One of the most intriguing if not controversial sayings many people have different views on is “money can’t buy happiness.” If you ask what I think about the quote, I’ll say money is a tool that helps you live comfortably. When you have enough money, you get to do and buy things that make you happy. It might not buy happiness, but it provides the privilege of being happy.
That’s why people work hard. We use most of our time working to earn money so we can live the life of our dreams. Some people are lucky to be born with money, while some need to work harder to have the same luck. Funnily, people with money have difficulty deciding on where to allocate it. You don’t necessarily have to be rich to have this dilemma. Sometimes, when you have extra funds, you simply can’t decide where to invest or keep them best.
With all of the financial advice people give, it can be overwhelming which one to follow. It’s even harder when you don’t understand a specific allocation like forex trading, stock buying, or mutual funds. What happens most of the time is that people end up spending their excess funds instead of investing and keeping them wisely.
If you have the same dilemma, we’ll try to ease your worries in this article. To start, here are five ways where you can allocate your extra funds.
1. Start an emergency fund account.
When you are lucky to be in a situation where you have extra money, your first instinct is to spend it immediately. We often forget how we might need the money for a rainy day when lost in this thought. You might even think that since it’s extra cash, it won’t be a reduction in your earnings anyway.
If you’re wealthy, that thought may be valid. However, if you’re living paycheck to paycheck, it’s best to consider that thought a sin to help you decide better. When you want to spend your extra funds, ask yourself, can I pay off my bills in case an emergency happens? If your answer is no, and you can see yourself stressing over money in that scenario, it means you need to grow your emergency fund.
Having an emergency fund account not only provides comfort but also provides you with peace of mind. Wouldn’t it be nice to not have any financial worries and struggles during an unforeseen event? If you’re lucky to have extra funds you don’t need to spend, I suggest allocating them to your emergency fund instead.
2. Add it up to your savings account.
One of the common mistakes many people make is not separating their emergency fund from their savings account. As a result, they feel like all of the money they worked hard for years is gone in an instant when an emergency happens. It would be best to allocate your funds separately to avoid that feeling.
When you have extra funds, it would be nice if you could allocate a portion to your emergency fund and savings account separately instead of combining them. You can consider your savings account your “income asset” rather than an emergency fund. Identifying your emergency fund from your savings will help you know where to get money in case of accidents and other misfortunes.
If you feel like you already have enough funds for emergencies, I suggest bulking up your savings account for your asset column.
3. Consider buying stocks for possible money growth.
One of the many financial success stories people share includes the stock market. Many wealthy individuals recommend buying stocks of companies to grow your money within five and more years. However, many don’t have a good experience with the stock market either.
Before you put any of your money into the stock market, you must understand how it works. Learning the basic terms they use and understanding each market’s risk will help you manage your expectations. When you know what you’re getting into, you can play the game safely and manageably.
Stockholders often have one piece of advice for people who are new to the stock market. When someone tells you not to put your eggs in one basket, I suggest taking their advice. Keep in mind that the stock market is ever-changing. As each day passes by, you’ll witness your stocks go up and down. But if you understand that its returns come long-term, you wouldn’t stress about its daily changing rates.
4. Try forex trading if you’re interested in it.
Just like the stock market, forex trading is a fast-paced financial game. If you’re into trading currencies, you can grow your funds in forex. However, know that forex trading has a different set of rules than the stock market. So before getting into the game, you must understand and take learning materials about how forex trading works.
It’s also important to note that forex trading has a high volatility rate. Many things affect forex trading’s movement, like trade flows and economic changes. Every time you trade and exchange a pair of currencies, another trader speculates whether one currency will rise or fall.
Like stocks, you can buy and sell currencies using your mobile phone or other electronic gadgets, making trading convenient for many people across the globe.
5. Buy a real estate property, then sell it in the future once its value doubles or triples.
My last allocation instrument may or may not be relatable to many people. But if you’re lucky to have some extra funds that can buy you a real estate property, I hope you read on. Real estate is one of the assets that continuously rises in value. And so, if you can afford to invest in one, it would be wise to do so.
Other real estate owners are unhappy with selling their properties because their asking value is low. Some are rushing to sell their properties—so they settle for a cheaper rate than the property’s worth. You must be wise when selling your property to get twice or thrice worth of what you paid when you bought it.
Patience is also another value that you must have when selling your property. When you combine those two skills, you’ll know when the right time to sell and how much to list it for in the market. You can start by buying a condominium unit or an apartment. If buying a house and lot is too much, there are other properties that you can consider, too.
Evaluate each allocation opportunity before putting your funds away.
All of the allocation opportunities above could provide benefits to every individual depending on their needs. To make the most out of it, you should take the time to evaluate and study each opportunity. That way, you’ll allocate your funds to the best financial instrument that could help your money grow best.
About the author:
Bianca Banda is a writer for FP Markets, one of the best regulated Global forex brokers with over 40 global industry awards—and counting, making them the trusted trading broker by many.