What to do with surplus funds

After calculating your expenses or trimming your budget for the year, you’ll probably notice you’re able to save a little extra money each month. Before you plan your next shopping spree, think of ways to make that surplus cash grow or work for you. Depending on your individual situation, the following tips could be useful:

• Use that extra bunch of cash to settle your credit card balance. Prioritize the one with highest interest, otherwise your debt could balloon to unmanageable proportions. “Aim to be free of credit card debt as fast as possible. I have seen a Dh10,000 debt grow to Dh51,000 in three years with interest, late payment charges, over-balance charges and legal fees. The debtor lost his employment suddenly, and this was the result,” advises Steve Gregory of Holborn Assets.

• If you have a loan, now is probably a great time to pay it off early or make advance payments, depending on how much extra cash you have. Watch out for early settlement fees, though.

• Start an emergency fund and keep it in a deposit account. “The amount needs to be three months’ expenses in case of any emergency and for families, maybe even more than three months,” says Gregory.

• Go through your life insurance and find out if it’s more or less than you need. Also, consider ad hoc payments to your investment programme, advises Gregory. “Ad hoc funds are not the same as regular commitment monies. Most regular commitment plans permit ad hoc payments also,” he says.

• Think about the projects you earlier shelved because you didn’t have enough money. Now that you’re making extra money, Gregory says it could be a great time to start an investment programme to fund education, a house purchase or retirement.