Defense wins championships.
You’ve heard the adage. Coaches, players, announcers, fans, and pretty much everyone involved in team sports believes that defense wins championships.
And it makes sense.
If you can stop the other team from scoring it stands to reason that you’ll have a good shot at winning the game.
While you’ve probably heard the adage used in many sports, you probably hear it used most often in reference to basketball, especially the National Basketball Association (NBA).
So, what does this have to do with personal finance?
Glad you asked.
Let’s delve into money lessons from the game of basketball.
Offense or Defense?
The game of basketball can be broken down into two basic elements: offense and defense.
The same is true of personal finance, with the equivalent elements of personal finance being income and spending. More specifically, increasing your income or decreasing your spending.
Like the competing elements of offense and defense in basketball, you can make financial progress by increasing your income and/or decreasing your spending.
You need both to succeed, but which is better for winning the game?
The personal finance community is somewhat torn on which element is most important for financial success. Some advocate that increasing your income (offense) is most important because there’s unlimited potential. Others feel that decreasing your spending (defense) is most critical to reduce debt and live within your means no matter your income.
The jury is still out on whether income or spending is more important, but what about basketball? Does defense really win championships?
Does Defense Really Win Championships?
You’ve heard the adage, but is it true?
In NBA basketball at least, the data seems to suggest so.
Statistics are a huge part of the NBA game, with some of the most important statistics relating to offense and defensive ratings and percentages. With so much data available it’s pretty easy to put the theory that defense wins championships to the test.
Looking at the last 20 NBA champions, it is clear that having a good defense does greatly impact the ability to win games and, ultimately, a championship.
Two of the most telling defensive statistics are opponent points per game (PPG) and opponent field goal percentage (FG%). Opponent PPG is the average number of points scored per game by the opponent and opponent FG% is the average percentage of shots made by opponents during a game. The lower each of these stats is, the better your team is at defense.
Looking at the last 20 NBA champions, 18 of them allowed fewer opponent PPG than the league average during the regular season. Furthermore, 45% of those teams ranked in the top 5 for opponent PPG and 70% ranked in the top 10 (out of 30 teams).
These stats mean that the vast majority of NBA champions were above average defensive teams, with half of them ranking in the top 5 in the NBA during the regular season. Being ranked in the top of the league for opponent PPG means that these teams allowed less points per game to be scored on them.
Aside from opponent PPG, another indicator of defensive efficiency is opponent FG%, or the percent of shots that the other team makes. In general, the lower the FG%, the better the defense.
Again, looking at the last 20 NBA champions, each allowed an opponent FG% below the league average. Additionally, 6 of them had the lowest opponent FG% in the league, 13 were in the top 5, and 18 were in ranked in the top 10.
As with opponent PPG, being in the top 10 in opponent FG% is an indicator of a good defensive team because it suggests that opponents miss a higher percentage of their shots while playing that team.
Although it’s true that teams may sometimes just have an off-night offensively, averaging the stats over the course of an 82-game NBA season means it’s highly unlikely that these numbers are due to chance.
Taken together, these statistics about the defensive capabilities of the last 20 NBA champions suggests that defense heavily influences a team’s ability to win games during the regular season, and by extension, championships.
Obviously, offense is important too, but clearly defense has the edge when it comes to ultimate success in basketball.
Defense in Personal Finance
We’ve already mentioned that personal finance can be broken down into the two main elements of income and spending, with income serving as your personal offensive game and spending as your personal defensive game.
Unlike basketball, personal finance offense and defense is harder to break down into simple statistics. However, there are some stats we can use to draw inferences about the average Americans offensive and defensive games.
Let’s start with offense.
According to the U.S. Census Bureau, the average income for Americans in 2017 was $48,150 while the median income was $31,786. Furthermore, 29.2% of households had incomes of $100,000 or more in 2017. It’s also been well-documented that a higher level of education typically correlates with a higher income.
The offense is looking okay so far, and there appears to be a clear path to bettering your offensive game through acquiring more knowledge and skills.
What about defense?
According to a GOBankingRates study, the average American:
- Spends around $164.55 a day, with millennials spending the most on average at around $208.77 a day
- Only 32% of Americans keep a budget
- About half of American households are living paycheck to paycheck
- 19% have nothing saved for emergencies while 31% have less than $500 saved
Furthermore, a 2015 Nielsen study found that 25% of households making $150,000 or more live paycheck to paycheck.
Let’s not even get into the debt situation in America.
So, there you have it. While Americans are doing okay on the offensive front, overall, these numbers suggest they’re doing worse on the defensive end.
There are clear paths to improve on both offense and defense, but which is more important?
Money Lessons from the Game of Basketball
Here’s where basketball comes in.
Remember the adage defense wins championships? The numbers clearly support it.
Of course, you’ll need to be pretty good on both offense and defense to win a championship, but the vast majority of NBA champions displayed elite level defense along with a pretty good offense.
In other words, they didn’t need to be offensive juggernauts as long as they could score at a good rate while shutting down the other team.
The offense could be just okay as long as the defense was elite.
Now let’s take this lesson and apply it to personal finance.
The statistics on personal finance show a similar pattern to basketball. It’s clear that a large portion of Americans struggle with defense, aka, controlling their spending. So much so that even when they possess an elite level offense (a high income) they’re still struggling to live within their means and control their spending (defense).
So, which is the key to winning the personal finance championship?
The clear winner is defense.
Controlling your spending through budgeting and living within your means should be the first step for anyone looking to advance their financial lives.
While it’s true that many Americans are struggling to cover even basic means with their current incomes, it’s also true that increasing your income is only part of the battle.
The most important factor in getting your financial life under control is developing an elite defensive strategy where you’re able to control your spending. If you increase your income but don’t keep your spending in check it won’t matter how much you make.
Offense will only take you so far, it’s defense that’ll win you the championship.
Moral of the Story
Defense wins championships.
While you need to be able to score, an elite defense will allow you to stop the other team even if you have a poor offensive outing.
Great defense will help compensate for poor offense.
It’s the same in personal finance, where Americans must learn to balance their offensive games with their defensive ones.
While increasing your income (offense) is always encouraged, the real key to winning the personal finance championship is through controlling your spending (defense).
At least a quarter of Americans with elite offenses are losing games because of their poor defense, demonstrating the need for Americans to step their defensive game up.
Focus on your defensive game if you want to improve your finances. Develop a strong defensive game and the offense will follow.
Talk about Money Saved.