So, you’ve got extra money sitting around in the bank with infinite options before you. You’re like an employee with your first pay check — you’re pretty giddy, but you have no idea where to spend the money.
Of course, if you’re in a situation where you have “extra money” around, then it’s a good problem to have. Now assuming you already have emergency an emergency fund for yourself or your family for at least six months, and there aren’t any other big financial goals like buying a home, car, etc., here are some of the places you can spend that extra dough.
Start a side business. Sometimes the best way to secure and grow your extra income is to invest in another venue – business venue! Based on a study by the University of Phoenix, 63% of those under the age of 30 want to start a side business. The best way to do this is to start a business that’s fun for you as well – that’s an awesome win/win.
Start investing in your IRA. I’ll just say it here: opening and investing in an individual retirement account can be a huge pain – thankfully, online banking and investing allows you to be up and running with a new IRA in a matter of minutes.
Providers can even go as far to provide complete hands off financial administration for a small fee. Use your extra money for an initial deposit so you can make your money work for you over time.
Invest in stocks. You’ve heard this before – and because of good reasons. Investing for a couple of bucks in stocks in the past actually made some people millionaires. However, don’t fall into this without planning. It’s not a get rich scheme as glamorized by the media.
The magic happens through long-term growth over time. A bit of money today can actually grow into a whole lot in the future. Let’s use $10,000 as an example. Instead of using that $10,000 to pay for a new car’s down payment, let’s say you invested it in one really solid stock and left that stock alone until you’re ready to spend the earnings.
If that stock consistently grows at a rate of 8% over time, in 30 years, you would have about $132,000, in 40 years, this will be $314,000, and in 50 years, you’re looking at $743,000 – that’s over 70x of what you originally invested.
Invest safely for a future goal. Every so often cash savings isn’t sufficient to meet whatever future goals you want. If you need bigger amounts of money for a specific future financial goal, a safe investment that produces a high chance of growth at a reasonable rate can be a better choice for your extra cash. Bond funds is a perfect choice if you want a safe investment as it allows you to invest in a portfolio of securities that earns regular income
The bottom line
You might be thinking about just putting money in a savings account. With interest rates so low, you can actually lose money because of inflation. The real gains will come from investing your extra money in the above options, whether it be your IRA or through secure bond funds so your money works for you or your family’s future.