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How Chess Players Can Win at Personal Finance

One well known, but seldom practiced, strategy in chess is to think a few moves ahead. Chess players are able to increase their odds of success by simply planning for a variety of possible outcomes in the near future. The ability to anticipate future problems and opportunities, a skill that chess players often develop, can also help your personal finances tremendously if you apply those abilities to your investments.

Your financial situation can be improved if you keep an eye toward the future. When you think a bit further down the road you are more likely to make the decision that has the maximum benefit over the long term. Here's how a chess master would approach some common financial situations.

A chess master buys when demand is low. Are you looking at Halloween costumes? You could have saved a good chunk of money if you bought the outfit last year at the beginning of November. And speaking of clothing, winter clothes like jackets and coats are always on sale in the spring and short sleeves in the fall. Those who think ahead know that they will eventually wear the clothes when the correct season rolls around again and buy them now at a huge discount. The same strategy works for traveling. Everyone likes to go at peak season, but shoulder season trips are typically cheaper and are often a better trip because there are fewer crowds.

A chess master carefully picks the best college and major. With college costs skyrocketing, it's becoming more and more important to go to a sensible college that doesn't leave you in a massive amount of debt just as you are starting your career. There are certainly cases where a high cost private college is worth the money, but smart chess players weigh the options and pick the path that gives them the most bang for their buck. They consider the type of job they are going to be able to get by getting a degree at a specific school and how long it will take to pay off the loan if they need to take on debt to finish school. It's certainly worth considering if the fame that accompanies going to a more prestigious school is worth the extra financial hardship. Some high schoolers might even ponder whether they need a four-year degree for their chosen career field. Every high school graduate should contemplate all of their higher education options so they don't graduate from college with so much debt that it will crush their financial life for decades.

A chess master stays the course because he is able to invest rationally. One of the most damaging moves inexperienced investors make is bailing out when stocks significantly decline in value. Staying the course is difficult when everyone is panicking and making you fear that you'll lose everything if you don't sell your investments. Yet, investing should be based on expected returns. When volatile investments go down, the expected return generally goes up. If anything, there's now a higher chance the investments you own will generate a higher return. A smart chess player might even buy more when the market is low so they can reap the rewards of the recovery.

A chess master will maximize tax-advantaged accounts. Many people have taxable investments earmarked for the long term even while not contributing the maximum possible amount to retirement accounts, which means they are paying more tax than they need to. If you know you don't need the money in the short term, you can get tax perks by contributing to traditional and Roth 401(k)s and IRAs. Long-term investors will come out ahead by stashing as much as they can in tax-preferred retirement accounts.

With a bit of practice, chess players develop the discipline to think ahead. Start planning a few moves ahead and your finances will benefit too.

David Ning is the founder of MoneyNing.com .

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