Thursday 16 January 2014

Extra Money in Your Budget? Five Things to Do with your Extra Cash

Extra Money in Your Budget? Five Things to Do with your Extra Cash

Have you found yourself in the enviable position of having extra money left over in your budget at the end of the month? First off, congratulations! You are achieving what many households work so hard to accomplish. It can be very hard to budget your earnings so well that you actually have extra money at the end of the month. Especially in an economy where many Americans are living paycheck to paycheck. It is very hard to earn extra money, but it can be just as hard to decide what to use that extra money for.

Pay off Debts

If you have a credit card, student loan or revolving loan debt, that extra cash can make a significant difference in the amount you pay on interest. For example, if you have a five-year auto loan of $20,000 with a three percent interest rate, paying an additional $200 per month can save you almost $600 in interest over the life of the loan. It's also best to get these debts out of the way while you have the means. That way, if you are ever in a position where you don't have extra money later on, your monthly bills will be quite a bit lower since you won't have to worry about monthly debt payments.

Treat Yourself

If your overall financial picture is looking good, use that extra cash to treat yourself. Take a vacation to see a place you have always wanted to see, splurge on a special gift for yourself or put the extra money into a savings account toward a larger goal, such as a new car or down payment on your dream home. Of course it is best to save most of your money, but you need to have fun to. You most likely have been working very hard in order to be in a position to have extra money, so you deserve a reward.

Invest it

There are many traditional ways to invest your money that can help you improve your wealth now or enjoy a comfortable retirement later. Stocks, bonds and certificates of deposit are common options. You might also consider investing in real estate, such as rentals or vacant land in areas where property values are rising. Investing is a great way to grow your savings for future use.

Build an Emergency Fund

Most experts recommend having an emergency fund that is accessed only in true emergencies equivalent to three, six or nine months of living expenses. This can help you hedge against illness, job loss or other unexpected expenses that are so common in life. You might save only for absolutely necessary monthly expenses, such as rent, food, and power, or save enough to maintain your current standard of living for a set amount of time.

Invest in Home Improvement

Are you already a homeowner? You can spend your money on home improvements to make your home more enjoyable and also increase its value, helping you later should you decide to sell. Investments like energy-efficient doors and windows, a newer, more efficient furnace, or updated siding can enhance your home and make it worth significantly more at selling time. Just remember, certain upgrades you may want can also decrease the value of the home. So think about each update from a market perspective as well as personal preference.

Having extra money left over from your budget is an excellent position to be in. With so many ways to spend the excess, deciding what to do with it might be the most difficult part.

In conclusion, finding yourself with extra money at the end of the month is indeed a commendable achievement, considering the financial challenges many households face today. However, the decision of how to allocate this surplus can be both exciting and daunting.

One option is to use the extra funds to pay off existing debts, thus reducing interest payments and lightening future financial burdens. Alternatively, treating yourself to a well-deserved reward, whether it's a vacation, a special purchase, or contributing to a savings goal, can provide a sense of fulfillment and enjoyment.

Investing the extra money offers opportunities to grow wealth and secure a comfortable future, whether through traditional avenues like stocks and bonds or alternative options like real estate. Similarly, building an emergency fund provides peace of mind and financial security against unforeseen circumstances.

For homeowners, investing in home improvements not only enhances the living experience but also increases property value, offering long-term benefits.

Ultimately, the decision on how to utilize the surplus should align with individual financial goals, priorities, and circumstances. Regardless of the chosen path, the opportunity to have extra money signifies prudent financial management and opens doors to various possibilities for future financial well-being and enjoyment.

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