“Income to double? What should I do?” This is certainly a good problem to have. Not so many people have an opportunity to reflect on the luxury of having more money than they need, but that can easily happen. A spouse returning to the workplace, a major increase in you pay or a return on investment can bring in this happy challenge.
So if you’re in the situation, what should you do? The answer is think before you spend, and have a plan in place as soon as possible. The reason is: Expenses could expand and eat up pay increases quickly. If you don’t have a plan, you can easily settle into a new normal that doesn’t allow you to use the extra income to its potential.
In addition, with the availability of extra cash, you easily could lose targets of your budget. It is simply time to sit down and take a serious look at your income vs. expenses. You also should be prepared to pick and choose your priorities and align them with those of other family members. Some might be short-term goals that have been on your or their bucket list and others could be long-term investment plans.
Regardless, if your income is significantly, you certainly need to get your priorities straight, and have new clear objectives added and budgeted for. Here are some to consider.
Buy convenience
The extra money may be tempting to splurge on one or two big-ticket items. A monthlong trip overseas and new furniture for the whole house? How about upgrading all the cars? A different route that could be a better choice is to invest in something that improve your convenience.
Convenience is understandably a relative concept. In all cases, try to pick what helps you not only live a better life, but also have the opportunity to save and improve your productivity at home and at work.
Although the choice is highly individual, try to get something that helps you feel more comfortable long-term. For example, hire household help, a better accommodation that reduces your commute time, enrol in a fitness club, learn something new, etc. By doing so, you are more likely feel the benefit of the extra income over a longer period of time, which will help improve your lifestyle.
Pay down debt
If you have high-interest debt like credit card debt, pay it down as soon as possible. This will save you in the long run. Having said that, let your mortgage or car financing run their course, unless you have a reason to move or change your car.
Getting rid of high-interest, short-term debt will help you eliminate this burden and also budget for the future. Your goal should be to have predictable, manageable payments, and to understand the disposable income that you can use for saving, investment, luxury purchases, etc.
Save and invest
It is never too early to save for retirement or children education. Find funds or schemes that help you get the most return on your investments and savings. If you anticipate your higher income to be the new normal, talk with your banker or financial adviser about different plans for short-term and long-term investments and savings as well as the level of risk associated with them.
While you don’t want these savings and investments to be easily accessible, make sure that you won’t lose significantly if you decide to tap into them before their maturity date.
Donate your money
This is the time to fulfil any charity goals you have had. Pick and choose carefully, however, to ensure that your money is going to achieve its goals. Although you may not donate all or a significant portion of your extra income, giving some can help you feel fulfilled — similar to getting something checked off your bucket list.
The writer, a former Gulf News Business Features Editor, is a Seattle-based editor.
Using extra income
Make lifestyle convenience choices
Get rid of high-interest debt
Invest and save for the future
Enjoy a high-ticket item or donation
— R.O.
