Whenever you obtain extra money, it is an opportunity to take your finances to another level. Instead of racing out to spend it frivolously, I encourage you to consider how you can put that money to use in a way that propels your financial situation forward.
- Pay off a debt When you pay off a debt, it will instantly increase your monthly cash flow. This is something we call “monthly margin” around here at I Was Broke. Now I’m Not. Plus, what other financial decision is more rewarding than making a debt leave your life?
- Buy yourself out of a membership/subscription Things like cell phone contracts, gym memberships, satellite tv subscriptions, etc. Many people keep an unwanted subscription around simply because they don’t have the money to buy out the few months ‘cancellation fee’ required to cease service. This allows you to gain monthly margin and makes an annoying expense begin to fade in your rear view mirror!
- Build savings Increasing your financial reserves/cushion/margin – something we call “reserves margin” around here at I Was Broke. Now I’m Not. – is never a poor decision! This positions you to accommodate unexpected financial challenges or pursue an opportunity.
- Invest for retirement $1,000 extra today will be worth $3,300 in 10 years, $10,893 in 20 years, $35,950 in 30 years and $118,648 in 40 years. Get #FiredUp!
- Invest for college $100/month will be worth $8,167 in 5 years, $23,004 in 10 years, and $75,786 in 18 years. Excellent decision!
- Obtain more education/certifications Knowledge is power and can equal a substantial increase in your income and your value to the business you conduct.
- Purchase a(nother) home Real estate is one of the time-tested ways for people to build wealth. Plus it can produce additional income using a service like VRBO, Homeaway, or AirbNb
- Become a private investor There are lots of ways to become a private investor. You could start a small business. Maybe acquiring a minority stake in a larger existing business is more your style. Angel investing has been very popular over the past decade. Hard money lending is another way to put your extra money to work. Perhaps being a silent partner in a franchise could be more suitable for you.
- Vacation A great leader once shared this formula with me: Change of pace + Change of place = Change of perspective | I’ve found it to be true. There is something about “getting away from it all” that helps you achieve clarity on your next steps.
- Give it away There’s something powerful about giving money away. One friend told me that he “gives because it keeps him from becoming greedy.” When I give money away, it makes me want to make better money decisions so I can give even more. It connects to the “perspective” part of the equation I shared in #9.
No matter what decision you make, choose to put the extra money to work for you. Your future self is depending on you!