Guest post by Grace Frenson
Most people tend to be irresponsible when they have surplus money by buying things they don’t really need, believing that the money is never-ending. While some people are born into fortune, a lot of people are not.
Proper money management is one of the surest ways to secure one’s future and save for rainy days or anything unexpected. There are several things to do with extra cash–the list is unlimited.
Though you may feel the need to spend your money on whatever you want, it is important to have your priorities sorted out. If you consider some essential things you need in life, you can determine the best plan of action to take. Here is how you can use extra money:
Invest in a Business
Businessmen are often preoccupied with the best way to use surplus money to make more money. Investing in one or more business could be the best way to achieve this.
People who are fainthearted in taking business risks would prefer to leave the money in their savings account, but the money would seldom grow when left there.
Investments do not always ensure the safety of the money, but if it succeeds it will bring a greater return than when left in a savings account. If it is really surplus money, it may be worthwhile to take a risk on it.
Use a 10 Year Saving Strategy
You have been working to secure your future, and now you have extra money. it is time to put some mechanisms into place to keep you from overspending.
One way to keep tabs on future events is by creating a 10 year saving strategy. This allows you to save for predictable expenses for the next 10 years.
Such expenses could include predictable costs such as a house, a wedding, kids, and so forth. If you have enough surplus money, you could even set up separate accounts for each of the items.
Stash the Money in an Emergency Fund
Money is not an inexhaustible commodity–unless you are a multibillionaire, you may exhaust the “excess” money in just a few months. If you haven’t already, you need to consider stashing the money in an emergency fund to take care of emergency situations only.
The amount of money you chose to put in it is up to you. However, emergency funds may come in handy in situations such as unexpected and costly health care bills, home repairs, auto repairs, unanticipated travel, and so forth, so you want to save wisely. Besides helping you to deal with an emergency situation, emergency funds could help protect your credit record.
Job loss is one of the common reasons people end up needing an emergency fund. Say you get injured or sick and have to go on disability, you want to have those supplemental savings in place in case your career or livelihood is threatened.
Increase Your Health Insurance
This may seem obvious, you need to invest in as much insurance coverage as you can afford. If you really have a surplus cash, health insurance is paramount. Health is wealth, and wealth becomes irrelevant and meaningless if the health cannot be secured.
Opting for health insurance is one of the wisest investment decisions you can ever make. This is even much more critical with how high medical bills are today. Medical debt is the single biggest reason people end up bankrupt or in a huge amount of debt.
Putting the money toward health insurance is synonymous to saving it for rainy days.
Obviously, nobody plans on having a critical health condition, but it does happen and you don’t want to be unprepared when it does. Thankfully, you have the cash, and you could make a difference to be prepared for the unexpected.
Create a Budget
You may really be misconstruing the cash as being excess if you have not created a budget and mapped out all of your upcoming payments. A budget will help you keep tabs on your income and expenditures.
It helps you to manage the financial flows and see where your money goes or would potentially go. Creating a budget will help you to make a detailed plan on important necessities like insurance, utilities, food, and housing, as well as miscellaneous activities.
Even extremely frugal people would be tempted to spend money on unnecessary stuff when they have excess money. By making a list of preference and value would help you to know what to spend money on and what to avoid.
A list of preference and value simply shows you items that are worth spending your money on. Of course, the preference and value may differ from person to person but the bottom-line is that it details your highest level of priority and utility.
The highest scale of your value and preferences is the right place to begin spending your surplus money. However, if some items don’t really make it to your list but they are simply critical for life–you need to reconsider your budget and adjust it accordingly.
Be Careful When Spending
When having an abundance of money, it is easy to spend it all quickly. Be careful to not go down this path, and spend your money on what is prevalent in your life.
If you are in a bit of credit card debt, consider paying that off, or paying off your child’s student loans. You want to be sure you don’t spend the money and then not even know what you spent it on once it’s all gone.
Think long and hard about how you want to spend–or not spend the extra cash. You don’t want to regret the decision you make in the long run.