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.
