How to manage extra funds!

Have you been the recipient of a large cash award? Perhaps you won a court case, received retroactive money from your employer, inherited money, received a large refund or sold a house or car that you don’t immediately need to replace.

If so, congratulations as I am sure the funds you received were not only well needed but will go a long way in easing some of the financial pressure of day to day living.

Pitfalls to avoid

Some however, fall into a common problem that when they receive the extra funds they then go into a shopping frenzy. My mother used to say, “Your money burning a hole in your pocket?” Essentially she was referring to the fact that those who get extra funds should not be in such a hurry to spend it and should instead let it remain in their ‘pocket’ or savings.

If you receive funds unexpectedly it is very easy to get carried away with the idea of how much you could buy with the money.  As soon as you know you will be getting the extra funds, then you should begin the planning process to ensure that you are not caught up in the excitement and over spend.

Allocating the funds to various needs that you have  is imperative before you begin to spend it. Random spending will result in pain and grief later when its all gone and you have little if anything to show for it.

There is also the temptation of paying off all your debts. While it might be a good idea to pay off some debts, it depends on the size of the grant you received.  If you just took out the loan, it might be a better idea to pay some of it to lower your payments and keep some cash in reserve. However, if you are almost at the end of the loan agreement then removing debt can be a relief!

Options

There are many options available to consumers who want to save their money especially when large amounts are involved. There is the option of buying stocks on the stock market and several companies offer advice to clients on which stocks to buy.

Other more traditional forms of savings that carry less risk are fixed deposit plans. These plans offer consumers the incentive of saving their money for thirty, sixty or ninety days and in order to receive the full benefit it must remain at the institution for the specified time. Several banks and credit unions also offer savings plans where you can deposit funds and receive attractive interests rates.

Whichever option you choose, its important to note that if you want to benefit from the funds in the long term, there must be a plan where you decide how you will ensure it is kept secure. Just remember saving it under your mattress is not an option!

So let me hear from you! How would you manage getting extra funds?

Teri Ann Renee Paisley

Gleaner online writer

Tags: funds, retroactive