What can you learn about managing your money from Moneyball?

What can you learn about managing your money from Moneyball?

The story of Billy Beane and the Oakland Athletics (or the “Oakland A’s”) is arguably one of the greatest tales in modern sport history.

The general manager (GM) of the A’s, Beane is famed for having used statistical analysis (known as “sabermetrics”) to identify undervalued Major League Baseball (MLB) players, buying them cheaply to assemble a winning roster.

While many initially saw Beane’s methods as uncouth and frankly crazy, his strategies proved to be effective. Indeed, in 2002, the A’s even set an American League record after winning 20 consecutive games – a feat that had never been achieved in more than 100 years of American league baseball at the time.

Over the next few years, the A’s became one of the most cost-effective teams in MLB. In fact, by 2006, the side ranked 24th out of 30 for player salaries, all while still having the fifth-best regular-season record.

Beane’s success ultimately saw him immortalised by Brad Pitt in the 2011 film Moneyball, based on the 2003 Michael Lewis book of the same name.

Moneyball can teach you about more than just baseball; in fact, Beane’s unique outlook and approach contains valuable lessons that you can apply to dealing with your finances on a daily basis.

So, find out what you can learn about managing your money from Moneyball.

Creating a plan can give you focus

Firstly, Beane’s approach can show you the importance of having a plan for what you need.

Beane wanted to win games, but also knew that he didn’t have the same budget as the big teams, meaning he had to be cost-efficient. So, using sabermetrics, he identified the key figures that would matter to winning and built a team that could play in that way.

A plan is the best place to start when managing your money. Having defined goals for what you want out of life means you can make logical choices with your finances that look to meet those targets.

For example, it’s all well and good to invest in certain assets, but how do they fit into your wider financial strategy? Are you investing because it’s useful to you and your plans, or because you think you should be?

Investing in assets that aren’t tailored to your goals could come with significant drawbacks, such as taking on more risk than you really need to. In the long run, this could harm your prospects of reaching your goals.

Meanwhile, by creating a plan for what you want to achieve with your money, you’ll make decisions that suit you, your goals, and your personal circumstances.

Make the most of what you have

Of course, having a plan is just a part of the process. An enormous part of Billy Beane’s success was executing his plan by making the most of what he had to work with.

Knowing the financial constraints that the A’s would have against the bigger teams, Beane sought out a cost-effective way to select undervalued players. This is what allowed him to build his record-breaking side.

In this case, Beane knew that he needed to make the most of what he had. He had a plan for how he wanted to win, and figured out a way to execute it with the team’s limited resources.

You should take the same approach with your money, making the most of what you have available to achieve the best possible outcome.

For example, this might involve making the most of allowances and exemptions that make your money as tax-efficient as possible.

It might be sensible for you to liquidate investments for profit each year up to your Capital Gains Tax (CGT) exempt amount – standing at £12,300 in the 2022/23 tax year.

Or it might involve maximising your ISA allowance (£20,000 in 2022/23), saving and investing without having to worry about Income Tax, CGT, or Dividend Tax on any interest or returns generated.

It may even be as simple as managing your finances alongside your spouse or partner to make sure that you’re both on the same page, making decisions that target your shared goals for the future.

These may sound like small, insignificant things to do that don’t make a difference. But, as Beane showed with his approach to selecting players, making the most of what you have one bit at a time adds up to make a notable difference.

Be methodical and use the information available

Perhaps most importantly of all, Beane’s approach shows the immense value of having accurate facts and figures to make decisions, using your head rather than your heart.

The logic of baseball scouts before Beane’s intervention was to make assumptions around which players would be successful based on nothing more than their personal biases and what had worked before.

Beane changed the game here. His entire philosophy revolved around the importance of clear, actionable data to figure out which players would add most value to his roster.

With this to hand, he was able to achieve the main goals of the team: remaining cost-efficient while still being competitive.

There’s a great deal of value in using a methodical, data-driven approach to manage your money. For example, using cashflow modelling software can give you useful, visual information to help you see different scenarios for your money, and how your decisions in your strategy could affect your future.

Of course, just as for Billy Beane, the key is being able to make decisions with that data. It’s all well and good to gather it, but it needs to serve a purpose.

This is where working with an expert can be transformative. A financial planner can create this cashflow model and, crucially, draw conclusions from the report.

By having this information, you can be confident that your money is doing what it needs for you to reach your future targets.

This can also remove the emotional side to making choices over your finances. Rather than guessing at what you need to do, you can make rational decisions based on logic to help you achieve what you want.

Speak to us

If you’d like to find out how we can help you create a winning strategy for your money, please get in touch with us at ProSport.

Email enquiries@prosportwealth.co.uk or call 01204 602909 to speak to us today.

Please note

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

This article is for information only. Please do not act solely based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.