Holistic Survival
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Where to Apply Your Extra Monthly Income

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We are experiencing some tough economic times with many Americans out of work or fearful of their own job stability. Even if you are secure in your work position, it is always a good idea to plan ahead and prepare for times of hardship. There are three main options for using your “extra” money each month.

1. Save: Many people choose to save their extra income, choosing to earn the small percentage of interest that banks pay on regular savings accounts and having the option of removing the money as needed, either in one lump sum or little by little as needed. A bank account is an ideal short-term option for saving enough money to purchase a rental property or other commodity. Keeping funds in a bank account long-term is not the best decision when planning for your financial future. However, with a savings account, if you are suddenly faced with financial difficulties, such as a spike in utility bills, you’ll have the option of removing money from your account to pay.
2. Pay Ahead on Loans: Instead of putting extra income in the bank, use it to pay in advance on short-term, high-interest loans, such as credit cards. Since these types of bills continue to charge you interest each month that your account remains open, it makes sense to pay them off quickly, which not only saves you money, it helps your credit.  It is never a good idea to fall behind on high-interest loan payments, so you should make paying these off a priority. However, the disadvantage of this option is that if you face a sudden hardship, such as job loss, you have no savings and are still required to make the monthly payments. Never pay ahead on long-term, fixed-rate loans, which are beneficial during this current time of high inflation rates.

3. Pay Ahead on Utilities: Other people feel that the best option for preparing for unplanned financial crises is to pay more than required on your monthly utility bills. In addition to other options, this is a good plan. The idea is that if you are suddenly faced with unemployment, you won’t be caught in a situation where your utilities may be cut off.  Additionally, this option looks great on your credit report, as does paying ahead on loans would.

Remember, if you do face financial difficulty, most states offer an assistance program, particularly for households with young children or the elderly.

As Jason Hartman points out in his podcasts, debt is not necessarily a bad thing. Fixed-rate, long-term mortgages work in your favor since inflation rates are as high as they are. Now is the time to borrow money in order to invest in commodities or rental property, so that if the job market does fail you, you will be ahead of the game. Now is the time to prepare for the unexpected in your financial life.  (Top image: Flickr | 401 (k) 2012)

The Holistic Survival Team


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