If you are a full-time bi-weekly employee, you probably received an extra check in either March or April. In fact, you get two great months a year — one in March/April and then a second time in November where you most likely get three checks — not just two. Now, if you’re like most people, you would began the month of March or April without even knowing it is coming. Then, you end the month wondering what bill you didn’t pay because your checking account has a little extra money in it.
However, you’re not like most people any more. You are different because you are making choices to take control of your finances and educate yourself. You are also different because you will save this money as opposed to wasting it on some epic night out.
Here are a few more tips of what to do with your extra pay check:
- Put it towards any outstanding credit card bills you have. I suggest putting it all on the one with the highest interest rate or, if you are able to pay off a bill, pay it off!
- Put it towards your student loans. If you are in the process of paying off student loans and are not working in a field in which you receive student loan forgiveness, you should try to get rid of these loans as quickly as possible.
- Pay off car loans. Let’s be honest, most of us are underwater when it comes to our car loan. This means we owe more on the car than it is worth. So, if you are paying any type of an interest rate, you are just throwing good money out the window.
- Put it towards your mortgage. If you plan on living in your home for more than five years, it makes financial sense to attempt to pay off your mortgage in less than thirty years. This is mostly because the more you pay off, the less interest you pay and the more equity you build in your home. A lot of people attempt to pay their mortgage in biweekly payments in order to pay it off in 22 years. You can have a similar pay off date if you use your two extra checks and put them on your mortgage. This relieves the burden of paying every two weeks.
- Pay off any other debts you may be carrying. This would be things like late electric bills, cell phone bills, or cable bills.
- Put it in a high interest account to pay for this summer’s vacation.
- Put it in a CD to save towards engagement rings, your wedding, house, babies, new kitchens, baths, or just to have as a rainy day fund.
- Invest it in dividend paying stocks. I suggest sticking to utility stocks at this point in time.
I suggest that you do not follow suggestions 6 through 8 if you have any type of debt. It is important that you pay off any debt that carries an interest rate or has any affect on your credit score.
Furthermore, it is silly to be attempting to save money when banks are paying less than one percent in interest and are charging 4.5 percent and more on credit cards, student loans, and mortgages.