5 Ways to Invest Your Extra Cash After You Cut Back
Sometimes cutting back your spending is the easy part. It’s what to do with the extra cash in your wallet that many people seem to be unable to do. Do you save it for a rainy day? Do you invest it in the stock market? Do you put it under your mattress?
This list aims to help you explore five options for spending that excess saved cash. By following these suggestions, you’ll find that you may end up benefiting in several unique and positive ways.
1. Put Your Money in the Bank
This option is the most obvious when it comes to having excess cash. If you don’t already have an emergency fund, start building one right away. It’s almost second nature to choose an account with the best interest rate and put any spare change into it, so why not the additional hundreds of dollars you save from being a bit frugal?
The guiding factor to discovering what type of savings account you should use generally comes with the amount of money you have on hand. If you have less than $50,000, then you may have to rule out putting your money into a high-interest savings account unless you’re willing to switch banks.
2. Invest it in Bonds
A bond is much like a loan to a bond issuer in that it represents a debt. You hand over the amount of money that the bond issuer asks for, and you will receive either a specific amount when the term of the bond finishes or with periodic payments. When the bond has matured, and thus the period is up, the issuer will then pay back your initial investment.
The simple reason that you may want to invest in bonds over other forms of investment is that it is generally safer to invest in a debt than it is equity. In contrast to equity investments like stocks, people who hold debts receive priority over investors when it comes to getting their money back. That means that even if a company goes belly up, you’re likely to at least recoup some of your invested cash.
3. Put It Into a Company With Stocks
It should be noted that while the stock market isn’t doing great right now, there are many companies that are still making millions of dollars of profit each year and looking to expand. You could very easily take home a share of one such company simply by contacting a broker.
One reason that may persuade you into investing in the stock market is the fact that while it is a comparatively high risk investment, it’s also one where you could gain quite a lot of money in return. If you feel that you don’t need the extra money that you have idly sitting around, then you may want to do some research and invest in the stocks right now.
You could also go with a safer investment alternative, like the next one.
4. Toss Into a Mutual Fund
Mutual funds are a popular vehicle of investment. If you’re not great with investing already or you just want something simple, then this option may be for you.
The way a mutual fund works is a company takes your money and generally pools it together with other people investing in it. These funds are then invested in various vehicles, such as stocks, bonds and money market funds.
The big advantage of mutual funds is that they’re generally safer modes of investment because your money is spread out between different resources. You can also invest smaller amounts due to the fact that other people are investing.
5. Buy Some Precious Metals
The value of precious metals has consistently risen over the past 40 years. Thus it makes sense that if you want a long-term investment that is safer, you may want to invest in the purchase of a metal like gold.