Money plays a significant role in our day-to-day lives.  We work for it, we use it, we like to talk about it, but how often have you actually sat back and thought of the different things that you can do with money.  What is the first use of money that pops into your head?  Answers may vary from person to person, in fact, your answer may vary based on the type of day you are having.  Maybe some days you feel like a saver and other days you feel like a spender.  Are there days you want to give your money away?  When you really boil it down there are three main things you can do with your money.  Let’s take a look at these options. 

SPEND

This one almost seems too obvious.  Get money, spend money.  However, there is a little more to it than we think.  What type of spender are you?  Your goal while spending money should be to do so in a responsible way.  We all need to spend money but how can you stretch your dollar further?  The first thing you can do is make sure you are spending money on things that you need versus things that you want.  This takes some restraint, especially when you can afford things that are nicer.  Remember, just because you CAN doesn’t mean you SHOULD.  That doesn’t mean that you should refuse yourself certain luxuries, it just means that you should think twice about how necessary the purchase is. 

Another practice that you can employ while spending money is to look for ways to minimize the amount you spend.  My first thought is looking for sales.  There are always going to be promotions out there, take advantage of them.  Are there certain days that some purchases are cheaper, like plane tickets for instance?  It can be worth the time you put into researching prices.  While we’re speaking of saving time, think about the amount of money we are spending on delivery services recently.  Is it worth the extra $10-$15 dollars we spend to have food delivered to our door or should we hop in the car for the extra 10 minutes?  At the end of the day, you are in the driver’s seat to decide which things to spend your money on, choose wisely

SAVE/INVEST

The second option with your money is putting it to work for you.  There are different ways you can do this but ultimately it is by saving and investing.  Think of these options as different buckets.  The first bucket is to put some money into an emergency savings account.  This way you can hopefully not have to use credit when something comes up, because something will always come up.  The next bucket would be your long-term savings, this can be anywhere from 3 to 12 months depending on how long you think it would take you to find a new job if you lost yours.  These two buckets were exposed when the pandemic started.  People lost their jobs quickly and had to rely on savings to get them through.  Another savings bucket you should be aware of is savings for a specific purchase.  Saving to Spend!  This is also a great way to stay out of debt.

The other way to make your money work for you is by investing.  There are many different ways that you can invest your money, but most times when you invest you are hoping for one of two things, appreciation of the investment or a dividend/income from the investment.  Maybe you invest in a stock.  That stock could go up in price or it could pay you a dividend.  Maybe you invest in a rental property.  The price of the home may go up and you also get rent from your tenant.  With all the different options for investing your money, it is important to focus on your risk tolerance and time horizon before making decisions because there is always risk involved with investing. 

GIVE/LEND

The last option for your money is to give it.  There are two main ways of giving your money, either for charity or for profit.  If you give your money and make a profit you are lending your money.  In both scenarios, you are giving away your access to the funds.

Charitable giving is common in this space.  You can pick your favorite local charity to give to or decide to give money to a struggling family member or friend.  Regardless of who the money goes to you are not expecting any type of repayment, that is charity. Lending on the other hand is done with the intent of making some form of interest on your money.  In this sense lending, your money could be viewed as an investment as well.  It’s important to look at your overall financial picture and figure out the right amount to give.

WHICH OPTION IS FOR YOU?

In most cases, people employ all three options.  There needs to be balanced in your financial life.  The key is to try and be efficient with each option.  Make sure that you are aware of how much you spend, save/invest, lend/give.  This can give you more control over your finances and leave you feeling more comfortable with your financial picture.

If you need some help looking over your current utilization of money, reach out to us at Redwood Financial Network.  We would love the opportunity to work with you on how to best utilize each option for your money. 

Investing involves risk including the potential loss of principal.  No investment strategy can guarantee a profit or protect against loss.  The payment of dividends is not guaranteed.  This material is intended for informational purposes only and is not intended to be a substitute for specific individualized advice, as situations will vary.

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