Defense wins Championships

Football and Finances have a lot in common. Tom Brady and the Tampa Bay Buccaneers won the Superbowl last week, and by a pretty wide margin, 31-9. This added fuel to the discussion on weather Brady is the GOAT (Greatest Of All Time) in football or even in all of sports. But did Brady do it alone? Almost no one would argue that. In fact, it was Tampa Bay’s defense that may have truly won the game for them. Stopping the Chiefs was no easy task. Led by quarterback Patrick Mahomes, the Chiefs had scored enough points in ELEVEN of their games this season to beat the Buccaneers. They have a productive offense of their own. But the Tampa Bay defense shut them down and won the championship.

The best offense is a good defense.

Surprises can be fun, but not when it comes to your finances. But what can you do when those surprise expenses pop up? The answer shouldn’t surprise you! (pun intended). Preparing in advance (defense) is the best way to keep your financial game plan on track when the inevitable bumps and bruises of life happen.

The best basic defense is having and sticking to a spending plan. This allows you to set aside part of your monthly income for some of the minor setbacks that inevitably happen. With a well planned budget, you can include a fund for car repairs, doctor appointments, or other things that you will spend money on occasionally but not necessarily on an regular schedule. Pay yourself first by putting the money into these "funds" before you set any discretionary spending amounts in your monthly plan.

Maintaining an emergency fund is also a big part of your defense against the unexpected. While three to six months of expenses is ideal, depending your situation, a smaller emergency fund may be necessary as you work through getting out of debt and getting your finances in order. Start by saving $1000. Over 60% of Americans don’t have that $1000 cushion for emergencies. You don’t have to be one of them. Pay minimum payments on everything until you can sock away that starter emergency fund. Get a temporary part time job if needed to get to that level. That will help keep minor emergencies from becoming major problems. If you have some breathing room in your budget, start working toward that larger fund to help keep larger surprise expenses from knocking you out of the game. One thing is certain, we don’t know what the next surprise expense will be or how much it will cost, but we do know there will be one!

Good insurance coverage is one of the foundations of this preparation. Having auto, home/renters, and health insurance is the very basic preparation. Add to this term life insurance, long-term care insurance (depending on your age), an HSA (Health Savings Account) if eligible, and disability insurance (both short and long-term) to cover a broader array of the unexpected. An umbrella policy to cover things over and above these other safety nets is the icing on the cake. As boring as it is, you need to read through each policy and make sure it fits your needs. Ask for clarification where you don’t understand. The last thing you want to hear when you have a crisis is “that’s not covered on your policy”. A great agent can help you with most or all of the needs that you might not have covered.

Having a will, an advance directive (living will), and healthcare powers-of-attorney in place is the third block in your financial foundation. Knowing what will happen with your money if you are no longer here to direct it is critical to making sure your plan continues. Having information readily available for your family and loved ones to deal with situations that may arise with your health allows them the peace of knowing your desires. Avoiding the uncomfortable just makes things harder for them at a time when they will need peace and rest. Thinking “I don’t have enough assets to worry about” is the wrong thinking, as there will always be things that need to be taken care of that should have your input.

Whether in football or finances, having your defense ready can help you win. Applying the strategies above, along with the 4 Actions to Take from our earlier post, will make you the GOAT for your finances! If all of this is a lot to take on at one time, please reach out to us for guidance and help at www.moneysensecoaching.com