If you just received a bonus from work or your yearly tax refund, the extra money may tempt you to shop for fun items. Falling for temptation only makes your financial situation worse. Financial experts suggest investing your money in ways that improve your monetary outlook for the future. Several smart strategies can be used to stretch your extra funds.
Concentrate On High Interest
Look through all of your debtor accounts and find the high interest amounts, such as credit cards. Try to place more money on each account to pay off the balance. You want to pay these accounts faster so that the interest does not accrue uncontrollably. Other accounts, like student loans, should be paid normally because you take the paid interest off on your tax return. Interest is one of the most common reasons people go into debt, so taking care of bills that have a high interest rate will be greatly beneficial to you. It might not seem like much from month to month, but over time, the interest you owe could end up being quite a bit more than you thought originally.
Look To The Stock Market
Although you may be wary about investing on the stock market, there are relatively stable strategies to increase your wealth. Choose a portfolio with a high percentage of bonds. They do not have a high rate of return, but they are less risky than stocks. If you are young, consult stock market newsletters or online recommendations to choose desirable stocks. Any extreme fluctuations in the market will eventually balance out in your account. In other words, you won’t lose everything in one day. Make sure you spread your money into different stocks to avoid the risk of loosing all of your money.
Contribute To IRA Account
An IRA, or individual retirement account, is a specialized savings account used after you retire. Money deposited into the account is tax deductible, depending on the amount. Although you may have a 401K account through your employer, an IRA is a great investment to have so you save even more funds for a comfortable retirement. Talk to your employer to see if they math your contributions. This is a great investment that will likely grow into a comfortable retirement fund, especially if your employer will contribute as well.
Certificates of Deposit
If you want your money to be accessible, but you don’t need it immediately, invest in bank CDs, or certificates of deposit. You choose a certificate for a certain time period, such as 6 months. Your money is not available during this 6-month period, but you gain considerable interest after it expires. At that point, you take your money out of the CD or simply renew it for another guaranteed interest rate.
Accidents and unemployment can happen at any time. Having an emergency fund allows you to pay your bills when you can’t work. It also gives you some time to look for a better job to support you and your family, rather than scrambling to find any job you can find to try and cover your bills. Put your extra money into a savings account earmarked for emergencies only. In theory, you need about 3-6 months of saved income to be comfortable during a personal crisis. Make sure you put the money in a savings or checking account account that you can access any time without paying penalties for withdrawals.
Make your money work for you. By following these tips, you can be prepared for financial situations that would otherwise drain your bank account. Rather than spend your extra money, invest now so you can gain interest and end up with more money in your pocket.