(A little further on in this article, I’m going to give you a critical free resource that you can use right now in order to start planning your investments like a professional. You’ll love it, so keep reading.)
Financial strategy is a long-term vision for how you want your money to work for you. Even though it is long-term, a good financial strategy breaks up the future into distinct time periods. Chess metaphors are particularly useful in developing a solid financial strategy.
Here are my three favorite financial strategies learned from chess:
1. Build a financial plan
When a professional chess player is about to play, he develops a beginning, middle, and endgame strategy. He needs to decide which gambit to use to open the game, how to develop a strong defense before launching an offense in the middle game, and what kind of material exchanges to make to finish with a strong endgame.
Similarly, when trying to improve your finances, you need to create a financial plan. To be able to do this, you need to find out what your goals are, what resources are available to you, and what kind of strategy is most applicable to your situation so that you can realize your financial objectives.
2. Look at the board
Once a chess player has developed his strategy, he examines the board. Which pieces are available? Where are they positioned? What is their strength in relation to his opponent’s pieces?
This can be compared to looking at the financial tools you have available in order to implement your financial plan. You must assess your net worth and tax liabilities, and figure out your asset allocation. Evaluate your present and future finances by considering factors like cash flow, assets, and withdrawal plans.
Do you think that your estimated asset growth will be sufficient for realizing your financial goals? If you don’t think so, then you need to decide which steps to take to create a more secure future.
Easy-to-use, free financial planning organizer you can use now
As a financial planner, what I really need to help my clients is accurate data presented in a clear format. It’s much harder to do my job well when clients don’t have their statements with them, don’t understand their budget, or don’t even know where all of their money is held. To help them out, and to help you out too, I’ve created the “Financial Snapshot” tool. It’s an online questionnaire that you can use right now to help yourself get organized. You can save the results as you work, in case it takes you a while to gather all of your information, and you can also email a copy to yourself or your own financial planner. People who buy the book Rich As A King get access to this special form along with over 20 more awesome resources. But I think it’s so important for everyone to get their finances organized, that I’m happy to give this to you for free. You don’t have to sign up, and you don’t have to buy the book (though I hope you’ll consider it). Just click here and take this super important first step now.
3. Is it worth the risk?
Reward goes hand-in-hand with taking a risk. Unless there is some initiative, a move forward, there is nothing to gain. However, sometimes the consequences of a loss can be too hard to bear. For example, in chess, exchanging pieces or creating a new position is a risk. One wrong move can ruin the game, yet one right move can create an overwhelming victory. Before making any move, the chess player has to ask himself whether the potential reward outweighs the possible risk.
The same applies to the individual investor when choosing an investment for his portfolio. If you are still young and working with a full-time salary, your level of risk tolerance will be different from that of an investor who only has another five years to go until retirement. Before you take any significant financial steps, it is vitally important to research and, if necessary, to take advice from your financial advisor, regarding all of the possible risks and rewards.
For more ways to learn how the strategic thinking involved in chess can improve your finances, click here.