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A Big Truth About the Big Game: Defense Wins Championships

With Sunday almost upon us, it’s as good time as any for a short pep talk. Consider these X’s and O’s.

Our culture celebrates the offensive. I don’t refer to twerking here; I refer to scoring. Points produce popularity. And that’s why most people know about Peyton Manning, because he’s a big time scorer.

Defenses, meanwhile, labor in relative obscurity. But for his recent outburst, few would know about Richard Sherman.

Despite our points-obsessed culture, defense matters. To win at football, you have to outscore the opponent.  You can enjoy an explosive offense and still lose (if your offense scores 38, but a porous defense allows 39, the result is never victory). And you can suffer from a lousy offense and still win (if your team scores 7, but a stingy defense allows 6, you always prevail).

What’s true in football holds true in finances. A household can earn $250,000 in annual income, but if it spends $251,000 each year, it’s continually thrown for a loss and never gets ahead.  Another household can make $50,000 per year, but if it spends only $25,000, it gains ground fast—and outperforms defenseless spenders who earn five times as much.

Many high earners are myopic. They focus solely on offense. They enjoy good jobs, earn impressive incomes, and think they’ve got it made. Such thinking is dead wrong. News archives are littered with stories of those who enjoyed offensively large incomes, but went bankrupt because they ignored their spending and lived paycheck to paycheck.

Kickoff time is almost here, so let’s reduce this pep talk to a single chart that reports two scenarios (here’s where the X’s and O’s come in).

Line O: Big Offense, Bad Defense.
This consumer makes $150,000 per year, but saves only one percent of gross income. Savings grow at six percent. After thirty years of such paycheck-to-paycheck living, household net worth totals $117,000.

Line X: Average+ Offense, Great Defense.
This Frugal Fringer makes $75,000, or half as much as the consumer in Line O, but saves thirty-five percent of gross income. Savings grow at six percent. After thirty years of frugality, household net worth exceeds $2 million.

Big Game Graph

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So here’s today’s takeaway: to achieve financial freedom, you don’t need to earn a massive income—you need to live well within your means. A paycheck-to-paycheck lifestyle doesn’t cut it, even if you make six figures.

And one more thing: pity anyone who travels the path of Line O and procures its life of servitude. Thirty years of lavish spending buys nothing but a slavish ending.

Enjoy the Big Game!

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