And you thought March Madness was only about basketball! March is a mad month for money, particularly this March, because the month is full of extra money but also of extra challenges–more than most months. Jon White tweeted last week about #2 below and it got me thinking. Thank you, Jon, financial coach and blogger at J W Financial Coaching for the idea and the encouragement to write this.
March Money Madness is because of the 7 things listed. Will you be the winner of this financial tournament? You have the choice to avoid the traps and gain financial advantages the month holds, or to let yourself be caught in one of the many traps.
- Many people get 3 paychecks in March, so your income goes up by 50%. This may not be for you this month, but if you are paid every two weeks you will get two extra paychecks two months each year. If you don’t plan for this extra money, if you don’t closely watch spending, you may spend this money without realizing it.
- March has 5 weekends this year. I don’t know about you, but we do more fun things on the weekend such as eating out, and more mundane things like grocery shopping. If you are not careful you may end up spending more than you have budgeted and lose the advantage of the extra paycheck because of weekend spending.
- March is Tax Refund month. Many people who really rely on their tax refunds have submitted their tax return already; they may get it this month. Make smart plans now what to do with this money (see below), whether you receive it this month or later.
- Are you due a bonus? I never realized it before, but I have spoken to a number of people who have recently received a bonus or will get one this month (see below).
- Basketball Tournament Winners: Okay, this one is a stretch. However, if you enter a basketball bracket contest with a few bucks and win, you might have extra cash to plan for. I’m not advocating gambling as a financial tip, far from it (check back with this blog in several days, for I will post an important article about this).
- March is Spring Fever Month. Have you been cooped up all Winter? As soon as warm weather breaks, if you live in the north you will be outside washing the car in your shorts in 50 degree weather because it will feel warm. Many stores start seeing increased sales. The lawn and garden department at your local hardware store sees a lot of new sales. In addition, automotive dealers and boat and RV sales really get cranked up starting now.
- Tax Refund Advertisements start. Everywhere you will see advertisements on how to spend your tax return, everything from vacation planners and cars to furniture. For a small fee, they will even give you a short-term loan until the check arrives in the mail, but the interest on the loan will probably be some crazy figure like 100+% if computed annually.
How to win the March Madness Game? If you are in debt, have no emergency savings, or are always stressed about money, this is what you can do!
What to do with extra money: tax refunds, bonuses and extra paychecks: Here is your great opportunity to get ahead in life. This doesn’t happen often, so take serious advantage of it.
- Invest $100 in a financial class: Take a financial class; it will only cost you $100, such as Dave Ramsey Financial Peace University. Go to his website and search by your zip code for a class near you. I promise you, your investment of $100 will return you many thousands of dollars. I am not kidding you: you will get much more back than you will ever receive in tax refunds.
- Put the money in a savings account, all of it! If you need to remove the temptation right away, open up a separate account at a bank where you don’t have any accounts; otherwise, you will spend it, maybe all at once, or slowly transfer it into checking and it will dwindle away.
- Plan for needs and not wants: Do not spend it on vacations, large screen TV’s or vacationing if you have debt and no savings. If you have been doing without for quite a while because finances have been tight, this extra money will make you feel a sense of elation. When we feel this way, we end up spending more money. Our emotions tell us that good times are back for good, even though it is a temporary thing.
- Make a list of all of your savings and debts.
- Make a list of the things you really need: If your car’s tires are bald, or you need money for upcoming things for medical, children’s needs, savings for Christmas in 9 months–set it aside. Now prioritize your list. Don’t forget to include tithe (10%) if you are a church or temple attendee, if not give some away anyway to help others- it feels good, helps others and puts things into perspective. If you do all of these things right, you will have more money every month in the future, not just once per year.
- Put $1,000 in savings, if you don’t have any. This is to be used if you have a real emergency, for example, the car is on fire or a family member is bleeding. I’m exaggerating of course, but this is not for the emergency pizza. You will have a car repair or other emergency need in the future; this is your ‘rainy day’ savings so that you don’t have to borrow to make it–you see, we are trying to avoid the trap of debt.
- Now look at your needs list again and prioritize the really immediate needs and debts. See how many loan payments you get get rid of by paying off some debt, and use that freed up monthly payment that you don’t have anymore to pay off the other debt each month until you are debt free (this is called debt snowballing).
- Put 6 months of expenses in savings for big financial setbacks like job loss. This is if all non-mortgage debt is paid off, and your $1,000 emergency fund is established. Every financial planning book says to do this, and it is really smart.
- It is okay to use a small part of the windfall for fun, but instead of blowing $100’s, take a few bucks a buy some steak and a nice bottle of wine and have a home date and watch a video.
- If you have done all of these things, you are ready to plan for intermediate things, like car replacements, or long-term needs like retirement and college education.
Just because you got a nice chunk of change, it isn’t time to live big, but by being wise you can make great decisions, and maybe this year you will advance to a stage in life of living smarter with less stress. This is what the wealthy have learned to do, and if you want to accumulate wealth, this is what you will do. Poor people blow it and a few months from now wonder were it all went; they never seem to get ahead. March Money Madness–who wins? You will if you do these things.