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How to Avoid Busting Your Financial Bracket

By U.S. News & World Report

This year, the NCAA basketball tournament has been nothing short of exciting. With major upsets like that of Duke by unexpected sleeper team South Carolina and the prospect of an all-Carolinas final, March Madness has proven to be full of surprises.

While this makes for exciting game-viewing, it has also created chaos in many fans’ brackets, and the Final Four has likely turned out to be much different than what many envisioned.

Like it or not, various life circumstances can lead to similarly unexpected outcomes for individuals and their finances. From health issues to career changes to a surprise windfall, people’s financial situations can change quickly for better or worse. Because we can’t fully predict the future, it is critical for individuals to plan for the unthinkable with their financial advisor as well as other professionals on their team including accountants, estate planners and lawyers.

[See: 10 Long-Term Investing Strategies That Work.]

Create and maintain a long-term investment strategy. With unpredictable events in both markets and politics occurring around the world, it is more important than ever to invest for the long term. Instead of panicking in reaction to short-term market events and making big changes in your portfolio, stay the course and you’ll stand to benefit from the potential ensuing rallies. Investing for the long term also means that rather than trying to pick stocks and time the market, you should focus on portfolio diversification, which will help limit downside risk during market shocks.

One of the biggest mistakes investors generally make and could make in 2017 would be to take too much exposure to any one potential outcome. From the Great Rotation, to the Trump Trade, to the End of the Bond Bull, remember that every view, argument and strategy is subject to the Law of Small Numbers, which is the phenomenon where impossible outcomes are increasingly likely the smaller the sample size.

Any short-term assessment of asset markets will find a majority of performance to be driven by one-off events and their unpredictable effects on prices and trends. This means that the improbable will likely happen, and investment portfolios positioned for the long run have the best chance of surviving confusing times, should they remain disciplined and diversified amid the chaos of the short run.

Update your estate plan and ensure it aligns with your overall financial plan. Again, we can’t predict the future, but we do know that life will one day come to an end. Yet, many families realize after it’s too late, whether due to the death of a loved one or a significant health obstacle, that an estate plan isn’t up to date, or worse, that it doesn’t exist. This can lead to scrambling of family members to identify what belongs to whom and where assets are located.

[See: 9 Psychological Biases That Hurt Investors.]

Of course, estate planning conversations can be difficult, which is why many people tend to delay them. But it’s never too early to begin creating important estate planning documents such as a will, trust or life insurance policy, which will ultimately help protect your family in the event of a death. Involving your financial advisor will also help ensure that your documents account for your current and future income, assets and tax implications.

Give your emergency fund some extra padding. Starting an emergency fund may seem like a no-brainer, but a recent survey from the New York Fed found that one third of Americans said they weren’t likely to be able to come up with $2,000 in the event of an emergency.

There truly isn’t a better way to ensure you are prepared for an unexpected event — whether it’s a minor car repair or a major event like a job loss or medical issue — than to have the money already set aside to pay for it. Not only will this give you peace of mind now (and a sense of relief when the event occurs), but it will also help you avoid potential interest charges, late fees or other costs that you might have encountered otherwise.

A proper emergency fund should be equal to three months of your annual salary at a minimum, but having even more set aside is a good idea.

[See: 10 Skills the Best Investors Have.]

In the end, investing for the long term and planning for unexpected scenarios will help keep the madness out of your finances. And if you do happen to win that office bracket, it would be wise to drop those winnings right into your emergency fund.

More from U.S. News

7 Stocks That Soar in a Recession

10 Ways to Buy Industrial Stocks

The 25 Best Blue-Chip Stocks to Buy for 2017

How to Avoid Busting Your Financial Bracket originally appeared on usnews.com

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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