players that you want on your financial team.
Next, you will need to create a plan on how you believe you can achieve your goals. This means that it is time to look at how the players available to you may fit your goals. Are your goals long or short term, high or low risk? In this same way as a fantasy coach plans to pick a team that he or she believes will help them in particular matchups along the way as well as in the season as a whole, you will need to look for the balance that will meet your needs and goals.
Building Options into a Plan
Remember that as author and poet Robert Burns said, “The best laid plans of mice and men often go awry.” I mention this not to scare you, rather to advise to build options into your plan. Much as during a fantasy football draft, the player you want may get drafted ahead of you and you will have to go to your second or third choice when it is your turn. In the financial world, it is always a good idea to have diversification and flexibility built into your plan. A fantasy coach doesn’t want to have too many players on a bye week simultaneously, and a financial plan should also not risk too many “players” in one sector that may have a short-term plateau.
Finally, the plan must be flexible in the long term. This means monitoring the performance over the period of plans life. Just as a football player can have a bad season or suffer an injury, so can a company or even an entire industry. A fantasy football coach may trade a player or even cut the player in favor of a player who is having a better season or is not injured. Likewise, a financial plan must be monitored and corrective action taken when performance is not living up to the plan goals.
While managing a fantasy football team may seem daunting to someone unfamiliar with the concept, so may the financial planning. This is where research, learning, and advice from a certified financial planner will help in managing your financial future. (For more from this author, see: What to Include in Your Financial Spring Cleaning.)