The NFL recently announced that the 2014 Super Bowl would be hosted by New York/New Jersey and played in the new stadium being built for the Giants and Jets.  If you’re not a sports fan you may not realize that although they are considered New York teams, both franchises actually play in Northern New Jersey. 

I live about 10 minutes away from the stadium and needless to say there has been a lot of excitement in the area ever since the announcement was made.  Everyone is talking about how much the local economy stands to gain by hosting the Super Bowl. 

Forgetting the fact that the event is still over 3 years away and no one knows where the economy will be by that time, my initial reaction was that it should give the local economy a nice boost.  After all, there will be 100,000 plus visitors staying at hotels, eating in restaurants and sports bars, using taxi or car rental services, and taking in other attractions during their stay.  Plus the state could benefit from increased collection of sales taxes, hotel fees, etc.

The story I heard on the local news claims that the Super Bowl will inject $550 million into the local economy.  But as I’ve since learned, most independent studies show these estimates to be grossly over-exaggerated.  In fact, a study completed by Robert Baade of Lake Forest College and Victor Matheson of Williams College found that on average Super Bowls only generate about one-fourth of the economic impact projected by the NFL and supporters. 

Now that is a pretty big difference ($550 million vs $137.5 million).  But why?

According to Baade and Matheson, the NFL bases its numbers on simple projections of money that will come in as a result of the Super Bowl.  But while that seems like a straightforward way of looking at it, you’ll soon realize that they are leaving out some rather important factors. 

First, there is the crowding-out effect in which locals who don’t want to deal with all of the hoopla simply take their business elsewhere.  They may decide to eat at home rather than dining out with rowdy football fans.  Or they may leave town altogether to be free of the traffic headaches and chaos that the Super Bowl brings with it.

Secondly, projections often overestimate the multiplier effect which is “the notion that direct spending increases induce additional rounds of spending due to increased incomes that occur as a result of additional spending.”

For example, let’s say an influx of customers leads to a record profit for the local sports bar.  The owner then spends that extra money fixing up his bar which benefits the local contractor.  The contractor uses that extra money to buy a new van from the local car dealership, who then has the money to…and so forth.  The initial round of spending multiplies and goes through the local economy again and again in a tidy, little circle.

But there may be significant leakages in the flow of payments.  For example, the hotel industry stands to gain a lot from 100,000 or so visitors to the area in need of a place to stay.  But if the hotel is a nationally owned chain then most of those profits are getting passed on to the shareholders and big wigs in the corporate offices, not the maids and bellhops who live in the neighborhood. 

Now in the end I still think hosting the Super Bowl could be good for the NY Metro area.  Although the added traffic might just kill me, I’m willing to accept 2 weeks of craziness if it really is a boon to the local economies. 

I’m just not convinced the impact will be anywhere near as great as being advertised.

When I’m brainstorming for post ideas I often find inspiration in strange places.  As I watch the New York Mets baseball team prepare for the 2010 season I realized I could use them as an example.  And not in a good way. 

I admit it.  I’m a Mets fan.

Please don’t beat me up for it.  I take enough abuse from all the Yankee fans running around waving their championships in my face. 

I was raised a Mets fan and I’m too just loyal to switch now.  So instead of looking forward to a 2010 baseball season where my team has a shot to win it all…I’m just hoping they’ll be able to make some moves that bring them closer to respectability in 2011 and beyond.

Let’s take a quick look at the Mets and see what kind of parallels we could draw to your own personal finances.

1. The Mets appear to have no long term plan at all.  While the Yankees always seem to have a coherent plan and multiple fallback options, the Mets are a team in utter disarray and no one within the organization seems able to pull them out of it.  They simply throw something against the wall and hope for the best.

Do you have a long term plan to meet your financial goals?  Wanting to retire early and travel or play golf is a nice goal.  But how do you plan to achieve it?  What are you doing now to prepare?  Or are you just crossing your fingers and hoping the 401k gods are kind?

2.  The Mets are too concerned with what others think of them.  Sharing the Big Apple with the Yankees has given them an inferiority complex and they worry too much about what the fans and talk radio guys think they should do.  They end up making moves for show instead of addressing their real needs. 

Case in point…the Jason Bay signing.  The Mets signed Bay to a huge free agent contract this summer and I think it was done mostly to show they could get a big name and keep fans in the seats.  But I predict Bay will be an expensive failure. 

Don’t get me wrong, Bay is a great player and I wish him well.  But the Mets play in a pitcher’s ballpark where the impact of  Bay’s hitting will be less than it was in Boston.  He’s also getting older and the Red Sox were concerned about his knees holding up.  And even if Bay does play well…he Mets really need better pitching to compete.  Not another bat.

Do you let other people’s opinion’s cloud your judgement?  Do you buy things you can’t afford so you can appear to be more successful than you are?

3.  The Mets bid against themselves and paid Bay more than necessary even though he had no other concrete offers on the table and didn’t show any interest in playing for the Mets.  They misread the market and didn’t do their homework.

Do you pay more because you don’t understand basic economics?  Did the car dealer rip you off because you had no idea what a fair price for your new car was?

4.  The Mets built an amazing new stadium.  Citi Field is absolutely beautiful.  But it cost a lot of money and now they don’t seem to have the cash to pay for upgrades to their lineup.  And the more they struggle on the field the more empty seats there will be.

Did you buy more house than you can afford?  Are you having trouble making your mortgage payment and paying off your other bills too?

5.  The Mets blame their 2009 debacle of a season on injuries, but the truth is they weren’t very good even before their players started marching off to the disabled list.  Any Mets fan can tell you that Mets management needs to look in the mirror and accept for responsibility for the mess they’ve made.  Only then will they be able to move on and rebuild for the future.

Do you blame everyone else for your financial troubles instead of taking responsibility for them?  Of course there can be extenuating circumstances (sickness, death, a job layoff) that led to your current situation.  But the first step to turning things around is to stop blaming the world and start forming a plan to get back on your feet.