You’ve discovered some ways to make extra money. In fact, you forecast that this extra income is going to be consistently earned. But now you wonder: “Where should I put all this extra income?” You’ve come to the right spot. Let’s consider together some of the things you can do with all that extra cash! Shall we?
It’s a blessing, treat it that way.
The first thing you should recognize about this extra money is that it’s a blessing. As Christians, we are called to handle money the way God would want us to manage it. Extra money should not be squandered, but rather handled with care. Here are some things you shouldn’t do:
- Gamble it away. This can be tempting, and remember, not all gambling means hitting the casinos. People might be tempted to invest in single companies or “invest” in a high risk business venture. Don’t gamble with extra income. It’s not worth it.
- Spend it on toys. Another temptation, spending money on that brand new car you want or faster computer (when yours is doing just fine) is never a good idea. You have better places to throw your cash. Spending money on high-ticket items should come when you are wealthy. You’re wealthy when you have no debt (including no mortgage) and have significant investments. Instead, buy modest items that provide you with only what you need.
- Throw it into a savings account without a purpose. Saving money is great, but only when it is done with a purpose. Merely throwing money into a savings account with no intent of investment or game plan is not very wise. You could be earning interest on that money, or using it to fund goals like education.
There are many places you can put extra income.
There’s no way to list all the places you can throw extra income, but this will give you a great start. Here are some of my favorites:
- Throw it at debt. Blasting through your debt is one of the best ways to use your extra cash. Why? You’re guaranteed a return on your investment because it will result in you not having to pay interest. Think about that! A guaranteed interest rate! Wow. Not to mention, you cut down on the risk of defaulting on your loans, and you free up cash flow. Bonus, bonus, bonus!
- Throw it into emergency savings. Everyone should have a solid 3 to 6 months worth of expenses emergency fund. Storms happen. It’s going to rain! The wind is going to blow! The tree might fall through your financial house! Get an emergency fund.
- Throw it into investments. Retirement investing always comes first, then comes wealth-building investments. Need help? Consider the proper method to prioritize your investments.
- Throw it into a college fund. There’s nothing like a large, healthy education fund. Figure out how much money you need to build your college fund and cash flow it! College with a purpose is one of the best investments you can make. Do it now, do it right!
- Give it away. With this one, there’s a catch. Make sure you give it away once you are wealthy. Everyone should give a certain portion of their money away on a regular basis, but extra money should be given away once you are wealthy. Giving keeps money in the proper perspective. Try it, you’ll love it!
Where to start, where to start?
That is the question. I’ve found Dave Ramsey’s 7 Baby Steps to be an excellent starting place to learn how to prioritize your finances. It also helps to make a list of all your options and write next to them what your return on investment (ROI) will be. Don’t forget to measure risk in your analysis!
So, how about you readers? Where do you throw your extra income?
Photo By f_trudeau