photo credit: MarkyBonI often dream about having an unlimited supply of money that would never run out. Think of all the places we could visit and new things we could try. I could quit my job and spend all my time with my children and wife. I could learn how to cook and sail (2 things I have always wanted to learn) and have all the time in the world to train for marathons. The opportunities would be endless and the memories priceless. I understand that money doesn’t buy happiness, but I think it buys my time. I could spend the day doing things that I wanted to do in my life instead of working 60 hours per week for a company that could turn around tomorrow and let me go.
The chances of having an endless supply of money are extremely remote. I think each individual would have their own interpretation of endless supply of money, so I won’t put a number on it. What I think is possible is to eventually have an increase in my annual salary, or a new job that pays more than I currently get. Someday, when my passive income streams are more established, I am expecting to have a decent increase in income. So I ask myself, what would I do with that extra money? Just a few months ago, I was hours away from getting a new job offer that would have increased my monthly salary by $1,000 per month take home. That would have been a significant increase in income. I would have been sacrificing the same amount of my time as I currently do, so the time on the job would have been similar. Unfortunately (at the time), I was disappointed about losing out on this opportunity. Fortunately (present), it worked out in the end as the other company is now facing pressures from the week economy and laying people off. I guess things happen for a reason (but that is a different story).
For simplicity, let’s say tomorrow I got $1,000 extra in take home per month from my job or from an extra income stream. What would I do with that extra income? I have put together a few notes on what I would use this money for.
- Update Monthly Budget – I would make changes to the monthly budget that I post every month. I would initially increase my income to the appropriate amount and adjust my savings expense category with the balance of money. This ensures that our family stays on the same budget and lifestyle. I like the idea of getting a raise or increase in income and put it directly into your savings without changing your spending habits.
- Increase 401k contributions – I currently contribute 10% of my salary to my 401k along with a 6% company match. I would immediately increase my contributions to 12%, which is even more important now with the market being so low.
- Donate to charities – This is one area that I need to focus on. My family really does not donate any money at this point. We always donate extra clothing, blankets, coats, etc. but we never donate money. I would like to start giving back and would look into setting up some monthly donations with this extra income.
- Purchase more assets – As stated above in the monthly budget section, I would put almost all of the extra income (except for donations) into our savings. From our savings, I would look to purchase assets that could produce streams of passive income into the future. I would look at things like Tax Liens, Foreclosures, Rental Properties, Purchase High Yield Stocks, and more.
The important thing to keep in mind is that with any increases in our monthly income, we would try and maintain our current lifestyle. This would allow us to reach our long-term financial goals of financial independence.
What would you do with an extra $1,000 per month or any other large sum of money per month?
{ 4 comments… read them below or add one }
I’m not sure I consider $1,000 a month a large sum. Though if I had more money coming in I would save more and give more to charity. After watching a segment on Dave Ramsey with the Modest Needs charity, my wife and I recently started giving to charity (we’ve since increased the amount we’re giving due to the economy). If you’re looking for a reputable charity I highly recommend Modest Needs. They have a strict documentation process for approving applicants and the money goes directly to paying the bill/service they’re having an issue paying (getting them back on their feet). Also, a nonprofit organization matches your contributions dollar for dollar.
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Hee – that would only give me $100 to spare! I’d probably put it in my emergency funds.
Seriously, I would probably keep doing what I am doing, but working at paying of what little extra debt I have a bit faster. My car and my credit card should both be paid off by next year, instead I would pay them off in a couple of months. Then I really would fund my emergency savings. Ok, and saying ALL that is done, I’d go back to school and take some more classes and invest in myself.
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I’ll actually have something like that (in NZD) in my pay packet this month. Earlier this year I went down to 4 days a week and since then I have had a pay rise and there has been a tax cut here in New Zealand. I’ve just been asked to go back to 5 days a week so my pay packet will be substantially more than it was before.
I think I’ll end up putting much of it in my Emergency Fund and my Freedom Fund.
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I’d pay down my debt faster and then build my emergency fund faster. Let me tell you that rental properties are definitely NOT passive income! They are a lot of work!
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