Five Financial Self-Defense Moves

Have you ever wondered why so many lottery players and pro athletes go belly up? Because they were never given the financial tools to defend their finances from bad spending habits.

According to Sports Illustrated, 78 percent of former NFL players are bankrupt or under financial duress within two years of retirement. Likewise, 60 percent of former NBA players were reportedly bankrupt five years out.

It’s hard to grasp that people who earn hundreds of thousands or millions of dollars a year can find themselves broke so quickly. However, there’s a tried and true coaching adage that goes: “Great defense wins games.” This applies just as much to our finances as it does to sport!

Many of us think that if we can just play good enough offense and make enough money all our problems will be solved, but this example would suggest otherwise…even a tremendous income isn’t enough if you don’t play defense and watch your spending at the same time. Here are five moves to make.

Buy less house than you can afford

Housing expenses are the biggest part of our budget and it’s hard to keep things in alignment if it eats up too much of your cash flow. For too long many of us maxed out on housing, going up to the limits of what people would lend, but that sometimes that’s like your local rec basketball team playing the Lakers—a game they can’t win. We’ve all heard the expression “house poor”—don’t let that be you.

Control your fixed, recurring costs

Gym memberships, school tuition, child care, gardening and housecleaning, phone bills, utilities, internet, subscriptions…life’s little (okay, medium-sized) expenses mount up. Every time you commit to spending in this category, you’re actually committing to hundreds of dollars per year. Before signing up, consider the annual cost.

Make your day-to-day spending only from one account

Spending from multiple checking accounts and credit cards makes it harder to know exactly where you stand. In basketball, this would be like playing 5 simultaneous games of one-on-one rather than a single, coordinated game. Clean this up by creating a dedicated checking or prepaid debit account (not credit card) for all your daily spending. Agree with your spouse to put a fixed amount into the account and then simply manage your spending to the balance. You can set up daily balance alerts so you always know where you are. With this approach you won’t have to worry about complicated category-level budgets…just manage your spending to what you have.

Follow the 24-hour rule

If you see something you like but you know is not a necessity, wait for 24 hours before buying it. Sleep on it, talk about it with your spouse or partner, then come back and get it if you decide you really can’t live without it. You’ll make better decisions.

Write things down in advance

In sports, most coaches create a game plan that they communicate to the players and then stick to during the game. It helps them focus on the important keys to victory and not get distracted by the noise. You can create your own financial game by deciding what you need in advance of going to a store and writing it on a list. If you’re at the store and an item isn’t on the list, don’t buy it. This ensures that you only buy things you need. If you see something great at the store, think about it at home, decide if you need it, and write in on the next shopping list.

Finally, embrace the defensive mindset. Sports defenders love the effort and exhaustion of playing tenacious D. They always just give slightly more than the others and they’re the ones who come away with steals, blocks, or rebounds. If you can learn to love playing defense, you’ll watch your own financial score and notice you’re winning. You’ll see how your actions help you succeed. And you’ll feel accomplishment every time you exercise your defensive spending muscles. Learn to take pleasure in saying “no” and become a great defender.

Jean Chatzky

Jean Chatzky