The end of the year brings many good things. There are celebrations, holidays and for most of us, bonuses. Sometimes you are expecting them, and sometimes they come as a very pleasant surprise. Whether it is a bonus or some return on investment that has given you some extra cash in hand, you need to spend it wisely.
Not sure how to do it? Let us help you out.
Here are some tips from experts on what to do with your extra money.
Pay Off the High-Rate Debt
So, you have some extra money. Why not use it to pay off your debts? If you are paying interest in double-digits on anything, for example, mortgage, student loan, etc., you can use this extra money to
pay off this debt before you plan to do anything else. Choose the debt that has the highest interest rate and use your money smartly to pay it off.
Establish a Rainy-Day Fund
Another important thing you can do with your extra money is to establish an emergency fund. Experts recommend that you should have at least 3-6 months of living expenses in your emergency fund. This will get you through tough times in case you are not able to work because of emergency reasons. It is best to keep this money separate from the one you use for your monthly expenses to make sure it is not wasted in any way.
Make Long-Term Investments
Thinking about retirement isn’t something that most of the young folks do. They think that it is decades in the future and they don’t really have to worry about it now. What they don’t consider is the most important asset: time. If they start at the right time, their money will have time to grow.
If you are just starting, the first thing you need to do is save as much as you can in tax-advantaged retirement accounts such as traditional IRA, Roth IRA or 401(k). You can then move to individual investment accounts when you have already maxed out those.
Spend it on Something That Holds Value
Life is nothing without some fun. If you have some extra money, you may want to use it for some fun. As long as you are not dealing with major debt with high interests, you can spend around 15-20% of your extra money on something fun. Just make sure you don’t have a big expense coming your way in the near future.
Extra money in your hand is always a blessing. You can use it in so many productive ways to help your financial situation. Just make sure you don’t spend it all on something that you regret later on. While having fun when you have some extra money is perfectly alright, just make sure you don’t go overboard.