March Madness is underway and we are all eager to see if the final four predictions were correct. There will be plenty of Cinderella stories this year, as well as some favorites who make their way through the brackets and to the final winner. Note: Kennesaw State is officially in March Madness! March Madness is a great way to learn about money.
Each team that competes in the NCAA Tournament, starting with the 64 (now 68), gets a line on a bracket. The process of bracketology is used to predict the NCAA Basketball Tournament field. It is named this way because it is often used to fill out the tournament for the postseason. The NCAA Selection Committee uses a Ratings Percentage Index to select the at-large teams (non conference winning teams) to fill out the field. It also seeds the field based on the order of the teams. Joe Lunardi, the resident bracketologist at ESPN and former owner of the Blue Ribbon College Basketball Yearbook is credited with the invention of “bracketology”. (source: wikipedia.com)
I realized that we often have to make decisions about our finances that feel like brackets. It is difficult to choose a winner for every financial bracket in our lives, but if we make more good decisions than bad, we can decide whether or not we will win our financial life. Three very important bracket choices that you’ll have to make today. These decisions can make or break your financial plan.
BRACKET 1- PAY TAX TODAY OR PAY IT LATER
Nobody can predict the future tax rate. When you remove the political aspects, I have suggested that tax rates need to be higher because cutting costs will not allow us to balance our fiscal budget or pay off our massive debt. You all know that you should save for retirement through vehicles such as your employer’s plan 401(k). If your employer allows Roth deferrals, you can choose to defer pre-tax or do both. I like to max out the pre-tax deductions up to the maximum match, and then do the rest in Roth. This is unless you’re in the top three tax brackets. Then I would recommend doing as much pre-tax as possible.
BRACKET TWO – BUY COOL STuff AND HAVE FUN NOW or LATER
It is never easy to make this bracket decision. This weekend, I saw on the evening news that someone who had been unemployed for six months was now working again at a hotel. She said that she couldn’t have waited to get her first pay so she could buy new clothes and get her hair done. As you receive pay increases at work, I recommend that you do the following. Spend about one third of your new raises on cool things and put the rest in the fun later section. The government will likely take the remaining third. It always seems like the best option to pick fun now, as many people are far behind in saving for retirement. You should give money to the team that will have fun later, otherwise you’ll only be able to enjoy greeting people at WalMart.
BRACKET THREE- RENT OR BUY A HOME
It is extremely difficult to choose. Both have their pros and cons. If you decide to buy a team, you should not go into it thinking that you will be using this asset in the future. Your home is a good investment that you can use to earn money in the future. Renting is a better option, even if you want to spend time with your family or friends. Renting is the best option if you do not want to deal with the hassle or risk of owning a home. Renting is a good option for many people who have underwater homes and cannot sell them.
March Madness can be a lot of fun, even if your favorite sport isn’t college basketball. If you are faced with a financial bracketology, it is best to weigh the pros and cons for each side and concentrate on picking more winners. Make sure to avoid making a financial mistake that could end up ruining your bracket. These are the ones you will regret in the future!
