In a perfect world, you’d be able to slowly but surely work your way from one job or position to another and start to make more and more money as you progress. Theoretically, this should allow you to start living a more comfortable lifestyle and begin saving more. However, many people find that, regardless of how much money they make, they get stuck with the same financial problems because they wind up spending their money in unwise ways.
To help you break from this cycle, here are three things you should do with your money once you start to make more than you need.
Pay Down Your Debts Faster
Almost everyone today has at least some amount of debt to their name. But while paying your minimum monthly payments will keep the creditors off your back, it will also keep you in debt potentially for years and years.
Knowing this, Trent Hamm, a contributor to The Simple Dollar, shares that once you begin making more money, you should take that money to start paying down your debts faster. While this isn’t going to be the most glamorous option, paying more than the minimum payment or paying extra payments will help you get out of debt quickly and allow you to have more freedom with your money in the future. You’ll also end up saving a lot of money on interest payments as well.
Now that you have some money that you can play around with, one thing you might want to start doing is investing that money.
There are tons of options for how to invest your money depending on how you handle risk and how long you’re willing to let your money sit in an investment vehicle. If you’re unsure what to do or how to get started, Mike Brassfield, a contributor to The Penny Hoarder, recommends either using an app that makes investing simple or trusting your money to a professional. You could also start doing your own research about things like term deposits, bonds, securities, and more.
Save For Your Future
In addition to investing your money, you should also make a plan for how you’ll save now for a more stable financial future.
While you can always just slowly add money to a savings account, Liz Knueven, a contributor to Business Insider, shares that some better options include putting more toward your 401(k) or contributing to a Roth IRA. Both of these savings options will give you a better return on your money than a traditional savings account while still being relatively safe for your money when you’re committed to saving for the long-term.
If you’ve recently gotten a raise or are making more money than you ever have before, consider using the tips mentioned above to help you know how to be smart with this new financial capital.
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