Winning the lottery. Getting a hefty tax return. Earning an extra bonus at work. Being on the receiving end of a large inheritance. These are things we all dream of, but once you’ve got that money in your pocket, what should you do with it?
Financial expert David Lester breaks down five ways to utilize our extra finances in order capitalize on that extra cash.
When it comes to big debts, you should pay them off as soon as possible. This will help you save seven to 30 per cent on your lines of credit, credit cards and department store cards. You’ll end up saving a lot more in the long run.
When it comes to paying off any mortgages you have (i.e. your own or a rental apartment), it’s best to pay off your mortgage first and keep a mortgage on a rental apartment. You’ll be able to write off the mortgage of the rental vs. not being able to with your own home that you live in. Also, renting it out will earn you some extra income.
RRSPs only make sense if you make more than $60,000 a year. If you don’t have an income at all, you don’t need the tax savings. Instead of filling up your RRSP, fill up a Tax Free Savings Account (TFSA) or keep the investment outside of your RRSP, depending on how much you make and what your accountant recommends.
If you rent your place and travel the world, you may be able to cover your costs and use the money to travel (and maybe even work on the side) and see the world for as long as you can!
Don’t just hand out money to family and friends. Instead, be a venture capitalist instead and invest in other people’s dreams. Ask for equity in the business or charge a fair interest return and you could make money and make dreams come true!