Financial Fitness For The Debt Free
You’ve worked your whole life trying to repay all your loans and now you’ve finally managed to do so. With some extra money in your pocket, it’s easy to want to go on a shopping spree every month. You simply don’t know what else to do with the extra cash.
Check Your Savings
If you don’t have an emergency savings in place, now is the time to do so. Try to have at least a 6-month buffer stashed away. This is to ensure your household expenses are taken care of in case you get fired or retrenched.
Once your emergency savings is in place, you can start saving for things you’ve always wanted to get involved in, for instance, travelling, art classes or carpentry over weekends in your shed.
Once you have your savings in place, you may want to approach a financial adviser at a reputable institution to discuss the various investment options open to you. Take care to have them explain the various risk classes to you. Don’t simply be lured into a product that promises a potentially high yield. Understanding risk will ensure you get into the right investment type for you. The higher the risk of an investment, the higher the potential of return. This does not guarantee the actual return, only the potential to earn.
When investing it is also important that you request guarantees if you require them. Also important to note is that you should be provided with a record of your discussion. If it doesn’t state the risk grade or your desire for guarantees, don’t sign the document. You don’t want to land up in a risky investment where you stand to lose your income if you have an aversion to risk.
Be Careful Of Overcapitalizing Your Property
The very first thing, apart from going on a holiday, that many who clear off their debt want to do, is renovate their homes. This is a great idea, especially if you want to increase its market value. Proceed with caution as you do not want to overcapitalize your property. This means that the money you’ve spent on the purchase and renovations simply cannot be recouped should you ever have to sell it. This will also create a problem in your estate should your children or spouse wish to sell the property in the event of your death. Get into contact with an estate agent and find out the maximum value properties in your area sell for and try not to exceed this limit. Rather invest these funds in a secondary property or a small business in order to generate some passive income.
Don’t Waste Heard-Earned Money On Depreciating Items
Spend your money on things that will generate income, as opposed to spending it on luxury items that depreciate over time. Collecting classics or antiques is an option, however, it does not guarantee that it will fetch a good price should you ever be in a forced sale situation.