Imagine coming home one evening to the news that a distant relative with Scrooge McDuck money has passed away, and on the account of there not being a next-of-kin, you stand to inherit a couple million dollars. The news alone would be enough to make your whole day, week, even a month, let alone the prospects of getting your hands on that sweet sum of money. Now, seeing as you’re a person in the top 10 percent, you should know what to do with your money. Your first thought is to be responsible with it and save or invest it, but that Mercedes at the dealership that caught your eyes a few weeks back is still there, beckoning you to come take ownership. You can now afford to splurge on more than just a Mercedes now, so why not go for it? Today, we’ll take a look at a question that eludes every one of us: what should I do with my money?
Basically, there are two ways you can go about reacting to your newfound wealth, regardless if it is a one-time occurrence (like an inheritance or a bonus) or a recurring one (a big increment at work); you can either save it or spend it. Other options may also ensue, but the simple answer to the question ‘what can you do with money’ is either save it or spend it. In the course of this passage, we will delve into the other options, as well as look into the smart things to do with your money.
Understand one thing before we start: spending money and the rentier approach to live life is never satisfying. Sure, a flashy car in the driveway and some cool gadgets and clothes may be able to take your mind off of things for a while, but it is not permanent. And keeping in consideration the different debts an average American has to pay off, you’d be better off investing the money and using the dividends and returns to carve out a stable, uneventful financial life.
What Should I Do With my Money?
As explained beforehand, regardless of the frequency of the cash input you have, be it a one-time thing or a big increment at work, the options stay the same. Let’s take a look at the grand total of moves you have when it comes to what can you do with money,
These four options are the total you have when such a situation presents itself. Two of these options are included in the list of smart things to do with your money, one is an admirable action but not a financially viable one, and one is well, what happens with lottery winners when they blow all their winnings on drugs and whatnot. We’ll leave you to decide which is which while we get into the details of all these options.
The first option on this list and the first impulse in anybody’s mind when they spot a 20 on the road or win a million dollars in the lottery is to spend the money, be it on a Big Mac and some fries or on some expensive cars and clothes. And that is fine, considering that us human beings live for the good things. However, it is the financially smart people who look for comfort beyond just a few days. If you wish to spend your money, no one will discourage you from doing that. You can splurge on anything you like, but know that the money you blow on wants and not needs will not hold their satisfaction for much longer. It will be a week or a month, tops, of a period where things will feel right, and from there onwards, it’ll be like every day. To summaries, you can focus on the short-term, but we would not suggest you to do so. We’d suggest you to go long-term and not sacrifice peace of mind for flashy cars and the glamour of a few weeks or months.
One of the best things to do with your money, but still not quite there, you have an option to start saving your money for a rainy day. If you are one of the many millions who are salaried individuals and live pay check-to-pay check, a lump sum amount of money can be nothing short of an absolute lifesaver. Because with a lifestyle of a salaried individual, every expense is calculated and accounted for, and little if nothing is left in savings or for a rainy day. And when that rainy day does come, people resort to borrowing and selling some stuff off their hands to ensure they weather that day.
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If you really want to know about a smart thing to do with money, saving is the next best thing to investing it. If you’ve inherited a couple of hundred thousand or a substantial bonus has been awarded to you, deposit the money in a savings or current account to be used later or to be withdrawn from in case of an emergency. This will ensure that whenever a big expense pops up, like that dreaded check engine light or even a medical emergency, you’ll have some funds behind you to take care of the problem, thus leaving your pay check unscathed and barely disturbing your financial life. This is the second option on the ‘smart thing to do with your money’ list.
The smartest option out of all, at least financially. The one advice that any sane person will give you once you get your hands on the money. Understand that once you get to spending, no amount is too big to be spent. Even a billion dollars can be spent within a month if you have a bucket list and a list of readily available items to go. This is an economy that encourages spending, so do not spend one minute be fooled into thinking that you live off this money entirely and still have some leftover for when you pass it to the next generation. This is why a steady source of income is still the best way to earn and spend.
Also Read: Is A Spouse Entitled To Inheritance Money?
Investment means that using the money you have to generate passive income, one that requires little to no work but still pays off, be it in the form of dividends, rent and whatnot. This is money that you will get aside from your monthly pay check, and if it starts to generate passive income, it will mean absolute good news for your financial self. Again, investment means that the money you got did not get wasted on clothes and whatnot, instead it is being used to generate income. Which means that while clothes and shiny cars will mean a good enough month or two, passive income coupled with active income will ensure that you live, tension-free, ready to face any curveball life might throw at you.
- Donate to a charity
The last option on the list of smart things to do with your money is donate it for a good cause, or to the less fortunate among us. While this may not be the best option from a financial standpoint, it is an admirable step to do with your money, helping those in need of help. Giving back to the people is certainly a good way to earn some good graces and make sure you don’t get lost too much in the money spending and earning cycle. In this time of spendthrift economy and a deeper divide between the rich and the poor, nothing will calm you more than to help the needy and make an effort to bridge that gap, because rich or poor, we are all humans. And if we can’t help our own selves, nobody else is going to step up and do that. The mere fact that you chose to do so will set you apart from the rest in a good way.