The title is a quote from Super Bowl winning coach Bill Parcells. The idea is that a team is as good or as bad as its record indicate.  Fans, commentators, and even players like to interpret – or rationalize – circumstances and game events so as to suggest that a team is better, or sometimes worse, than its record might suggest.  A lucky bounce here or a bad call there and those close losses are wins, see, ‘we’re better than our record suggests’.

Parcells on the other hand will have nothing of it.  His take is that a team’s record is its bottom line.  Explanations and rationalizations will not lead you to a championship season, only your results on the field of play.  So rather than tell me that you’re a good team, show me.

Life often parallels sports, or is it vice versa.

We have a bottom line metric that tells us without question or explanation how we are performing in the arena of our personal finances.  Too many assume this metric is our level of income.  But income alone is like the team who scores points in bunches only to watch their opponent do the same.  It (high income) can contribute to a win, but it is not the only ingredient in the winning process.

Rather, the key metric – the record indicating the relative success for our financial play – is our Net Worth.

For purposes of example, consider the wealthy business man living in the McMansion, funding newly leased German luxury sedans and Caribbean vacations rather than retirement or junior’s college education while sporting an array of $1000 suits.  The dude is loaded!  And doubly so when compared to the unassuming school teacher living in a quiet townhome and driving the 10 year Corolla raking perhaps a third the income.

But a funny thing happened on the way to a cozy retirement.  The schoolmarm contributes to her 401k (or equivalent) has steadily paid down her mortgager, and traded a monthly car payment for a positive monthly cash flow.  Meanwhile, the business man’s killer income has washed through his hands like so much water.  His kids are in private schools and travel soccer teams, his perpetually renewed leases provide a relentless and growing outflow, the leveraged dream home is upside down and retirement planning begins with the next raise or perhaps the one after that.

Hey, it sounds like fiction, but I’ve read enough Money mag “Real Life” segments and observed the bevy of Lexus’ in my office parking garage to know that too many folks are working away for the now rather than the future.  Sure they may be paying attention, but to net income and cash flow rather than to the bottom line – Net Worth.

So what is this Net Worth number?  Trent over at The Simple Dollar offers a great illustration of the mechanics, so I’ll send you here rather than recreate his efforts.  But suffice it to say that Net Worth sums the net value of your assets against the net value of your liabilities.

Simply stated:  Net Assets – Net Liabilities = Net Worth

In the example I provided, the business man with his leveraged home, car debts (a contracted lease obligation is the same as a debt… try breaking a lease if you doubt it), and limited savings may actually have a negative net worth.  For all his outward appearance he has nothing but debt to show for his efforts.  Whereas the teacher has learned the lesson taught by others – she has bulked up savings and equity in her home offset only by her mortgage balance.  According to her financial record, she is putting together a winning performance.

Now fast forward to the very end of our individual games.  Our net worth will represent our final estates.  It is the legacy we will or will not be able to leave behind to the ones about whom we care.  Dave Ramsey uses a line when talking to callers trying to settle an estate.  He is not meaning to be harsh, but reality is sometimes cold.  Depending upon the structure of the dialogue he’ll ask or comment (paraphrasing) “there is nothing left to show for the estate”.

When I hear this comment, I personally rephrase the question in my mind – rather harshly I might add – as motivation for myself:  “financially speaking, there is nothing to show for this person’s life work but debt”.

Now, the key is “financially speaking” because we’re all worth more than the money in our accounts, but this is how I repeat the question to myself and it forces me to consider how I’d want it answered upon my coda.

At a minimum, I don’t want my final possessions liquidated to pay my accrued debt.  Nor do I want creditors hounding my loved ones for payment when I’m gone.  So I find it important to keep score.

And, because one day I want to enjoy more of life’s finer things – including a dignified retirement – I actively keep score.  I monitor my net worth on a monthly basis and track my percentage change month over month.  I’ve written before about my net worth goals, and it is a winning score most anyone would be pleased to accomplish.  However, I’m now tracking my progress in a way that allows me to be intentional in my actions relative to those goals.  While that does not by itself ensure success, it sure crystallizes my game plan and directs the path for my execution.  One day I’ll look at my record and feel a touch of pride, because I’ll know both what it says and represents.

Photo By: AMERICANVIRUS

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We are all familiar with the images.  Sometimes hidden in the shuffle of “Baby On Board”, “Honor Student” and “favorite team” stickers and other window pasties, they are there and we have seen them.  The well intended but horribly mixed messaged “In Loving Memory of….” tributes tattooing the back windows of vehicles as though conveying some sort of rolling shrine or dedication status to an ordinary heap of car parts.

I’ll eventually update my own Will to say so, but in the meantime allow this request to suffice, if I am able to leave enough money behind for my heirs to buy a new car… please, please, please care enough for my memory so as to not affix my name as justification to your impulsive and self serving poor decision.

Now I will pause just long enough to allow for the idea that most folks who so emblazon their cars do so with appropriate intentions.  But borrowing from an old saying about intentions, we can agree that the best of intentions do not always yield the best of decisions.

Here are the basic ingredients in my homemade case:  we love and want to visibly honor the memory of our lost loved ones, while sad for the loss we are pleased to receive an inheritance, most folks already have some sort of monthly debts chipping away at their freedom (credit cards, existing car loans, student loans, mortgages, etc), most new cars are clearly and (overwhelming so) a horrible financial decision, and finally, we all still want a new car.

So, for many, at an already emotional time we’ll impulse an emotional decision related to a topic, personal finance, which is already an emotional tinder box.  And with, quite literally, window dressing we’ll pave over the entire transaction, insulating it from criticism because of what we intent it to represent.

But pause now, free from the moment, and consider the ridiculousness of the entire transaction.  A relative dies leaving a portion of their life’s work which is immediately exchanged for an asset universally known for its eroding value and limited shelf life.

Which is to say nothing for an inevitably dirty, rust heap-y, poorly maintained rolling tribute cutting me off in traffic with horns blaring and birds flipping… ah the memories.

No, that is so clearly not the legacy I care to leave nor that I can in good conscious attribute to a departed family member.  Rather than shuck my portion of someone’s life work into a chasm in exchange for a fleeting pleasure, I would rather invest those dollars in my future and the future of our family.  Use those dollars and the efforts they represent to enable us to stand on the shoulders of those going before us rather than as an anchor holding us back and weighing us down. 

Sending a child to college, eliminating debt, securing your future, and ensuring you leave a financial legacy are less glamorous in the moment but they enable a lasting memorial, an ongoing and continual nod to those we loved, and still love even today.

Photo By: stevelyon

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