As many of my readers know, a few months ago my wife got a raise. She had been working diligently to land the job that she wanted. As a result of which, our family finances saw a drastic increase in income. Before this point, we were scrapping by. We were still saving money and cutting every possible corner, but there wasn’t a lot of cushion. As a result of which, I had asked my readers what they thought the appropriate use of the extra money was. It has been a few months since I posted it, and I thought I would let you know what I did with the extra money.
What I did with the Extra Money
After my wife got a nice raise, we took a few steps that we deemed necessary. First, I opened a Roth IRA for myself (my wife already had one). I felt that this was important to do because we could max it out while the market was still low (and before the end of the year). I also wanted to get in the habit of maxing out two roth IRA’s each year as we start saving for our long-term retirement. If we make the sacrifice now, it will be easier to do it in the future because that will be the habit.
The second thing that we did with the extra income was to get a whole life insurance plan. I wanted to start protecting my wife in case something happened to me. Even though she now has a promising career ahead of her, it doesn’t hurt to be prepared. While I plan on writing up another post on my choice to go with whole life insurance instead of term, suffice it to say that I wanted it to be a long term investment plan as well. It offers me tax free growth with a projected return of over 7% on the cash value. (More to come on that later)
Lastly, we bought an IPAD. Granted, this wasn’t really with her raise, but it was something that I mentioned the that first post. Since I started making money with my blog(s), I have started to think of ways to invest in my future growth. There are quite a few areas that I am developing right now, but one thing that I needed was some hardware. I needed a portable computer device to help keep up with the online world. Because I have wifi at home, work and almost everywhere I go, I figured this was a reasonable choice. Considering that we are already saving a lot of money towards our long term retirement and I was making this money just with this blog, I decided to invest in the IPAD. This means less taxable income and increased productivity.
Having extra income coming in can be a dangerous thing because you are tempted to splurge more and as a result change from your frugal lifestyle. Before you know it, your lifestyle inflation has affected you and you can’t change your ways. Knowing this is the case, I wanted to reward ourselves with something, but instead focused on our savings and retirement goals. I decided to put the money away before I could spend it and get rid of the temptation.
What do you do with extra money?