Sometimes, it can be hard to know what you can do with your money. Putting it in a checking or savings account is usually the route most people take—but there are more things you can do with your money that are better and smarter. Here are 5 smart things you can do with your money right now.
1. Put Your Money in a Money Market Account or Savings Certificate
Instead of a regular savings account, consider putting your money in a Money Market Account or a Savings Certificate.
A Money Market Account (MMA) offers higher interest rates than traditional savings accounts—and also comes with free unlimited monthly withdrawals. This is a great option for those who want to earn money on their savings as well as have flexibility in the liquidity of their money. This money is not subject to market fluctuations, like investing in stocks. Instead, your principal investment is protected and can only grow. As of Summer 2024, UCCU’s rates on an MMA range from .75% to 4%, based on how much money you deposit into the account.
A Savings Certificate (Certificate of Deposit) is similar, but offers even higher rates than MMA’s. However, CD’s aren’t as flexible. When you deposit money into a CD, that money is locked for anywhere from 3 months to 5 years. During that time, your money can grow exponentially. This is a great option for saving up for a specific goal, like a family vacation in two years or buying a house in 5 years.
2. Make Your Savings Specific
As mentioned above, saving for a specific goal is a simple, yet powerful strategy when deciding what to do with your money. We are always saving for something—a car, a house, a vacation, having children, or buying those new shoes you’ve been looking at for months. So, we might as well be smarter about the way we save.
Instead of spontaneously purchasing something and exceeding your budget for the month, plan ahead! Using our Savings Goals tool can be a great option for doing this. With it, you can make a goal and save up a certain amount over a determined amount of time for that thing.
For example, you want to go to Hawaii next Summer. So, you make a goal to have $1,500 ready by then. That means you will need to save roughly $30 a week, which can automatically be pulled from your checking account each week into that savings goal account. Then, once next Summer arrives, you won’t have to stress about pulling the $1,500 from somewhere.
Setting specific savings goals can be a game changer for your finances. You will be more conscious about your spending habits and you will be able to have a dedicated spot for any extra cash you have.
3. Build an Emergency Fund
Building an Emergency Fund Fund is one of the most crucial things you can do with your money.
You never know when an emergency may happen. Maybe you get two flat tires this month, maybe your child falls off his bike and needs to go to the ER, or maybe you lose your job. Whatever it is, there will always be purchases that are unexpected that we need to make sometimes. But, those purchases don’t have to break the bank.
Instead of using your credit card to pay for these expensive moments and going into debt, or pulling from your retirement savings, build and pull from an emergency savings fund. This fund needs to be separate from other accounts and should contain about 3 to 6 months worth of money to cover necessary living expenses.
You can start building this by setting savings goals, setting up automatic transfers from your checking account, and regularly monitoring your progress. As you get more money, put more in. If you are currently living paycheck to paycheck, even a small amount can add up in the long run.
4. Pay off Your Debt Faster
Before doing this, make sure you have an emergency fund set up so that you don’t risk going into more debt. Once you have that done, you should set aside some extra cash to go toward paying off debt faster.
When you are in debt, you are tied down. Some debt is good and necessary—like a mortgage loan. But some debt can lead to undesirable situations—like credit card debt.
Start by writing out all of your debts. Then, make a plan for paying it off. You may decide to start with the smallest amount of debt first, or you may tackle the largest debt you have. Either strategy will work. However, note that it is recommended to start with the debt that has the highest interest rate.
You can pay off your debt faster in several ways. A simple one is adding on some extra cash to the monthly debt you are paying. For example, if your car payment is $200 a month but you have some extra cash hanging around, pay $250 this month! Then, you are $50 closer to owning your car. Another way is to get a debt consolidation loan, which you can learn more about here. This is a great option for those who have several high-interest debt payments, such as credit cards.
5. Invest
The final smart option for putting your extra cash somewhere is investing. If you already have an emergency fund and you are striving to pay off your debt, investing is a smart way to get ahead and secure your financial future. Here is a brief overview of some investment options:
- Stocks: When you buy stocks, you become a partial owner of a company. Stocks offer the potential for high returns but come with higher risk due to market volatility.
- Bonds: Bonds are loans you provide to governments or corporations in exchange for regular interest payments. Bonds are generally less risky than stocks and offer a steady income stream.
- Mutual Funds: Mutual funds pool money from multiple investors to invest in a diversified portfolio of stocks, bonds, or other assets. They provide diversification and professional management.
- Exchange-Traded Funds (ETFs): Similar to mutual funds, ETFs are collections of assets but trade on stock exchanges like individual stocks. They offer flexibility and typically have lower fees.
- Real Estate: You can invest in real estate by buying physical properties or through real estate investment trusts (REITs). Real estate can provide rental income and potential property value appreciation.
It is recommended to diversify your investment portfolio and consider your asset allocation strategy as well as risk tolerance. Also, don’t forget about investing in a 401K or IRa for retirement.
Work Smarter, Not Harder
If you follow these 5 smart things you can do with your money right now, you can start making your extra cash work for you, you will start on a path of financial security and success. Putting your money in a MMA or CD, setting specific savings goals, building an emergency fund, paying off your debt faster, and investing are all things you can start doing today.
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