6 Fundamental Financial Lessons From Hockey To Apply To Your Money And Life
This could be the most Canadian personal finance article ever written. Financial lessons from hockey…
How could a game played on ice with players wearing steel blades on boots carrying sticks shooting a rubber disc have any relevance to your money?
Given the scope of the business of hockey, characteristics of the athletes and scenarios the game provides, there are some applicable themes to build off of.
Here are 6 financial lessons from hockey to apply to your money and life.
1.) Playing Shorthanded
In hockey the term shorthanded means exactly what you’d expect. One team is playing down a player (or two) and is then of course, shorthanded.
This creates a scenario when the shorthanded team will need to battle and grind hard in an attempt to not give up a goal. This will likely create grueling situations for the defending players as they block shots and go to war in the corners to stave off the attacking team.
You’re battling off the disadvantage in order to get back to even strength.
Within your financial life the comparable scenario would be getting out of debt.
Financial Lesson #1: Getting Out Of Debt
Your debt is like playing shorthanded in your attempt to reach your financial goals. The interest rates of credit cards and car loans or the burden of your student loans are creating an uphill battle.
In order to overcome them, you’re going to need to grind and take a tactical approach. Formulate a student loan repayment plan to beat that shorthanded situation. Use a mortgage calculator to understand the full scope of that debt.
Getting out of debt will likely take the 1-2 punch approach of: optimizing the money you currently have and also earning additional income.
You have to best spend the money you have to open up additional dollars to put against your debt. Plus expedite that process by earning more money to really battle back to even strength.
Here are some great resources to help you do both of those:
- Credible: Credible is a service that allows you to compare pre-qualified refinancing rates on loans from up to 11 lenders. According to their website the average user saves an average of $18,000.
- SoFi: SoFi has become an industry leader in the student loan refinancing industry. The company has refinanced over $18 billion in loans since 2011 and their website claims that the average members lifetime savings is $15,767.
- Money Saving Services: There is a collection of apps and tools to help you save money through your normal spending habits.
- Side Hustles: The number of opportunities to make extra money to get out of debt are bountiful. With some time and effort you can really speed up that repayment timeline. Here are 35+ side hustles almost anyone can do to earn more money.
- How To Make $1,000 Quick: Similar to the side hustles above, there are ways to make $1,000+ quick to help reach your financial goals.
Just like being shorthanded, it’s going to take the combination of strategy and hardwork. Battle in the corners and put in the extra work against your opposition (debt).
The goal is to get back to even strength with your finances.
2.) Wearing Equipment For Safety
If you’ve ever played hockey or seen a hockey player without their jersey on, you know the gauntlet of equipment worn.
Helmet, visor, elbow pads, gloves, shoulder pads, jocks, knee pads, cut resistant socks and a handful of other safety measures. Not to mention the 25+ pounds of equipment goalies wear to fend off 100 MPH slapshots.
All these items are serving one purpose: protecting the player from injury.
The connection to your financial journey here would be the safety steps you take to protect your money and life when an unforeseen scenario arises by building an emergency fund.
Financial Lesson #2: Building An Emergency Fund
An emergency fund is intended to keep you above water should an unfortunate emergency arise.
Call it a weather the storm fund, the bunker of your finances or fallback account. The point is to build a financial safety net to survive when life hits you in the face with a dose of unfortunate circumstances.
Here is (almost) everything you need to know about emergency funds. Including what it is, where to put it, how much to save and other resources to help you put on this piece of financial safety equipment.
All the equipment hockey players wear serves a similar function. It’s all a preventative measure to protect themselves should a troublesome situation come to be. In your financial life this might be an applicable scenario to hockey like a medical emergency.
However, the list extends well beyond that.
Your emergency fund is meant to keep you afloat during job loss, vehicle issues, home repairs or a financial crisis.
A common recommendation is to build your emergency fund in phases:
- Save the first $1,000
- Increase that to 1 month of basic expenses
- Build that to 3-6 months of living expenses
However personal finances are personal. Just like the level of safety precautions taken by hockey players. You need to do what fits your lifestyle and works best for you.
Other financial safety guards would of course be diversification, insurance, etc. But one sure fire piece of equipment that should be in your financial life is an emergency fund.
3.) Reviewing Film
Professional hockey teams employ video analysts. These staff members pour over hours and hours of footage from both their team and the opposing teams. They have programs and tools to help them build a library of footage in order to have that historical insight across the hockey world.
With their own teams, they’re hoping to identify positive and negative trends in the player’s habits, effort and positioning.
The goal is to find areas of improvement or opportunities to exploit moving forward.
With your personal finances the common ground would be tracking and analyzing your spending habits.
Financial Lesson #3: Tracking Your Spending
The process of reviewing where the money you have is actually going often provides major aha moments. The discoveries that coaching staffs make when digging over hours of film delivers the same aha moments in hockey.
Thankfully, with our finances, free tools like Mint and Personal Capital have made this practice extremely efficient. Setting up an account takes a matter of minutes. You now have a history of all your spending in one location to deep dive and review.
This will allow you to identify areas of improvement or overspending.
A popular quote is “what gets measured, gets managed”. It’s hard to manage your finances without measuring where those dollars are going. Start tracking and getting a holistic understand of where each dollar is ending up.
You might not be aware of some bad habits and having that complete picture in front of you will often steer you in the right direction. Eliminate the spending as best you can that doesn’t bring you any happiness or value so you can spend more on the things that do.
Hockey teams use film to track their habits and you can do the same with your money.
4.) Operating Within The Salary Cap
Each of the 31 NHL teams operate within a hard salary cap. This cap is the maximum payroll that the team’s collection of players can total to. For the 2018-19 NHL season, the salary cap will net out at $79.5 million.
The team’s front office must best manage their roster’s contracts to fit within this salary cap. This requires optimizing for both the short term and long term if they want to be a perennial contender.
In the NHL you can’t go over the salary cap. However, in the NBA teams can spend over the salary cap but have to pay steep luxury tax rates.
Within the hockey world there is no flexibility. You either spend to the maximum of the cap or stay below it.
The financial lesson here is of course sticking to a budget.
Financial Lesson #4: Creating A Budget
You need to identify your own hard salary cap based on your income and spending habits in your life. The financial lesson above on tracking your spending will help with building a realistic salary cap.
Mint is often the consensus pick due to the combined powers of tracking and budgeting it provides for free.
Dive back into 6 months worth of spending to take the average across the main budget categories: accommodation, transportation, food, pensions and insurance, entertainment, etc.
Compare those figures to the Bureau of Labor Statistics 2016 Consumer Expenditure Report.
The Big 3 of Your Budget
Similar to the tracking lesson above, the goal here is to identify opportunities of continued improvement so you can better reach your financial goals. The biggest areas of spending for the average individual (or household) is the ‘big 3’: accommodation, transportation and food.
Those ‘big 3’ will make up the majority of your budget, almost like the big-name superstars on a hockey team. You want to have the most cost-effective ‘big 3’ as possible to fit your ideal lifestyle while staying within budget.
Check out this article on helping take control on the ‘big 3 expenses’.
The financial lesson from hockey is that you’re operating within the same standards of an NHL team. You’re implementing a hard cap and not going over your monthly (or annual) budget.
5.) Skill Development & Training
In the NHL teams have to navigate a 82 game regular season schedule. It’s a long, grinding road of planes, hotels and tiresome games across North American.
Not to mention the offseason, preseason and Playoffs.
While players are famous for the fun they have, they also have impressive dedication and commitment to their skill development and strength and conditioning training.
The specifics of their regiments differ in the offseason and during the months of endless action. However, the focus of this skill development and training remains consistent: increasing efficiency and effectiveness to maximize their performance.
Teams, or the player’s individually, will bring in specialized coaches and exports to support this skill development and training.
Continuous improvement and dedication to their craft.
You can apply this mindset of training and development with the support of others to your personal finance skill development and education.
Financial Lesson #5: Mastering Your Money Skills (Financial Literacy)
While the skills and training of hockey players will be physical in nature, your financial literacy training will take place with your eyes, earbuds, discussion and first-hand experiences.
Budgeting, saving, earning and investing instead of shooting, passing, skating and positioning.
Thankfully there are a bevy of resources to help you train.
There are dozens of amazing personal finance and investing books to assist you with continuing to sharpen those fundamental money skills.
In recent years, the able to connect with content through podcasts has made your financial literacy training more accessible than ever. Every day of the week new personal finance podcasts are released for free. They might feature interviews with industry experts (coaches) that can help you master whatever money skill you’re working on.
Hockey players have various tools and pieces of equipment to support their training. You have the same with the collection of apps and services to manage your money.
Athletes might use supplements to boost their energy or further the positive impact of their training. You can use this principle with free cash back and rewards tools.
You have the resources available to train your financial literacy and maximize your output like a pro hockey player does with skill development.
6.) Pursuing A Goal
At the NHL level all of the 850+ players who take to the ice every season are pursuing one goal: winning the Stanley Cup.
In other professional hockey leagues, like the American Hockey League, Swedish Hockey League or Canadian Women’s Hockey League, that pursuit of an ultimate goal remains the same.
The attempt to reach that prize likely starts with some specific short term goals at the start of year with progression in those goals as the season moves along.
Setting goals (speaking about the objective type, not the scoring kind) are essential in hockey.
With our personal finances, that same practice of generating targets and objectives is extremely beneficial.
Financial Lesson #6: Setting Financial Goals
As you look to improve your financial situation, having markers to reach for will help with motivation, commitment and self-appreciation when you reach them.
Those money goals will vary from person to person.
What are you trying to achieve with your money? How do we best get there in the short and long term? When you close your eyes and think of the ideal, realistic life, what do you see?
Reverse engineering from that optimal state is a great way to build out actionable financial goals.
Start from the finish line and work your way back by forming long-term, mid-term, short-term and micro goals.
A contending hockey team has the vision of winning the Stanley Cup. Along that journey the other goals might include winning the Conference, winning the Division, having a winning record every month of the season, etc.
One popular way to build financial goals is through what’s known as the SMART framework. Specific, Measurable, Attainable, Relevant and Time-based. A quick example of a short to mid-term goal that touches on aspects of the SMART goal method could be:
“Saving $5,000 over the next year to build an emergency fund to cover unforeseen expenses.”
It’s specific, measurable, attainable (depending on your finances), relevant and time-based.
You can use these different areas of goal-setting with your financial life: have a grand prize to pursue, reverse engineer back from it and set SMART short-term goals that ladder towards the bigger picture.
In Closing…Financial Lessons From Hockey
The world of professional hockey is exciting, fast-paced and always changing. Just like your money and life.
These financial lessons from hockey are really just another way of showcasing some of the fundamental areas of personal finance.
Some of the hockey connections to your money and life are:
- Getting Out Of Debt
- Building An Emergency Fund
- Tracking Your Spending
- Creating A Budget
- Mastering Your Money Skills (Financial Literacy)
- Setting Goals
Personal finances will be always be personal. Unique to a specific situation and lifestyle. However, the core principles will always be relevant.
Enjoy the ride (game).
What other financial lessons can we take from hockey or other sports?
Let me know in the comments below.
Here are some other posts to help you take control of your money and life.
- 15 Smart Money Moves You Can (Easily) Make This Month
- Financial Advice From 29 Personal Finance Bloggers: A Memo To The Next Generation
- How To Make $1,000 Quick: 9+ Fast Ways To Earn Money When You Need It
- Building Good Money Habits – Make Your Own Money Momentum
- The Personal Finance Resources And Content That Saved My Life
- 35+ Rewarding Side Hustles That Almost Anyone Can Do To Earn More Money
- Waking Up At 5AM Changed My Life – Win The Morning, Win The Day