So you’re finally making money…real money…like when everything adds up, I’m still in the green money! What now? Build your own pool of gold coins, and swim in it? Retire? Move to the better part of town? Whatever your plans may be, do consider these five things you can do with your income.
Oh, of course, the responsible person will know that this is just a blog that presents one person’s thoughts and should not be taken as actual financial advice. Also, these thoughts are not presented in any particular order.
Pay Off Your Liabilities.
Student loans. Credit card debt. Car loans. Personal loans. Pay day loans. It’s one of those dreaded words you hear roughly the same time each year—Faffffff – suuuuuhhhhh. For many of us, going through graduate school included the competition for financial aid and entry-level part-time wages. But when those are still not enough, many turn to the government to help finance their education. Now, let me be clear, I do not think there is shame in having loans. What I’m pushing you is to consider, if possible, to pay your loans ahead of time. To oversimplify this illustration—the principal is the amount you have to pay, the interest is the optional amount you pay to gain more time to pay down the principal. So for a 60-month loan, if you pay everything by the 58th month, you’ve just saved 2 months worth of interest! That’s money you can put into the next four items below!
Develop Safety Nets.
As a child, I was always taught about the importance of a “rainy day fund.” Now that I’ve grown up (relatively), that wisdom still applies. I use the plural “nets” purposely because depending on your unique situation; you may consider different types of nets. There are the standard malpractice and health insurances. If you have a family, maybe consider life insurance or a college fund for your children? How about insurance for your apartment or house? How about contributing to a retirement fund. Lastly, what about an emergency fund? Different financial gurus recommend saving between three to nine months worth of monthly expenses as a good rule of thumb. The assumption being that this, in addition to any additional supports (e.g., unemployment benefits, help from friends/family) can tide you over until you’re able to make money again.
Invest Extra Funds.
People can have multiple motivations to do this. For some, it’s about maintaining the value of their finances. This is due to the simple reason of inflation. Since the real value of money goes down over time, investments can help maintain the value of money over time. For others, beyond maintaining the value of their money, they want to increase the value of their money without necessarily having to generate more revenue. Depending on the amount of time, money, and involvement one dedicates, investments can grow to become an even larger sources of income compared to what one makes in their everyday jobs. Finally, I’ve known some therapists who invest outside the traditional financial investments into other areas such as other businesses and alternative opportunities.
Invest In Yourself.
Whether it be about having more moments with your loved ones or family, your own personal and/or professional development, or just cause (I was considering naming this category “Develop a Fun Fund” but “Investing in Yourself” just sounded better!). As cliché as it sounds, research has found that time and time again, money by itself is a poor predictor of life satisfaction, with diminishing returns after you reach a certain point. Instead, learn to utilize money well, to focus less on simply generating more piles of cash, but being mindful of what it may allow you to do to become a more mature, competent and loving person.
From the worlds oldest religions, to the many wisdom traditions, to Erikson’s developmental stages to the latest ‘science of happiness,’ one common thread (perhaps of several) that runs through them is the belief and encouragement that giving back to society is good for one’s soul. So be it your local church, temple or mosque, non-profit organization, charity, etc., consider giving some of your money back. Of course, money is just one of many ways you will be able to give back. Let it be a start, not the end, of your giving.
How have you made use of your newfound (relative) prosperity? Any habits that you’ve found helpful? Comment below!