How to be a Good Steward of Money: Mastering Debt, Taxes, and Investing
When it comes to managing money, it can feel like you’re at the mercy of an unforgiving force that only certain people know how to tame. The truth is you don’t need a finance degree or a crystal ball to be a good steward of your money. You just need a few solid strategies and a bit of patience... and maybe the occasional deep breath. Let’s talk about three key areas that are crucial to your financial life: debt, taxes, and investing.
Taming the Debt Monster (Without Going Broke in the Process)
Debt is like that one friend who insists on sticking around long after the party’s over. It’s there, it’s loud, and it has no intention of leaving until you deal with it head-on. But just because debt is persistent doesn’t mean it’s invincible.
The first thing to remember? Not all debt is created equal. There’s “good debt” (think mortgages or student loans) and “bad debt” (credit cards, store financing at 25%, etc.). Good debt is debt that you take on as an investment, with the intention to Gain a future financial benefit such as a higher net worth or increased earnings potential. Bad debt is debt that does not improve your financial situation and can be a Burden since it’s relatively expensive in the form of higher interest rates. More often when people are in debt it’s because of the bad debt they’ve accumulated over time due to unwise choices. With that said... some forms of debt such as medical and funeral debt aren’t always acquired by choice.
So how do you tackle it? Debt doesn’t disappear with wishful thinking. It begins with a plan. Two common strategies are the snowball method (paying off the debts with the smallest balances first) and the avalanche method (tackling the debts with the highest interest rates first).
The snowball method is all about momentum. By focusing on paying off the smallest debts first, regardless of the interest rates, you begin to build momentum as you eliminate one debt after another. Before you know it, you’re only left with the bigger balances. Many individuals feel overwhelmed not just by the size of the total debt they’re facing, but the number of different debts they’ve accumulated.
The avalanche method’s focus is to save the most amount of money while paying off your debt. The strategy involves tackling debts with the highest interest rates first. This strategy is very effective in saving money in the long-term but can be overwhelming for some as it may not feel like you’re making as much progress. Although the total debt balance will go down, many of the smaller debts can remain outstanding as you prioritize debts with higher interest rate first.
Both strategies are very effective. My advice? Choose the option that you can stick with to the end!
Oh, and for the love of all things financially holy, avoid adding more debt if you can while in the process of paying off your existing debt. If you can’t pay off your credit card balance each month... don’t buy something just because it’s on sale. Spoiler alert: a 20% discount doesn’t help if you’re paying 25% interest on that purchase.
Successfully paying off your debt will require you to change your spending habits – cancelling unnecessary subscriptions, limiting entertainment expenses, cooking at home instead of going out to eat, etc. It’s one thing to say you’re going to pay off debt, it’s another thing to successfully put it into motion. It's not easy, but it’s worth it.
Taxes: The Necessary Evil You Can Actually Tame
Ah, taxes. Like death, they’re inevitable, but unlike death, they come back around every year.
But here’s the thing: taxes don’t have to be your financial nemesis. Instead, think of them as a challenge to optimize your finances and keep more of your hard-earned money. The trick? Get to know the tax breaks and credits that actually apply to you. It’s like finding out that your least favorite board game actually has a strategy guide you’ve been ignoring!
If you’re contributing to a retirement account like a traditional 401(k) or an IRA, that’s money that won’t be taxed until you take it out. Translation: more savings for you now. Other potential goodies include deductions for student loan interest, the earned income credit, the child tax credit, the electric vehicle credit, and energy efficient home improvement credits.
What if I told you that getting a large tax refund when you file your taxes isn’t always a good thing. Many taxpayers with “simple” returns have grown accustomed to expecting a large tax refund when they file their tax return. Unfortunately... this is usually a result of excess withholding on your wages. Withholding more taxes than necessary on each paycheck throughout the year is like giving the government an interest free loan. You give the government your money now, just to wait and get it back at tax time. Your refunds aren’t a result of your amazing tax filing abilities... you’re just having to wait to get your money back from the government. Rather than having to wait until tax season to get your money back from the government, I’d advise adjusting your federal and state withholding to keep more money in your pocket from each paycheck throughout the year. Even if you were to owe a bit of tax when you file your return... that just means that you got to keep the most amount of money in your pocket all year long.
If you’re self-employed, make sure you're deducting all eligible expenses to offset your business income. For example, two common expenses that many individuals overlook are automobile and home office expenses. No, you cannot write off every car related expense, and no, you cannot write off every home related expense. My advice is to speak with a tax professional to gain a better understanding of the business expenses available to you. Depending on your industry, there may be certain expenses you’re eligible for that other professionals in different industries are not. The tax code is complex, but it’s there to help you too.
When it comes to your business, keep in mind that there are also different legal and tax structures to choose from – LLC, LP, Corporation, S Corporation, etc. There are varying factors that should be considered when selecting your optimal business structure, and it’s best speak with a tax professional to get off on the right foot. Reversing or un-doing a bad decision can be very costly down the road.
Remember – The tax system does not favor the rich, the rich just know how to use it to their advantage.
Investing: The Only Real Way to Make Your Money Work for You
Investing might sound intimidating — or even like it’s something only the “wealthy people” do. But here’s the thing: investing isn’t just for the wealthy or stock market geeks. It’s for you, too, and it’s one of the best ways to build long-term wealth.
If you’re new to investing, start with something simple, like an employer-sponsored 401(k) or an IRA. Some employers even offer a match for your contributions. You can also consider low-cost index funds or ETFs, which offer exposure to a broad range of companies without the need to pick individual stocks. If you’re feeling overwhelmed, don’t hesitate to reach out to a financial advisor for guidance. Many advisors would be happy to help you or simply point you in the right direction.
The key here? Patience. Patience. Patience. Investing isn’t about instant wealth; it’s about growing your money slowly over time. Think of it like planting a tree. You won’t see results immediately, but in ten or twenty years, you’ll have something solid and fruitful.
And while you might feel tempted to try your hand at “timing the market” to have the biggest return on your investment... resist the urge. The market has a funny way of humbling even the most brilliant investors. Remember – time IN the market > timing the market. My advice is to use a technique referred to as dollar-cost averaging. Definition? Invest a fixed amount of money at regular intervals (like weekly or monthly) regardless of how the market is performing. This will ensure that you consistently buy into an investment over a period rather than trying to time the market and stressing about short-term ups and downs. The key to long-term investing success is to have a consistent, discipled approach to investing, and this technique encourages just that. What’s even better? Since dollar-cost averaging encourages you to set aside a fixed amount of money each period for investing, it will in turn also encourage you to better budget your remaining funds for all the other financial needs in your life. Win-win.
In Summary: Stewardship Means Staying in Control, Not Being Perfect
Being a good steward of money isn’t about being perfect or hitting every financial milestone on some invisible timeline. It’s about making thoughtful, intentional choices with the resources you have. Here’s the big takeaway: if you can start tackling debt, staying smart with taxes, and dipping your toes into investing, you’re already ahead of the game.
Money doesn’t have to be scary, and it doesn’t need to be a source of stress. Treat it like you would a garden — give it a little attention, pull the weeds (aka the bad debt), and let it grow naturally over time. And if you mess up along the way? No worries. Even the best gardeners kill a plant or two.
Now go forth and manage your money like a pro! And if anyone asks how you got so wise, feel free to send them my way.
Thanks for sticking around to learn more about becoming a better steward of your money! Ready to dive even deeper? In this podcast episode with Brian Crawford, I explore these topics and more. Click here to listen now!
Happy listening, and here’s to mastering debt, taxes, and investing one step at a time!
