The below article is an excerpt from Satish's book 5 tales … 6 perspectives. To know more about Satish and read all the stories from the book click here.

I was in Goa on the New Year’s Eve when I bumped on to my school buddy Ronit.  I could hardly recognise him at first instance as he had transformed from a feeble boy to a muscular man. We pranced alongside the beach to reminisce our good old school days.

During our conversation I came to know that he works in a leading FMCG company as a Marketing manager and was attending a conference in Goa.  I told him that, “I am a Financial Planner” and that very moment his iPhone rang…he excused me for a moment and answered the call. I heard him holler “I don’t want anything”…please stop bothering me and disconnected the phone. I could see my friend sulking after attending the call and I asked him “All well!…any problem? Whose call was it? Ronit said “the same; those guys from the call centre requesting for an appointment to showcase new investment scheme which gives maximum returns with low risk”.

Ronit continued…first of all I do not understand a thing about the finance and they (call centre officials) go on blabbering about the features of some new investment scheme…non-stop. He narrated an anecdote where he had met a financial advisor who bombarded him with financial jargons like asset allocation, rebalance portfolio, risk profiling, financial planning, PMS and equity debt ratio etc. and left him befuddled. Ronit’s frustration was palpable…We sat on the sand with mug of beer gazing at the sunset. I asked him a question; do you understand the game of cricket? Of course! It is my favourite game he exclaimed. To which I replied, “then you will understand financial planning” Ronit sneered at me and asked are you kidding me!…No I am serious! I replied. Please elucidate how cricket and financial planning are akin, Ronit uttered

I continued…

Let’s play “Financial Cricket” I said… this game is similar to cricket. You need to concentrate on four parameters viz; Target; Overs; Run rate; Batsman to assimilate the linkage between financial planning and cricket.

Is it that simple asked Ronit with a look of amazement…you will enjoy it let’s play buddy I said with gusto.

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Say, Australia bats first and scores 350 runs in their allotted 50 overs. To chase down the stiff target the Indian coach and players sat in their dressing room to discuss various strategies.

I asked Ronit…for a minute assume you are the coach of Indian cricket team, and tell me what the Indian team should do to win this match? In came the quick reply from Ronit… okay! Let me enumerate some key areas which the Indian teams need to focus to win this match.

Ronit continued…here’s the strategy;

1.     While chasing a stiff target a good start can make all the difference hence Sachin and Sehwag should capitalize on the first 10 overs of the match when the fielding restrictions are on.

2.     It is important not to loose early wickets in initial overs as this could put immense pressure on middle order batsman.

3.     They need to maintain a run rate of 7 runs per over to win match. This is something every player needs to keep at the back of their mind.

4.     If they loose a early wicket or two in the first ten overs then by gauging the situation the captain and coach can promote a Striker (like a Yusuf Pathan) ahead of a recognized batsman to keep the momentum of runs. It is vital to assess the situation and act accordingly.

5.     It is vital to keep scoring and rotating the strike especially in the middle overs i.e. from over number 20 to over number 35.

6.     For the sake of convenience the Indian team can mentally set smaller milestones like in the first 15 overs they should try to amass 100 runs for the loss of say 1 wicket. By 30^th over they should try to outstrip 200 runs for the loss to 3 to 4 wickets. The balance can be met in the last 20 overs…Raina and Kohli will play a crucial role in the final overs.

7.     It is a team effort hence relying on one or two batsman will not help. All the players need to approach the game with a positive outlook and take the responsibility.

“I guess this is what I will tell the Indian players before they set out to chase the target”…said Ronit. 

“Well done buddy” …I said with a smile.

To this Ronit said…my dear friend these are basic things which any cricket lover can explain… I am sure even you can do this but why are we discussing the coach’s role…Our topic was “Financial Cricket” and where is the similarity between cricket and financial planning? 

Yeah! You are right Ronit… when you were narrating the strategy I was noting some key words (these key words are marked in bold in the above narration for the readers understanding).  There is a reason I did that…now allow me to explain how “Financial Cricket” works…I said 

1. Assess the situation and act:
   1. In the game of cricket the captain and coach assess the situation and decide their game plan i.e. When to attack? Which bowler to target? etc
   2. When it comes to investing your hard earned money, there is no game plan / roadmap; it is observed that most people invest in stocks, insurance policies, mutual funds, fixed deposits to fetch tax benefits or to park their surplus money. There is nothing wrong in investing but does it make sense to invest across all products? Is this financial planning?  It is NOT!
   3. Financial planning is assessing your current financial health and then charting out a financial roadmap for future years. It does not start with investing across different schemes which proffer high returns.
   4. Investments are like a bridge which helps an individual to travel from present to future destination.

2. Milestones:
   1. In the game of cricket the chasing team often set smaller targets to accomplish the final target.
   2. When it comes to investing money does any one have a milestone / financial objective in their mind? People generally spread their investments across various asset class and pull them out as they need.
   3. The proclivity is to spend money when you can see it. People break FD’s and go on a vacation without understanding its impact on other financial goals.
   4. Financial planning induces a goal centric approach. Use a particular fund to accomplish the relevant financial goal. In simple words create a holiday fund and go on holidays and do not mess with your education fund. 

3. Run rate:
   1. In the game of cricket ‘run rate’ specifies the rate at which the team needs to score runs. In the above example India were chasing 350 runs in 50 overs, this means India should look to score at least 7 runs per over to win the match.
   2. What rate of return should your investments earn to meet your financial goal? The fact is very few people even bother to check the rate of return offered by different investment products.
   3. It is ‘time (number of years), amount in hand and the goal target amount’ which dictates the rate of return. So if you have Rs. 5 lakhs and want to become a crorepati in 30 years then your funds need to grow @ 11% p.a. but if you want to earn a crore in 10 years then your funds need to grow @ 35% p.a.
   4. Another area which most people ignore is rate of inflation. Inflation is like the required run rate (rate of return) which every individual should get (earn) to save his / her money from erosion. Hence one should factor inflation while determining net return from an investment product.

4. Keep scoring:
   1. In the game of cricket batsmen need to keep the scoreboard ticking.
   2. Similarly, investing is not a one-time activity it is continuous process till you attain your financial objectives. 

5. Good start:
   1. In the game of cricket a good start always gives an upper hand to any team.
   2. Investing at an early age proves more beneficial in the long run.
   3. At age 30 if a person starts investing Rs. 10,000 every month then by age 60 he can amass approximately Rs. 3.5 crore. On the other hand at age 50 if a person invests Rs. 50 lakhs then by age 60 he can garner approximately Rs. 1.5 crore. The cost for starting late is gargantuan Rs. 2 crore.

So to sum up Financial Cricket for you in three words; 

Plan – Invest (money) – Achieve (financial goals)

Ronit was listening to all this patiently and when I asked him about Financial Cricket…he said “Financial Cricket makes sense and I would like to play this to plan my finances and achieve financial goals” On this note let’s have another glass of beer and enjoy the evening.