What Should You Do With Extra Money?

by Pam on July 14, 2010

Imagine you just received an unexpected gift of money, won a lottery, or your business did much better than expected.  Suddenly you have extra money that you need to decide what to do with.   What do you think you would do with it?

The answer will be different for everyone as we all have different ideas for what to do with extra cash.  Due to our unique situations in life, it might make more sense for some of us to pay down debt, while others should be topping up their emergency fund a bit more.  Still others might be wise to invest in the stock market or start up that business project they’ve always wanted to work on.

Before taking advice from just anyone, make sure that you think hard about what your goals are.  If you plan to do a lot of travelling or carry out expensive hobbies after you retire, you will likely want to use your extra cash towards investing for retirement, for instance, but if you are planning on taking a trip around the world in 5 years, that will likely be your priority.  No one understands your goals better than you do.

Although the obvious answers like retirement savings, paying off debt, building up emergency funds, or saving for your children’s education might be suitable for you, don’t limit yourself to these goals.  It’s your money, and you want to make sure you are using it for the things that matter most to you.  Who knows?  Maybe you desperately need a vacation in order to stay sane in your hectic work environment.  Or, perhaps you want to use your extra money to take a night class and learn a new skill.

Be wary of anyone giving you advice on what to do with your extra money before you’ve had a chance to determine your plans and goals.  Make sure your advisor understands your situation as a whole before providing advice.  Unfortunately, at times advisors may give you advice based on what benefits them instead of what would be most appropriate for you; so think things through before making decisions.

For more tips on this subject, check out the globeinvestor.com article entitled “What Should You Do With An Extra Dollar?

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