Broke-Ass Financial Coaching: What to do with “extra” money?

While being young, broke and beautiful is all well and good, some people’s finances are more jacked than others.  That’s why we’ve invited Betsy Crouch (aka Coach $izzle) to come onboard and dole out some much needed advice.  She is a professional financial coach after all.  If you’ve got a question you’d like answered please email her atcoachsizzle@brokeassstuart.com.  Maybe your question will be the next one answered.

Where is the best place to put extra money right now?  – TD

Extra money?! Woohoo! Yeah!  I know some of you reading this are thinking, “dang, that would be nice to have some ‘extra money,’ and if I had some I wouldn’t have any trouble thinking of what to do with it.”

What is 'œextra' money?  Is it the $10 you have left at the end of the night that you didn’t think you would have?  Is it the money beyond what you needed to cover your regular monthly expenses?  Is it the money you have beyond covering monthly expenses, savings, and retirement investments? It means something different to everyone, because what people feel they 'œhave to' make is different to everyone.

Sometimes money doesn’t have to move:
According to T. Harv Ecker we all have a financial blueprint.  In his book, Secrets of the Millionaire Mind, he talks about how we have a different blueprint, or set of feelings, beliefs and comfort levels with money.  If we make more than this amount we typically 'œget rid' of it by spending it and giving it away. What is the amount you are comfortable with?  Monthly?  Yearly?

If we make less than this amount we do everything we can to get back to that amount.  Around 30% of lottery winners go bankrupt, and 78% of NFL players go bankrupt within three years of retiring.  Why does this happen?  I believe one of the reasons this happens is that so many people in our culture believe that money is meant to 'œmove.'  So many people think we have to 'œdo' something with our money.  We have to buy stuff.  When we are in a habit of just getting by, money has to move.  To create a little bit of financial stability when you do have a little bit of 'œextra' money, what if you just let it sit there?  Don’t do anything major with it for a few months.  What would happen?

If you want different results, do something differently.
I realize that you may not be in a position of affecting your income in the short term.  I think one key to getting out of the cycle of “just getting by” is at least knowing what the amount you would need to make is to not only cover monthly expenses but also put some money into savings, have health insurance, and save some money for the future.

We cannot necessarily directly affect outside forces that influence our financial opportunities.  What we can do is influence our mind and how we think about these things, to contribute to the possibility of abundance in our lives, to practice expanding our comfort zone, so we are ready to seize opportunities when outside factors change and shift.

So, what to do with 'œextra' money?

What you do with your money is a highly personalized decision. In general for someone who is able to pay the monthly bills and has a little 'œextra' money'

1.    Insurance '“ Health insurance and Renters insurance.
2.    Cash Reserve '“ Nine months of personal expenses saved in a savings account, search www.bankrate.com for the savings accounts with the best interest rates.  In the past many recommendations were to have three to six months of personal expenses.  Right now, due to the economy I would err on the safe side. Be aware if your bank is charging you for your savings account $12 per month, for example, and only giving you 0.10% interest.  On $5,000, 0.10% is $5, and if you pay $12 per month, you are paying $144 for an account that is giving you $5 in interest.  Not awesome. Look into online banks, because they have lower overhead expenses due to not having branch banks, and therefore sometimes offer higher interest rates.
3.    Where you would put your money next would depend on when you expect to need access to the money.  Will you need it in 3-5 years or could you set it aside until you are retirement age?  Do you own a home?  Would you like to?  Do you have children?  This is a perfect time to speak with a professional who focuses on giving investment advice, which I do not do. Contact your local Charles Schwab, they have great customer service and they don’t try to belittle you for not having tons of moolah.  www.schwab.com

You, like lottery winners and NFL players are bombarded every day with messages about why you should spend your money on products and services.  Put yourself and your personal goals first.  Your money doesn’t have to move.

Please share your comments, coachsizzle@brokeassstuart.com.