What is the best use of your extra money — should you save it, spend it on something fun or invest it? There are pros and cons to each option, but the final decision is up to you. If you’re not sure what to do, here are some tips on how to make the most of your extra cash.
1. Save it
Saving your money is always good. It gives you the assurance that you have some cash saved up in case any unexpected changes in your life come up. There are many ways to save your money. First, you can try putting your money in a piggy bank so you can watch it accumulate. This process is good only for the first few months or years, especially when you only save change. Keeping your money at home can give you enough motivation to work harder because you can see your savings growing before your eyes. Just remember to keep it somewhere safe.
But for larger amounts, putting it in a bank is the best way to go. Of course, it’s good to shop around for the best interest rates you can get. By doing this, your money can grow with the interest while you are accumulating wealth. This also gives you more security compared to keeping your money at home. Your wealth is safer in a bank because even if your house gets ransacked, you can still get it back. Just make sure that when you are investing money, the bank is insured against robbery.
2. Invest it
Investing your money means that you’re putting it in a certain financial instrument, allowing its value to grow over time. Most people invest their money because they believe that the value of their chosen investment will increase before they need to use or sell it. In other words, by investing your money you are essentially letting it work for you so that it can grow.
One of the biggest advantages of investing is that you don’t have to watch over your investments all day — it’s basically hands-off after you’ve put your money into an investment. If you want to be a more active investor, there are other options available where you can buy and sell stocks yourself, but this can require a lot of time and effort so a certified financial planner may be of use to you.
3. Use it for your future plans
Using your money for future plans can be a bit risky, but it’s still a good thing to do. For example, you could use the money to pay down debts like your credit card balance or student loans. By paying these off earlier, you’ll save on interest fees and will also show that you’re determined in achieving your goals.
Another option is to use your extra money for a down payment on a house, car, or investment property. This means that you won’t have to pay rent anymore and will be able to build equity in your home.
Or you can use it on insurance. Different insurance policies come with different costs so you can use your money to pay for the insurance that best fits your needs. For example, if you don’t have life insurance then you should use your extra cash to get the plan that’s right for your family.
4. Spend it on something fun
Lastly, if you’re looking for an immediate return on your money, spending it on something fun is the way to go. This includes buying things like clothes, accessories, gadgets or even tickets to a concert. Some people think that this is a waste of saving but it can actually help you to stay motivated.
For example, if you need to save money for a year in order to buy something expensive, it might be difficult for you to do so. But if you allow yourself to spend your hard-earned cash every now and then on less expensive things, this will keep up your savings momentum as well as your morale.
Most importantly, you should always take into account your priorities and preferences when choosing the best use of your money. If saving is more important to you, then save it. Or if spending on something fun now will motivate you to work harder for longer periods of time, go ahead and make that purchase! It’s fine as long as you don’t lose sight of your financial goals.
There are many ways to use your money. You should find a way that best fits your lifestyle and goals or talk to a financial planner. Whatever you decide, just remember that the key to any successful investment plan is proper planning and goal-setting. So set attainable goals which can be achieved easily to make sure you stay motivated throughout the process.