Personal finance, like chess, is a game for thinkers

Who says that is Sunsan Polgar, a four-time women's world chess champion, resident of the United States since 1994. She also states the following reasons and now I understand why my personal finance is not as good as I would like:

1. To win at chess, you cannot make moves without a purpose. You need a plan that often includes short-term or medium-term goals (such as increasing the mobility of your pieces, or controlling a key area of the chessboard). Similarly, in personal finance it makes no sense to make investments at random (such as just because a magazine touted a hot stock or mutual fund) without well-defined short-, intermediate- and long-term goals.

2. Most moves in chess involve trade-offs, and you must consider the good and bad. A move that strengthens your position in one area may create a weakness somewhere else. The same is true with finances. Investments with higher potential returns, for example, typically pose a higher risk of loss and/or offer limited liquidity.

3. In chess, you generally can't win by attacking with just one piece. With investments, you need different asset classes working together in a diversified portfolio, not just one type of asset (as investors who piled into technology stocks discovered in 2000).

4. In chess, you must defend as well as attack - your opponent is trying to checkmate you, too. In financial planning, you must have your defenses in order, including an emergency reserve and adequate insurance, before you invest.

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