Okay – so the title of this article might seem a bit silly. I mean, do you really need a list of why it is good to make extra money? Of course it is good to make extra money! After all, no one ever goes to their boss to negotiate a cut in pay.
However, it is important to cover some of the key benefits to making extra money from a financial planning standpoint. Unfortunately, many people don’t really take advantage of their increased income when they do get a raise – wasting it on meals out and fancy clothes, instead of planning for the future.
Here are 5 specific benefits of making extra money. As you will see, each of these points is designed to point you toward a brighter financial future.
Pay Down Debt Faster
Paying off your debt as fast as possible is one of the keys to a healthy financial life. Spending money each month on interest is a game you are never going to win, as it can be tough to keep up with your minimum payments on things like credit cards. So, when extra income does make itself available, the first thing you should do is pay down the debts you have accrued. Only when you have paid off high interest debts should you worry about other financial planning steps.
Save for Retirement
There will be a time down the line when your working years are over, and you need to be as prepared for that point in time as possible. With any extra income that you may have available, be sure to develop a retirement savings plan that you can fund each month. Consider working with a professional who can help you craft a plan which will leave you in good shape when the day does come to walk away from your job.
Do you have kids who will be heading off to college at some point? If so, work on saving some of your additional income to help them pay for higher education. College tuition seems to get more and more expensive each year, and helping your kids avoid student loan debt will be a big boost to their future prospects.
Instead of putting purchases on a credit card, which might not get paid off at the end of each month, get into the habit of paying cash as often as possible for day to day purchases. By paying cash, you will see the money come out of your account as soon as you run your card, meaning you will see the consequences of your buying habits. Once you should have enough money in the back to not need credit to buy most items, try using a debit card whenever possible.
Get Better Deals
When financing bigger purchases, such as buying a car, you should be able to get a better interest rate by making a larger down payment and having your credit in good condition. Be smart with the extra money that you are making and you will find that you can benefit even further in the long run by getting better deals.
How do you use extra money? Do you have a side hustle for making extra money?
Photo courtesy of: 401(K) 2012