Do you have money leftover at the end of the month? What do you do with the money you have left in your bank account? There are only a few things you can do with your extra money: Spend it, Save it, or Invest it.

Spend It

Not my first choice but unless you have something pressing you need to buy for you or for someone else, there are better ways to use your money. You might say I am saving up for something big such as a new car, car repairs, home repairs, home upgrades, or a future vacation. For big ticket items like these, it’s better to put your money in a savings account to accrue interest until it’s time to spend your money. In the meantime, try not to just spend it just because you have it.

Save It

Put your money in a savings account and let it accrue interest. Interest rates aren’t that attractive these days but at least you’ll be accruing instead of spending it. As of 8/11/2020 Marcus Savings rate is 0.8% as well as Capital One Performance. These are high yield interest savings accounts. I’m not too keen on Certificate Deposits (CDs) because of the lower interest rates they return and you lock in a long term contract. The good thing about savings accounts is that you’re not locked in and you can withdraw your money anytime. The bad thing is that the rate is lower than the projected rate of inflation for 2021. Which means that when inflation goes up, it costs more to buy the same goods as before. And if savings interest rates continue to decline and inflation increases, then the interest you accrue is not worth as much anymore. Still, saving your money is a better option than spending it.

Invest It

One of my favorites and I’m a proponent of investing! One of the reasons I like investing money is because of the return on investment I’m experiencing and have experienced. In the long run, the Dow Jones has historically grown which is why my preferred use of my money is investing.

I invested early starting from my first job by opting in with a 401K and maximizing it. If you have a job that offers a 401K benefit, this could be the easiest way of starting your investment journey. Many employers will contribute on top of what you are putting into it which is essentially free money for you. Why not?

Similar to a 401K, there are other account types you can invest in such as an IRA and a Roth IRA. These are retirement accounts similar to the 401K but they do have their own unique rules such as how much you can contribute to it and withdrawing the money. Personally, I do have a IRA and a Roth IRA that I manage myself through my brokerage account in preparation when I retire.

If you have children and are preparing for their higher education expenses, look into a 529 plan. I started a 529 investment plan this year when the market dipped and I’m at a growth rate over 23%. Getting a return that’s over 20% is fantastic and I’m glad I made this investment. Check with your state’s 529 plans and you could get a tax benefit from it.

The stock market is a great way to invest your money in individual stocks, funds, and indexes. Beware though that the stock market goes up and down. Before you invest into the stock market do your research. Most of my financial portfolio is in the stock market and trust me, when the market is good, it’s good. And when the stock market is bad, it sucks. You will experience good investments and bad investments throughout your investment journey but as history shows, the market eventually goes up.

Investing in real estate is another investment option. Real estate is a good asset to invest in because it typically appreciates in value. There are a number of ways to invest in real estate that I wrote about and have experience in.

Invest in yourself. You might not hear this as much when it comes to financial investing but it is an important factor. Investing in your training or education will help you get ahead in your career or knowledge which can lead to promotions, a new job, a new career, increase in collaboration, increase in your network, and more. Also, do not forget to invest in your health. Investing in your health is your best investment. What good is your money if you can’t physically or mentally enjoy it?

Pay off your debt. I consider paying off debt as an investment because it’s a goal that you’re trying to achieve to help you reach your financial independence. Whether it’s school loans, car payments, or credit card balances, getting rid of debt will give you more options to use your money elsewhere.

As you can see, I wrote a lot more in the Invest It section because I believe that’s where your money will see the most growth. The question I ask myself all the time, Save or Invest? It is good to diversify your money so it’s not all in one location. I do have a savings account and yes, it doesn’t get a great return. But it gives me comfort that my savings doesn’t dip when the stock market dips or crashes. What do you do with your extra money? Saving and investing it will get you to your goal of financial independence. If you are interested in following my journey, email subscribe to get alerts of latest posts or follow me on Facebook.