While the title of this post might sound like a luxury and the opposite of anything someone would call a problem, I often see people misusing their positive situation. Maybe its your birthday or its Christmas or Hanukkah, whatever the reason you might find yourself in a position with what some would call “surplus cash”. This is great and dandy, but what do you do with it? You already have a iPad and you don’t need to upgrade from the 4s to the 5, lets be honest, you don’t. At this point you might wonder what options are on the table and while the below list is far from even close to being all the options for your money, its a great way to start thinking!
Savings Accounts-This is one of the most obvious. If you have money in the bank, keep it in savings. Although I always argue there is no different for most of my friends between savings and checking. Yes, savings might accrue interest and checking doesnt, but if you only keep a few hundred dollars in savings for a few days at a time before transferring it back to checking or withdrawing it from the ATM, its miniscule.
Stocks/Funds/ETF-This can be risky. If you don’t know what you are doing, I would suggest seeking professional advice or simply staying away. Stocks can have great returns and in many cases the higher the risk the more potential for return. Investing can have strategy such as those who invest in dividend only stocks and utilize the dividend for reinvesting or other strategic purposes. Some savvy investors use a theory of income investing basing their expenses on the dividend income they receive and thus living “for free” or “on the companies tab”.
Certificates of Deposit-This is a more stable investment in a sense. Again, in cases of CDs you should seek professional advice or information. CDs have maturity dates which in simplest terms means until the note matures you cannot access your initial deposit and/or any money without facing the potential for a financial fine or charge. Interest rates can vary based on the bank and the length as well as current market conditions, but the returns can sometimes be worth your while depending on how much the investment and how badly you may need the money prior to maturity.
Other Investments (ie: Real Estate, Collectibles, etc.)-This category can get really creative. You might be able to have enough extra money to invest in other things. Real estate may be an investment for you. I have friends who purchase multi-unit homes and live in a unit while renting the others and in turn paying their own mortgage. I also know an individual who chose to breed dogs as an income stream. It helped that she was a dog nut. All of these investments, along with basically any investment, requires research and due diligence on your part as well as on the part of anyone representing you in the transaction. Always make sure you understand what you are getting into and the potential for loss. As they say, buying a brand new expensive car is.. expensive, but the second you drive it off that lot it starts losing its value.
SPEND IT-I put this last for a reason. If you have been working hard saving for something special or particular that you want, then maybe this is the best option. Just make sure you know what you went through to get the savings and what you will get from your purchase. If one outweighs the other, go for it and enjoy! YOLO right?