There’s a good chance you’re a fan of, or at least know about, the hit TV show Shark Tank.
If you’ve somehow avoided this ratings juggernaut, here’s a quickie synopsis: amateur entrepreneurs come up with new ideas for businesses or products.
They then pitch the idea to a panel of successful businesspeople, who either approve the idea and give them funding, or (more likely) laugh them out of the room and let them know why their plan is doomed to failure.
There’s a good reason this show is called SHARK Tank.
If you’re not an entrepreneur, you may be wondering how a show where some guy tries to get Mark Cuban to fund a new line of folding guitars can help you in any way.
Well, as it turns out, there are a great many personal finance lessons one can find on this show. You just have to snake your way around some carefully edited reality show dramatics to find it.
So what can the Sharks teach you about personal finance?
Don’t Overestimate How Much You Have
On many occasions, an entrepreneur will ask for a large sum in exchange for giving one of the Sharks a small stake in their company. For example, they might ask for $100,000 for 10% ownership.
This means that, to the entrepreneur, their company is worth at least a million dollars.
If their sales figures don’t mesh with that value, the Sharks will laugh them off the stage and send them and their little business packing.
Overestimation of your own worth can be a big killer in the personal finance world as well.
If you think you have more in the bank account than you actually do, there’s a good chance your spending habits will reflect this.
You’ll buy more, eat out more, save less, and stop watching your balance. After all, you’ve got a lot of money, right?
In fact, you’ve been overdrawn for a week, the sad result of thinking you’re worth more than you really are.
Be Prepared for Unexpected Problems
If the Sharks are going to give somebody their money, they need to make sure this person is absolutely 100% ready to do well with it.
To this end, they will poke holes in every part of the pitch that they possibly can, to make sure the idea is completely airtight.
If the entrepreneur doesn’t see this line of questioning coming, and responds with a series of nervous uhhs and umms, backpedaling, or outright lies, the Sharks will quickly wave bye-bye and move on to the next contestant.
Now, while the clerk at your local bank probably won’t drill you with questions about your personal finance, the basic idea is still the same.
Your best laid plans for saving money could come under fire at any time from unexpected sources — higher bills, medical emergencies, a forced pay cut at work — and if you aren’t prepared in some way, you’re likely to quickly fall behind.
How can you prepare for unexpected financial surprises?
The same way the Shark tank entrepreneurs can prepare for endless questioning from the Sharks: assume it’s coming, and formulate a plan beforehand.
Research payment plans for medical bills, sit down and decide what bills are more important than others in times of emergency, keep your resume at the ready in case you need to apply for more work fast — basically, apply the Boy Scout motto “Be prepared” to every aspect of your life, whether it’s happened yet or not.
Don’t Spend Money on Pointless Junk
Occasionally, a Shark will bring up the possibility of outsourcing an entrepreneur’s company overseas, citing the need to cut costs as much as possible in every department, no matter how profitable the company may be at the time.
After all, if you can produce a product in another company for a fraction of the cost that you would pay in America, why wouldn’t you go for it?
In fact, if an entrepreneur doesn’t wish to go overseas, that might end up being the deal breaker for the Shark.
In regards to your personal finance, you likely don’t have anything to outsource.
However, you have plenty of things on which you could easily spend money: expensive clothes, fast food, new video game systems, or a day at the spa every week.
If your goal is to save money, these things are pointless.
Cheap clothing is just as good, grocery shopping is much cheaper than fast food (and learning to cook saves even more), and video games and spa treatments aren’t even close to necessities.
Focus on the necessities, get them as cheaply as possible, and watch your savings soar.
Know What You Want
There is no easier way to get a Shark’s immediate disapproval than to act confused about your own pitch.
How much do you want for funding? What kind of income are you looking for? What percentage of the company are you willing to give up?
Are you licensing or franchising? What exactly does your amazing product do?
If you don’t know, why would you expect the Shark to know? For that matter, why would you expect any customer to care?
This applies to your personal finances as well. The only way to successfully save money and spend wisely is to know your goals.
Are you looking to save a million dollars by retirement? Is your goal more short-term, like a vacation?
Do you want to cut your spending across the board? Or is the problem more explicit, like a need to chop your grocery bill in half?
Whatever your goal is, you need to know that goal, and stick to it.
Simply drifting from day to day, only saving a little bit here and there until you have a decent little pile of cash saved up for something down the line maybe, does nobody any good, least of all you.
Though primarily geared toward entrepreneurs and investors, Shark Tank can help the humble personal investor just as much.
By listening to the Sharks, as well as observing what the contestants do while both succeeding and failing, you can take charge of your own finances, curb your spending, increase your savings, and start building up a fortune comparable to the Sharks themselves! (More or less.)
Mary Hiers is a personal finance writer who helps people earn more and spend less.