A year-long hard earned money may come in the form of a bonus amount for employees, for businessmen a great business deal would yield them surplus of money, for a savings enthusiast income from a fixed deposit may come as a lump sum amount or income from any other sources or capital gains income may come as surplus income. Surplus money may come in any number of ways from winning a lottery, to selling and earning a sale on the property, property inheritance, retirement packages and so on.
Not having money is a challenge but having money and not knowing how to manage money is also a challenge because misusing money may ultimately lead to loss of money. Most of us aspire to have money and so much enough to achieve our goals and live a peaceful life.
Here in this article, we discuss mistakes that you should avoid when you have surplus money.
- Avoid Hasty decisions
- Reduce charity
- Don’t spend too much on family or friends
- Don’t retire early or quit job
- Do not keep cash forever
1. Avoid hasty decisions
Haste makes waste is an age-old saying which fits right even in today’s environment. Avoid hasty decisions in life and especially in financial matters. Generally what people do is when they have surplus money they spend on luxury things such as buying a car, going for vacation, spending on parties, and so on.
When you spend money on these things you will have temporary happiness but the value of the money you spend will depreciate. On the other hand, when you spend money on assets the return you enjoy from the asset will be for a longer period of time. It is advised that you consult a professional and take decisions from them.
2. Reduce charity
Do not involve yourself in too much charity. Charity is good, helping needy people is very good but when you spend your surplus money on the charity you will not be able to earn that amount so frequently again.
If you are in a position to earn surplus money regularly then spending too much on charity is wise. Arrange your priorities in order and fulfill your responsibilities and requirements. Get your financial affairs in good order and secure your life from financial risks.
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3. Don’t spend too much in family or friends
Spending less money on friends, family or relatives will yield a better result. When you spend too much money on unnecessary parties with friends or relatives by outings or get-togethers then you will lose your money which will not have any returns. On the other hand, if you are investing in a business with family or friends and lose money, you will have soaring relations as you will lose money and also relations. There may come up any difference in options, issues, or emotional arguments which will create disturbances in relationships.
4. Do not retire early or quit the job
Some people will think that money will last forever but they fail to understand that when they start spending money without earning income then even a mountain of money will start melting. When you get surplus money do not think that it will last forever.
Looking at that money, do not plan to retire early or do not plan to quit the job. If you decide on early retirement then you may have to lose regular sources of income. If you have family responsibilities then it will become a burden one day as you did not plan for the future.
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5. Do not keep cash forever
Saving money is a good idea and having liquid currency on hand as it will help to meet emergency requirements. When you keep the surplus money with you then you will forego the interest amount that you can earn on that money.
Suppose if you put surplus money in the fixed deposit then you will be able to earn good returns on the income. If you put that same amount in a savings account there is a possibility that you will use that money for your personal expenses and over a period of time, you will spend the entire amount. It is the fastest way that you will lose money.
Building your wealth slowly over a period of time consistently can be achieved through financial planning. Setting up specific goals, regular savings, reinvesting savings, protecting assets and others are all part of financial planning. For financial well being it is important to have a good financial plan. Have financial goals set and avoid financial mistakes for consistent growth in income.
About the author
Vinay Kumar Goguru is a finance professional with more than 8 years of diverse experience as a researcher, instructor and Industry work experience with both public and private entities. Prior to MyMoneySouq, he spent 6 years in Berkadia, It's a commercial mortgage banking company. He has a "Doctoral Degree in Commerce" and two master's degrees with a specialization in Finance, one as Master of Commerce and other as Master of Business Administration. He has written several articles on personal finance, published by different International journals. He loves traveling, reading and writing is his passion. He has a dream of writing a book on his favorite finance topics.