How to make the most of your March Madness office pool winnings

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How to make the most of your March Madness office pool winnings

March Madness is just about over, and if you took part in an office pool, that could mean March Money for you.

Over 70 million people filled out brackets for the 2017 NCAA men’s basketball tournament, betting a combined $10.4 billion. That’s a lot of money, and it’s no surprise that a lot of these bets are placed between coworkers. Some estimates put corporate productivity losses during March Madness in the billions, while others think those numbers are inflated, because it takes about two minutes to fill out a bracket and the time spent watching other games probably would have just been used on Facebook otherwise.

In fact, office pools may help work: in a recent survey performed by Randstad, 89% of respondents said that pools made work more enjoyable.

Of course, 75% of respondents also said that money was the main reason they joined an office pool. And with the average contribution sitting at just over $22, you could stand to win a decent amount of money. If you have 50 participants in a pool with a standard payout structure, first place will get you around $550.

The tournament may only be a few weeks long, but $550 can have an impact that goes a lot longer. Here are some things you should consider doing with that money to get the most out of March Madness.

Buy life insurance

How much life insurance can you pay for with $550? A surprising amount, actually.

A healthy 35-year-old male and female can get a million-dollar, 30-year policy starting at $60 to $70 a month, respectively. I know, you thought it would be more expensive than that. Or I assume you thought that, because most people do. A survey by LIMRA last year showed that a majority of respondents overestimated the cost of a life insurance policy by more than four times.

With the above example, you could get eight or nine months of coverage out of your winnings. (and you could go even further if you lower your policy cost even further – for example, if you don’t need a million dollars worth of coverage). That almost gets you to next March Madness!

For more steps on affording life insurance, check out our article here.

Pay your taxes

You know what’s convenient? That March Madness ends just around the time you’re scrambling to do your taxes at the last minute you’ve responsibly been planning to do your taxes at this time all along.

The average tax liability in the United States is over $9,000; for those making under $100,000, it’s around $2,700. Your bracket winnings won’t pay your entire tax bill, but $550 can take out a sizeable chunk of that responsibility.

This can be especially helpful for freelancers. Freelancers don’t have the luxury of having taxes withheld, and they have to file taxes quarterly, which means there’s a lot more to keep track of. That extra $550 can help give the extra cushion a freelancer needs if they find their tax bill to be unexpectedly higher because estimated taxes weren’t calculated correctly.

Invest for retirement

If you have a workplace 401(k), it’s probably not a great idea to go to your HR department and ask them to funnel your office bracket winnings directly to your account. But that doesn’t mean you can’t put the money to work for your retirement.

Contribution limits for an IRA are $5,500 for 2017, or $6,500 if you’re over the age of 50. Those limits are the same for 2016, if you find yourself needing to make some catch up contributions for last year.

When you’re deciding which type of IRA you want to contribute to – Roth or traditional – be aware of the tax implications. Contributions to a traditional IRA count as pre-tax, meaning you don’t pay tax on that money, but you’ll have to pay later on down the line. With a Roth IRA, you’ll still pay money on your contributions as if they were part of your taxable income, but you won’t pay taxes on withdrawals years from now. Both have their advantages – traditional accounts lower your tax obligation immediately, while Roth accounts can save you money when you’re older and potentially in a higher tax bracket – but know the differences regardless of which type you choose.

Invest elsewhere

An IRA isn’t the only way to save. If you want a way to invest money without any contribution limits, you have a lot of choices. Sure, you can go to a traditional financial planner, but a software solution might be the better option.

Services like Betterment and Wealthfront – called robo-advisors – aim to take the place of traditional (human) advisors. They help you make the most of your investments, lowering your tax burden, adjusting investments as necessary, and tailoring your portfolio to meet your needs and risk tolerance. An app like Robinhood lets you tackle the stock market on your own, making it a little riskier but giving your flexibility on the specific individual stocks you own. Then there are spare change investment apps like Acorns, which round up purchases and add to your portfolio, cents at a time.

There are a lot of things you need to be aware of when you're choosing an investment platform, whether it’s your goals, the amount of money you want to invest, or the fees involved with an individual platform. Regardless, $550 is plenty of money to get started with any of them. To decide which platform is best for you, read our round up here.

Start a 529 savings plan

You made your office pools winning on the backs of upset picks and college players who, for the most part, earned scholarships to their schools (and are otherwise uncompensated for participating in a multibillion-dollar industry, which is a discussion for another time). But you have to face the fact that your child is probably never going to learn how to dunk or hit a step-back three-pointer, and you’re going to have to pay for their school.

Why not start a 529?

A 529 savings account is a tax-advantaged account that lets you lower your tax bill and save for college. College is going to be even more expensive in the future than it is now, so getting a 529 opened as soon as possible is a must, and $550 is a decent starting point. Best of all, it’s something that will be around for a long time so grandparents can contribute to it, there are some neat tricks you can do with them, and you can use leftover 529 money to further your own education so it doesn’t go to waste.

Pay off debt

Before you start saving for your kid’s college, maybe you suddenly realize that you didn’t go to school on an athletic scholarship, either, and you have a mountain of student loan debt waiting for you.

Or maybe you have credit card debt, or a mortgage, or car payments, or any number of other debts currently keeping you from reaching your financial goals. Now’s the perfect time to start eating into those bills. Unless you’re finishing off your student loan payments, an extra $550 isn’t likely to completely wipe out your debt, but it’s a start. You can get a month ahead on loans or a mortgage, or start the snowball method by focusing entirely on the largest or smallest bill so you get it out of the way before moving onto the next one.

We have six steps you can take to tackle your debt here. That way, you can start even if it isn’t what you use your winnings for.

Is relying on winning a betting pool in an annual tournament the best financial plan? Probably not. You need to have a strategy and budgeting plan in place for every area we’ve discussed. But sometimes you also need that extra push. You need to pay off debt to give yourself some breathing room, or an infusion of cash to get you into the mentality of starting to invest.

A little luck never hurt anyone, and you can use your March Madness winnings to make financial planning a regular habit instead of a Cinderella story.