When it comes to money, there are two categories into which everything can be divided: offense and defense. Offense is what you EARN. Defense is what you KEEP. Personally, by necessity, my forte has always been defense. I’m getting better at offense. My goal, posted here for all the world to see, is to become excellent at both.
Offense – Someone who is good (strong) at playing offense will earn a high income relative to their needs. Someone who is bad (weak) at playing offense will earn a low income relative to their needs. Simple as that.
Defense – Someone who is good (strong) at playing defense will spend less than their income, which means that there is income that can be saved. Someone who is bad (weak) at playing defense will outspend their income, whatever it may be, leaving little or nothing for saving. While it is not difficult to overspend a low income, there are plenty of people who will overspend their income no matter how high it goes.
Many people are good at offense. Many people are good at defense. Much less common is the individual who is good at both, as this person will almost certainly end up wealthy. Someone who is good at neither may end up as broke as a $3 watch. Either way, the percentage of your income that you keep is more important than how much you earn. For this reason, I propose that defense is more important than offense.
OK, huddle up!
Strong Offense + Strong Defense
(Make a lot + keep a lot, relative to income) = Winning with money!
Weak Offense + Strong Defense
(Make a little + keep a lot, relative to income) = Winning with money!
Strong Offense + Weak Defense
(Make a lot + keep just a little or none) = This game is too close to call.
Weak Offense + Weak Defense
(Make a little + keep just a little or none) = A losing season. Time to fire the coach.
As shown above, strong defense is the “X” factor in winning. If you have a low or modest income, but live beneath your means, you will have money with which to build wealth. Small amounts of money invested over a working lifetime can lead to a fortune at retirement. If you have a high income, and live beneath your means, all the better. Either way, you win when you spend less than you earn and invest the difference.
As with any game plan, both a strong offense and a strong defense are best. I recommend that you get to work on the defense right away, since that is most important, and it is something you can have an immediate impact on. This means spending less and saving more. Improving your offensive game is a bit more work. To do this, you must make a plan to earn more. Easier said than done I know, but for most of us far from impossible.
One of my goals with this blog is to help you hone both your offensive and defensive game. I will do both with stories still to come. Meanwhile, some homework: brainstorm your own personal ways of getting better at money offense and defense. How will you start to earn more or reduce your expenses – right now, today? It would be cool if you’d share your ideas with the readers here at the Money Trip blog. Or, you may email me privately at firstname.lastname@example.org. Good luck!