Here are the Steps to Success in Chess and Investing

Here are the Steps to Success in Chess and Investing

When you play chess, you need to take small steps to success rather than making grandiose moves or waiting for your opponent’s blatant blunders. A good chess player builds his defensive and offensive fortress slowly, accumulating small advantages wherever possible.

The same idea applies to finance. Since it’s unlikely that you will win enough money in the lottery to support you forever, you’ll need to accrue money in reasonable, steady amounts. Over time, a collection of seemingly trivial sums adds up.

The book Rich As A King: How the Wisdom of Chess Can Make You a Grandmaster of Investing suggests the following small steps to help you build your nest egg. (To watch a 3-minute video about this, click here.):

Regular savings. Squirrel away $5 per day, and put it into a stock mutual fund monthly or quarterly over twenty years. If you net 6% per year on that pool of money, you’ll end up with over $67,000. (If you can save even more, great!)

Lower fees and expenses. Look for ways to reduce small, recurring cash outlays. You could transfer your banking relationship to a lower-priced firm (saving $400 per year), pay off your credit card every month (or better yet, switch to a debit card) and save $2,000 per year in interest payments, and renegotiate your cable and cell phone bills (save $30 per month). Examine your budget to find other possible savings routes. Implementing these alone would allow you to sock away $3,800 every year.

Get a better salary or find a second income. Could you find a job with a better salary, or perhaps work part-time in something you enjoy? If you currently earn $100,000 and could manage to make an extra 10% through switching jobs, working overtime/part-time, or a combination of both, or if your spouse could bring in that extra money, you’d have $10,000 more in your pocket. Save that money and you’re well on your way to wealth.

Reduce your lifestyle … a bit. Could you manage if you spent 2.5% less? Most people could find a way to cut back 2.5% of their cash outflow.

Contribute to a 401(k). Only about a third of young workers contribute to employer-sponsored retirement plans. Many don’t realize that employers usually match a portion of their contribution to 401(k) plans. If you allot 15% of your income to your 401(k) and your company matches a part of it, such as 5% of your income, that’s like getting an extra thirty-three cents for every dollar you put in, giving you an immediate return of 33%.

Maximize IRA contributions. If you can’t participate in a 401(k), at least put the maximum allowable into an Individual Retirement Account (IRA). If you add $5,500 to a tax-deferred account each year, assuming again the 6% rate of return, it could grow to $202,000 in two decades.

Ready to start with these savings? Add it all together, from the $5 daily savings and the lower fees all the way to the 401(k) retirement plan savings or IRA. If you keep that up for twenty years, you could end up with an impressive amount of savings. By building up your savings in small increments, you can checkmate a lot of financial opponents.

For more tactics and strategies using chess wisdom to build your wealth, get your copy of Rich As A King.


Douglas Goldstein, co-author of Rich As A King: How the Wisdom of Chess Can Make You a Grandmaster of Investing, is an avid chess fan, international investment advisor and Certified Financial Planner (CFP®).