So What To Do With Unexpected “Extra” Money

by Admin on June 20, 2021

So overtime is now offered for the next two months at my workplace.  My work situation is kind of weird.  Although I am a salaried employee,  I still get paid for any work done over 40 hours.  Pretty sweet huh?  Overtime used to be offered quite frequently in years past—when my salary was a lot lower than it is now.  However, recently funding has dried up and so we don’t see it all too often anymore.  The funny thing is, all the overtime I worked in the past, I don’t see any of it now—not in my savings, not in my checking, not in my investments.  Nada.  It frickin pisses me off how much money I’ve wasted.  It was easily $30k in overtime money.

Photo-by-AMagill-at-Flickr-Creative-Commons

Last time they offered overtime, I chose not to do it because I was working on my niche sites.  However, now that I think about it, I could’ve just put in as much time to my sites even if I was working overtime.  So this time, I will be taking the opportunity to earn some extra money—yes I hate trading in time for money.  But at the rate of $55 an hour, I’ll do it.  This upcoming overtime has inspired this upcoming post.  What should you do with all the “extra” money that you earn?  When I refer to extra money, I mean the money aside from the regular amount you get from your paychecks.  This may be bonuses.  This may be income from a second source.  This may be a windfall from an insurance claim.  This may be, as in my case right now, money from overtime.  Basically, extra money would be anything (unexpected) that doesn’t come from your regular recurring paychecks.

Put It Towards A Side Business

For those that have always wanted to start a business or currently own a business, extra money is perfect for this.  Remember, this is the money that you did not account for previously and therefore should not be “needed” to sustain your standard of living.  Putting it towards a new business stands means there is a good chance you may never see it again.   That is because there is a huge risk in starting a business, any business.  But possible loss should never stop you from putting yourself out there and trying to make a buck.  As long as your risks are calculated, you have a concrete plan, and will follow through with your plans.  If you fail, you lose a few thousand dollars but learn a valuable lesson and gain extremely useful experience.  I know I lost thousands of dollars and tried numerous things before I turned my first profit with my business.  Although the profit isn’t huge and can’t replace my full time income, it is something.

Starting a business is extremely cheap and easy nowadays.  You can do it for virtually nothing.  A common occurrence is people picking up skills or harnessing the skills they already have, and then lending their skills to others—in the form of freelancing.

Pay Off Debt

If you have a lot of credit card and high interest debt, you should definitely use your extra cash to pay off some debt.  Debt is a  major roadblock to freedom and happiness so the faster you get rid of it, the faster you can be free and happy.  Now I will qualify this by saying that you shouldn’t use your extra cash to pay off all your debt.  That is because some debt’s interest is so low that your extra money is better spent by growing it—thereby increasing your net worth.  I personally don’t think you should use your extra cash to pay off (federal) student loans or auto loans—or even a mortgage.  The interest on most of these debts for a person with good credit is south of 5%.  Now, if these debts that I have listed are north of 5% for you, then that is another matter.

Investing In Stocks

This is personally what I will do with my overtime money—put it into the stock market.  The stock market is a very worthy investment as the average returns have average 6 to 7% since inception, after adjusting for inflation.  Even in the last ten years, the Dow Jones Industrial Average has returned 5.63%, despite taking beating a few years ago—-the Dow Jones Industrial average decline nearly 50% in a little more than half a year (from July 2008 to March 2009).  I am against using  the term average when investing but the numbers above just shows you how resilient the stock market is.  Investing in the stock market while young is about as safe of an investment as it gets.  I will admit though, there are some ideal times to get into stock and some not-so-ideal times.  The ideal time would be in early 2009.  It is harder to find bargains now as opposed to 2008/2009, but there are still some if you look hard enough.

Above, I’ve listed three things you can do with your extra money.  There are plenty more things you can do with your extra money.  But the main point is to grow your money since you do not need that money.  You really shouldn’t use that money to temporarily raise your standard of living—because by putting to good use and growing it, you can afford to raise your standard of living permanently in the future.  The bottom line, increase your net worth—either by decreasing your debt or increasing your cash.

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