It’s time for March Madness! The NCAA tournament is about to get underway. Are you excited? It’s also tax season, a good time to reflect on how you’re doing with your finances in general. Are you headed in the right direction? Are you destined for financial success? Here are 5 tips we’ve prepared to help you get dribbling in the right direction.
Know Your Stats: Review and Improve Your Spending
In basketball, it’s important to understand where your team’s strengths lie. That way you can play to them and maximize your effort on the court. Likewise, it’s necessary to understand where you may be weakest, so that you can work to improve that area. With your finances, we’re usually most weakest when we spend more than we make (due to overpaying for expenses or simply having unnecessary expenses). Take this opportunity to list out all of your monthly expenses, both fixed and variable. Taking this quick inventory will allow you to see where you should focus your efforts going forward. Are there expenses you could eliminate or reduce?
Get in Shape: Get Rid of Debt and Expenses that Weigh You Down
Basketball players have to be in tip-top shape to run up and down the court for a full game. Any extra weight will hurt their chances of performing at their best. With your finances, excessive debt can hurt your chances of being able to save and live the secure financial life you desire. Make a plan to get rid of your debts. Start by reviewing your credit report to insure you’ve captured all of your debts. Then list your debts from smallest to largest. Start aggressively paying off your first debt, and then move to the next with full force. Keep going until you’re free of burdensome debt. Like losing weight, this can take some time and be a challenge. But your finances will thank you for it, and you’ll be able to do more with your money.
Utilize Your Key Players: Use These Savings Opportunities
Any good team is going to have a player or two that they can lean on to make them a winner. In the financial world, there are several savings opportunities that exist that should be your go to accounts when trying to save more money. The first place to look is your employer-sponsored retirement account (e.g. 401K)? If your employer is matching retirement contributions, then you need to take advantage of this opportunity to grab some free money. It’s tax-deductible too. This means you likely won’t have to pay taxes on the money you use to fund the account. If you don’t have an employer plan, or if you want another place to save, try the Roth IRA. If you’re eligible, you’ll see your money grow tax-free. When you’re ready to retire, you can withdraw it without the burden of paying Uncle Sam. Other good savings opportunity is the 529 College Savings Plan, which allows you to see money saved for college grow tax-free. Finally, if short-term savings is your game, consider a separate, online savings account. While rates aren’t as nice these days, these accounts are a great way to keep your savings away from your spending accounts. Put your money in all of these accounts automatically each month with a direct deposit, and you’ll really be using the key players on your personal finance team.
Shoot the Three Ball: Increase Your Earnings
If you don’t shoot the three-pointer, then you won’t make one. With your financial life, especially on the income side of things, you need to take some chances. This means doing things like: asking for a raise, interviewing for a better (higher-paying) job, working a part-time job at night or on the weekends, starting a small business, etc. Occasionally you’ll find that “hot streak” and be able to do things with your money that you never thought possible. Extra money is great for getting rid of your debts faster or getting to your savings goals a bit quicker. Like in basketball though, you need to take a few lower percentage shots to see your numbers climb higher in the long-run.
Protect the Paint: Insure Against Trouble
Finally, you can’t be all offense. You have to protect your goal. The other team is trying to win too. Luckily, life isn’t a zero sum game. But it still makes sense to protect your assets. This starts with a small piece of self-insurance called an emergency fund. Use a savings account to put away six months of your living expenses. This way, if you lose your job or face an unexpected expense, you won’t find yourself in deep debt or unable to keep up. Next, you need to invest in some actual insurance. If someone that can’t produce income in their own (i.e. child, stay-at-home-spouse) relies on your income, it’s critical to insure the income that you bring to the table. You do this buy purchasing a term life insurance policy. These policies aren’t that expensive, but they take time to acquire. So get started today. The tournament starts soon!