Legendary investor Mark Cuban knows a thing or two about money. Here are some of his top tips.
Mark Cuban wasn’t born rich. In fact, before he became a billionaire, he struggled to keep up with his bills and had to juggle different jobs just to stay afloat. Given his success as a business owner and investor, it pays to listen to whatever words of wisdom he’s willing to share. Here are some of Cuban’s top financial tips to follow.
1. Have a solid emergency fund
You never know when you might lose your job or encounter a whopper of an expense that your regular paycheck just can’t cover. That’s why it’s so important to have an emergency fund. Without one, you might land in costly debt when unplanned bills strike.
Cuban used to advise people to stock away six months’ worth of living expenses in a savings account. But since the pandemic, he’s adjusted that figure to cover a year of expenses.
Of course, that’s not the sort of thing most of us can do overnight. But it’s okay to start slowly and hit that savings threshold in time.
A good way to help yourself meet that goal is to get on a budget. That way, you’ll see where your money goes month after month, and you’ll have an easier time cutting back on expenses to carve out money for savings. If you’re new to budgeting, there are several budgeting apps you can use that will help you set yours up and stick with it.
Incidentally, Cuban insists that once you have a year’s worth of expenses in the bank, you should invest any extra money that comes your way. You can do so by opening a brokerage account or a retirement plan, like an IRA.
2. Steer clear of credit card debt
Any time you rack up charges on your credit card that you can’t pay off once your bill comes due, you’ll incur interest on those purchases. That means they’ll cost you more, but it also means that you’ll risk damaging your credit score, which could make it harder for you to borrow money affordably when you need to.
Carrying too high a credit card balance can cause your credit utilization ratio to soar. That ratio measures how much of your available credit you’re using at once. A higher ratio tells lenders that you’re more of a borrowing risk, so it’s a good habit to avoid credit card debt in the first place.
Following a budget will help you steer clear of debt. So will keeping most of your major expenses as low as possible. If you’re looking to rent a home, for example, and can afford to spend $1,500 a month, find a place for $1,200 a month instead. That will automatically free up extra money in your budget and give you more wiggle room with your other expenses.
3. Don’t be afraid to negotiate
The less money you have to spend on various living expenses, the easier it’ll be for you to build savings, avoid debt, and meet whatever other financial goals you set for yourself. As consumers, we’re wired to think that the prices we’re presented with are the prices we need to pay. But Cuban insists that there’s often room to negotiate, even when you’d least expect it.
The next time you want to take a last-minute trip and you see hotel rooms listed for $200 a night, call, speak to a manager, and see if they’ll let a room go for $150. Often, Cuban insists, a merchant will take some money rather than risk getting none at all.
Similarly, you can negotiate expenses like your cable bill, your cell phone bill, and even your rent. The key is to not be afraid to make a counteroffer of your own.
To say that Mark Cuban has done quite well for himself would be an understatement. It’s a good idea to follow his advice because it could be your ticket to a lifetime of success in your personal finances.