Most news reports say that the Sochi Winter Olympics have cost around $51 billion, making it the most expensive Games in history. But a closer look at that figure shows that it may not be entirely accurate. According to the Washington Post, the source of that eye-popping price tag was Dmitry Kozak, a deputy prime minister who was head of Russia’s Olympic preparatory commission. However, the estimate was made more than a year ago, when exchange rates were less complimentary to the Russian ruble. And some of that amount has been spent improving Sochi’s infrastructure as well as construction on non-Olympics-related venues, like a racetrack, by both public and private sources.
Despite the questionable numbers, the fact is that a lot of money has been spent trying to get Sochi ready to host the Winter Olympics. While we don’t know what lasting economic impact the Games will have — we do know that there are important personal finance lessons to be gleaned from Sochi.
1. Stick to a budget
Much has been made about the excessive spending in Sochi. And to be fair, there has been a lot of construction to improve the cityscape. There’s a new beltway, which has diverted traffic through town, better access for the disabled with more wheelchair ramps, a more modern airport, and great public transportation with new buses. However, there have also been questions raised about how much overspending has occurred. According to a report from opposition leader Alexei Navalny, Russia has spent twice as much as necessary to build at least 10 of the Olympic venues.
Money lesson: stick to a budget. Don’t overspend. Make sure you spend within your means.
2. Research before you buy
Russian President Vladimir Putin has never seen the Sochi Games as just a sporting event, but rather an opportunity to show “new Russia” to the world and rejuvenate the region. Putin even traveled to Guatemala City to give a speech to International Olympic Committee delegates to secure the Games. And he got them. However, even before construction began, choosing Sochi as a host city presented engineering problems. Sochi rests on a narrow slope of land between the sea and mountains, so venues would have to be built 20 miles away from the city’s center. Not enough research and planning was done beforehand, so a more appropriate site wasn’t chosen to host the Games, potentially saving millions of dollars in construction and engineering costs.
Money lesson: before you buy, make sure you comparison shop and do your research. You don’t want to get stuck with a defective product or make an ill-advised purchase that you’ll have to spend more money on to repair later.
3. Save for a rainy day
Because many Olympic venues had to be built in the Imereti Valley, a patch of flood-prone land 20 miles away from Sochi, recurring flooding occurred. That meant venues had to be rebuilt over and over again. After a powerful storm hit the region in 2009, equipment was damaged, which delayed the building of other venues as new materials had to be sent in. All this construction contributed to the Games’ overall price tag.
Money lesson: You never know what type of natural disaster or emergency situation might pop up. Saving for a rainy day fund will help you be better prepared should you find yourself needing to come up with money in a difficult situation.
4. Live within your means
Because the Sochi Olympics were so important to Putin, no expense was spared. So when construction mistakes were made or more money was needed, it wasn’t a big issue. When a road leading up to Krasnaya Polyana — host of the snow events in Sochi — wasn’t finished on time, a helicopter was used to deliver cement needed to build ski lifts. Overspending was also seen in the construction of Fisht stadium. Originally, the stadium was meant to have a retractable roof, but when organizers decided they wanted a different look to the stadium — construction workers were left scrambling to get the necessary materials to build it.
Money lesson: Learn to live within your means. Just because you have the money doesn’t mean you should spend it (especially if you’ll be paying for it later). Managing your money properly means spending what is appropriate for what you truly need, not what you want.
5. Plan for your future
After the Olympics are over, what will become of everything that was built for the Games? Sure, public transportation can be used by locals and tourists. But nearby villages, like Akhshtyr, where an illegal waste dump was places, will have to deal with the environmental consequences.
And what about the new venues that have been built? Some will be utilized for tourism, but will enough tourists want to come to Sochi after the Games to justify the costs of construction? Some are already casting doubt about the viability of Sochi as a tourist magnet. With all the money that was spent to prepare Sochi to host the Games, the government will have to decide what to do once it’s all over.
Money lesson: plan for your future today so that you are financially prepared for what may happen tomorrow.