Day 210: Play “Money Defense!”

They say the best offense is a good defense. When it comes to money management, I couldn’t agree more.

In this area, playing defense is where I seem to shine. Before I make a list of areas that we play “money defense,” let me define what I mean by it:

Playing defense with your money means doing all that you can to maximize how much you keep.

In other words, playing money defense is about minimizing losses. Warren Buffett said the number one rule of investing is “Don’t lose.” Another familiar refrain is “Pay yourself first.” Playing money defense is about being smart with how you allocate your money so that you don’t spend it all as soon as you get it.

I’m not suggesting that spending is bad (although on some level I seem to feel that way, or at least be resistant to it ). Obviously, we need to spend money to enjoy our lives. What I’m saying is that with a few intelligent money habits, you can play a strong defense that helps your money go further and leaves you with some (for saving and investing) after the spending is done. Here are ways we play defense with our money:

  • Make regular contributions to our retirement accounts using low-cost index funds. Low-cost is important, because the price you pay for investing is something you can control. Keeping the cost of investing down is great defense!
  • Practice “empowered frugality” habits such as planning our grocery shopping, eating at home, and limiting extraneous driving. In these ways, our lifestyle is conducive to spending less, which leaves us for more to save and invest.
  • Have a broadly diversified portfolio which includes, cash, stocks, bonds, I-Bonds, and even some precious medals.* This spreads our risk around.
  • Carry no debt (though we do use rewards credit cards!). Bad debt is a hole in anybody’s financial boat. One of the best ways to play defense with your money is to seal that hole as quickly as possible (Note: there may be situations, such as low-interest loans or perhaps a mortgage, where paying off as fast is possible may not be absolutely crucial, depending on your situation).
  • Get our bills paid on time. This might be obvious (is it?), but I’m adding it here because paying our bills saves all sorts of headaches such as late fees, penalties, and problems with people we owe. Being well-organized and maintaining basic financial responsibility sound like good defense to me! Note: personally, I use a spreadsheet to stay on top of bills. Setting up autopay is probably sufficient for most people.
  • Keep learning about how to be smart with our money. I admit, this is more my interest than my wife’s. I like to think by continually looking at how we can optimize our money, I am helping us move faster to our goals.

*Furthermore, our accounts are calibrated to our individual money and investing styles. For instance, I have found myself to be quite comfortable going all in with stocks. My wife, on the other hand, is more risk-averse. She has stocks and bonds but prefers liquid cash and tangible assets. This is why we own some silver and gold (as well as a gold ETF). She also loves I-Bonds (what’s not to love in the last few years?).

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