January 25, 2011, 5:00 am

Top 5 Of What You Should Do With Extra Money

by: The Financial Blogger    Category: Pay off your Debts,Personal Finance
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Hey! You know me by now; I always think about how to make more money. I’m trying to get as many raises as possible from my day job and always looking for a way to make more money through my online company. After using my extra money to buy a lot of stuff, I am now calming down and started to think seriously on how to spend my extra income. Here’s my current list:

#1 Pay off my debts

This is the first time since I started working (back in 2003) that paying off debt is part of my priorities. Only a year ago, I was still trying to make more money to cover for my lifestyle. But I realized something in 2010; nothing is eternal. What if I can’t make a huge bonus at work next year? What if my online company starts crumbling down? What if interest rates hike big time? (I’m in variable rates on all my debts).

While these 3 examples are less likely to happen in 2011, I want to pay off my debts for another great reason: I want to reach financial freedom at a young age. Financial freedom is a combination of 2 achievements:

#1 Being debt free

#2 Having a recurrent income

While I have worked my way to building a solid income stream, I never looked at paying off my debts too much. It’s now time to clear the mark over my head.

#2 Invest in my house

I will use part of my bonus to make improvements to my house. I think it’s important because you spend most of your free time at home. This is why renovating or adding equipment to your home is a good idea. This year, I will work on my landscaping since it doesn’t cost much and I will also install central A/C. I know, I am talking about taming lifestyle inflation and simultaneously announce that I will spend a few thousand on my house…

But having A/C this summer is definitely a must. We had to sleep in the basement for more than 2 weeks last summer. I wasn’t super productive during that time!

What I also like about spending money on your house is that you don’t lose it entirely. When I renovated the basement of my previous property, I made back each dollar spent at the moment of the sale.

#3 Thinking of my kids education

With my 2012 bonus, I will fund my kids’ RESP. I have been neglecting this aspect of my personal finance for too long already. Now that my RRSP is maximized and will be paying off a few debts this year, I will be able to use the 2012 bonus to make sure my kids will have a great future.

Education will definitely not be free and if you don’t save 15 years in advance, the bill will be pretty hard to cover when they reach University. In Quebec, we get a 30% subsidy from both provincial and federal governments. So if you invest $1,000, you automatically get $300 for free added to the account. Very interesting concept!

#4 Investing

A part of my extra income automatically goes to investing. It’s either by maximizing my RRSP or by not taking money away from my online company. While I want to drop my debt level in 2011, I’m still a firm believer that one should start investing before paying down low interest rate debts.

The stock market shows great investing opportunities (just look at my recent stock analysis over at The Dividend Guy Blog to know what I am talking about). I will see how the year goes but I might want to get back to my first idea of restarting a Smith Manoeuvre account…. We will see!

#5 Minimal rewards

There is one thing very important when you make extra money and it is to reward yourself. Extra money often means extra effort, extra hours worked and ultimately, extra sacrifices of time spent away from your family and friends. This is why it is important to reward yourself for what you do. In 2010, I went a little bit too far on the reward side of the equation (new big house, new sports car, new furniture and a huge load of clothing…). This year, I will do it differently!

What do you do with your extra income?

Are you traveling? Buying something? Saving? I’m curious to know what you do with your extra income?

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This year I’m sending all my blog income to our travel fund, it’s an incentive to make more!

I have to say that I laughed at point #5 when I read that after recommending minimal rewards you had spent a literal fortune in the last year on rewards 🙂

Although, I know you have worked hard and have earned these rewards for yourself it was still funny to read the paradox.

My extra income is split similarly to yours. A portion goes to debt repayment, then my cash account and then my dividend producing portfolio (in that order)

by: The Financial Blogger | January 25th, 2011 (9:10 pm)


Yeah I know, it’s quite a paradox…. I just need to make sure I don’t repeat my spending of 2010 again!

Any extra income I get is going towards my debt. I don’t want to enter my marriage in credit card or personal loan debt. I want to be freeee!

Whenever I have a windfall or earn extra money I tend to:

1. Have fun. Anything from going on a trip to covering the drinks on a Friday night.

2. Invest in myself. This can be a new book, course, or consulting.

3. Just save. Sometimes I just leave the money in my account.

My extra income is going towards my debt or on my upcoming wedding this spring. When my debt will be paid off, I’ll put these extra on savings like a CELI… maybe to treat myself to an Nissan Leaf in a year or two 😉

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