Over at Budgeting in the Fun Stuff, Crystal writes about a friend with a problem that plenty of people wouldn’t mind having.
“They are now earning more than they need to pay their bills, and they wanted my advice on what to tackle next. I love those kinds of conversations!” says the blogger.
Among her suggestions: emergency fund, retirement, various types of insurance, paying down existing debt, and health savings and/or flexible spending accounts. All good choices.
What would you do with extra cash? Maybe you haven’t thought about it, being too focused on keeping the books balanced or paying down debt. But there could come a day when you either get more money (a raise, a windfall, a side gig) or need less money (debts paid off, kids leave home).
Start thinking now about what you’d do with it, for two reasons:
- It helps keep you focused on your goals (prepaying a mortgage, helping a child through college), and
- It will help you spend when the time is right.
You might think that second one sounds silly. “Help me spend? I can’t wait for the day when I don’t have to agonize over every dime!”
Then again, you might be surprised.
I once wrote a column for MSN Money about the fear of spending after a long period of enforced frugality. Dr. Ted Klontz, co-author of “Mind Over Money: Overcoming the Money Disorders That Threaten Our Financial Health” (Random House), pointed out that many survivors of the Great Depression had trouble spending money even after times were better.
People who went through what some are calling the Great Recession could be similarly damaged, he said. They might continue to live as though the wolf were still at the door, having “a lot of difficulty (taking) care of themselves and their families in reasonable ways.”
For some people the wolf really is at the door because times haven’t gotten better. The recession hasn’t receded. If that’s you, currently dreaming of the coupons you won’t clip and the lattes you will sip, don’t be surprised if having even a small amount of “extra” cash turns out to be downright scary.
Where will your money go?
A good way to work through that is to start thinking of smart ways to use those funds. For a start, I like all of Crystal’s suggestions. Me being me, I have some tactics to suggest as well. These are especially do-able if the “extra” cash you get doesn’t amount to much — say, a raise that after taxes turns out to be $25 a week.
That’s an extra $1,300 a year and it might get dribbled away if you don’t pay attention. So if you’ve already covered an emergency fund, retirement and such, start setting aside that money to do things like:
1. Join a warehouse club. This can be a big money-saver – or a big money-sucker. Go with a friend or get a day pass and wander through the Costco, Sam’s or BJ’s nearest you. Be realistic: Can you eat that big a box of grape tomatoes or will they go bad? Are you an impulse buyer who’d go in for cereal and diapers and walk out with RTA furniture and five pounds of gummy worms? If you think it would save you some bucks, devote a couple of weeks’ worth of raise toward a membership. Which brings us to my next suggestion….
2. Build a nice deep pantry. Buy stuff you like to eat and you know you’ll use: rice, tuna, dried beans, canned tomatoes, flour, cereal, etc. Not only will this enable you to save money by cooking, it’ll become what personal finance writer Liz Weston calls “the emergency fund you can eat” if, heaven forbid, you or your partner should get laid off. Note: Warehouse clubs don’t always have the best prices; see “The low-maintenance preppers” for other tips on how to build a stash on the cheap.
3. Plant a garden. This doesn’t have to be expensive; when I was a kid we just threw seeds and starts in our naturally rich soil and jumped out of the way. But depending on where you live there could be some outlay for raised-bed materials, soil amendments and other items. If this is all new to you, contact the local Cooperative Extension System office for advice and/or apprentice with the best gardener on your block. Start with a smallish spread so that you don’t burn out, and prepare to be shocked when you discover what lettuce is supposed to taste like.
Take care of business
4. See to your health. When was your last physical? Budget those extra dollars toward a checkup with some basic blood work, because health issues are easier to fix when caught early. And no, it doesn’t matter if you feel fine; I once interviewed a mountaineering guide who was stupendously fit but dropped by a health fair anyway. Blood work showed that his kidneys weren’t working right; he wound up needing a transplant. Get your teeth X-rayed and your eyes examined, too.
5. Pamper your ride. Take your car in for a checkup, too, especially if you’ve skipped schedule maintenance. Replace the wipers if needed. Have a look at the tires; if you’re riding on borrowed tread, look for the best deals on new ones at sites like FatWallet, RetailMeNot or Savings.com. Replenish any basics, including but not limited to road flares, a jug of windshield fluid and batteries for the flashlight in the glove compartment. (You do have one of those, right?)
6. Improve your home. Things like insulation, weatherstripping, a low-flow showerhead, compact fluorescent bulbs, faucet aerators and a water-saving toilet will help reduce the costs of running your home. Cutting down on drafts could help reduce the thermostat wars next winter.
7. Cover your butt. If you rent rather than own, for heaven’s sake get some renter’s insurance. Ask for a discount if you pay for the whole year at once.
8. Get a cheaper commute. If you’re a public transit user rather than a car owner, find out what a monthly pass costs. Compare it to your daily usage now. Sigh, sob or whatever that math makes you feel like doing, and then get in the habit of paying by the month. (Or by the half-year or year, if those options exist and you’re pretty sure you’re staying put.)
9. Get some discounted gift cards. Paying as you go at the drugstore, supermarket, pet-supply warehouse, movie theater or department store? The secondary market provides plastic at 3 to 20 percent off, good for everything from cat litter to your next cut ’n’ curl. In my own wallet right now are cards for Walgreens (14 percent off), Regis Salons (15 percent off) and those midnight movies (11 to 20 percent off).
These are just a few suggestions, obviously, rather than a comprehensive list. So how about it, readers: What would you do with extra cash, even if it amounted to only $25 a week?