Money Matters – What Should You Do If You Have Extra Ringgit?

Source: Calibre, April 2012

Money doesn’t come easy. So what should you do when extra Ringgit come your way? We outline five essential considerations that merit the extra Ringgit.

Not many people have the privilege of saying they have more than enough cash to spare. Most will tell you they struggle to pay the bills that seem to grow faster than their increments can keep pace.

However, we do happen to chance on some extra bit of cash occasionally, either from our increments and bonuses or a profitable investment or when we finish paying off a debt. But before you blow that bit of extra cash that slips your way on random whims, here are some sensible options to chew over to put your money to good use.

1. Paying Off Your Debts

Looking into the details of your debt may seem like an overwhelming task but it can be accomplished by focusing on one item at a time. You need to know the exact amount of each of your debts as well as their interest rates and minimum payments.

Make two lists of your debts: in order from lowest to highest amount and in order from highest to lowest interest rate. Most people will pay the highest interest rate debts first. That makes sense for the most part, particularly if you want to save money on debts with ridiculously high interest rates. But, opting to pay off your lowest amount first may give you the satisfaction and motivation to continue reducing your debts. Assess the pros and cons of paying off each debt. You should take it on a case-by-case basis though. Weigh how much you owe against the interest rate to see which method is better for you.

2. Spending Wisely

Of course now that you’ve come into some extra money, you may want to indulge a little and allow yourself a small splurge. Make a list of things that you want to get and look at what you can afford in that list. Know how much you can spend before you enter the store and do your research to ensure you are getting the best price for your purchases. It may be an indulgence, but remember to spend within your means.

Then again, you can choose to spend the money on necessities such as your auto maintenance or things to get for your home. Consider expenditures that will add value to what you have, for example, a house renovation. Or you can go for purchases that can grow in value like an art piece or an antique that would fit well in your home.

3. Intelligent Investing

There are several investment ideas worth considering if you find yourself with some cash on hand. After all, it is not wise to keep your money idle.

Those looking to invest for the long term can look at equity unit trust funds. Unit trusts offer investors a simple, convenient and less time consuming method of investing in various securities. There is a wide array of equity unit trusts available in the market to suit investors’ risk appetite. Generally, funds with high risk profile will generate higher returns and vice versa.

Investors are also advised to keep a toehold in fix-income assets to diversify their portfolio and generate regular income stream. Fixed income funds invest mainly in Malaysian Government Securities, corporate bonds and money market instruments.

Alternatively, if you prefer to hold cash, you can opt to look at money-market funds that are considered very liquid and safe. However, note that money market securities offer significantly lower returns than most other securities because of their conservative nature.

4. Improving Yourself

Perhaps one of the best investment options is to invest in yourself. Most times, we are so engrossed with making the extra ringgit to build a better life that we forget to actually use it to improve ourselves. So what does “investing in yourself” mean? This depends on what your goals are and where you plan on putting more time, money and thought.

Generally, there are three big areas that you might want to consider to improve yourself in; your appearance, skills and health. Focusing on one’s appearance may seem like a shallow thing but remember that your appearance has a huge effect on your confidence. So it’s ok to spend some money on making yourself look and feel good.

Also, everyone has a certain skill set suitable for a particular job, hobby or for a day-to-day experience. Identify the skills that you want to develop and enrol in courses or get books to improve yourself. And never hold back money when it comes to your health. Know that investments made to better yourself will never go to waste.

5. Prepping For Rainy Days

If there is no immediate need for money, then make a generous contribution to your emergency fund. While keeping money in a savings account will yield lower returns, it is important to have easily accessible cash to cover any unexpected expenses. Having a stash of emergency cash is becoming more important in the time of uncertainties.

Besides, it never hurts to have buffer cash.