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What to do if you get some Extra Money

At times, some of us are lucky enough to get some money. This could be an inheritance, jackpot win, gift, refund or bonus, perhaps. When we get a chunk of money like this, we will need to think about what we want to spend it on. We will have a lot of different options and which we choose will be a very personal decision. However, it can be worth thinking hard because the choice that we make could have a considerable impact on our financial future.

Pay of debt

If we owe money then it can make sense to start by using the money to repay that debt. The money we owe will be likely to be accumulating interest and if we repay it, we will save a considerable amount. This can make a big difference. It can feel really boring to use money like this to pay off a debt. It can almost feel that we get nothing back in return as well. However, it is worth thinking about all of the benefits of repaying the debt. We will not have to make those regular repayments anymore and we will not be being charged for the debt. That money that we no longer have to pay out we could be using to save up and accumulate some money, so it will not go to waste at all. It can also feel really good to know that we have repaid our debts and that we do not have this hanging over us anymore.

Save

It can be a good idea to save some of the money for the future. We never know when we might need a bit of extra money and it an give a sense of security as well. It can help because we know that we have some money to fall back on in an emergency. So, if we get an unexpected bill or some other reason to need money, we know that it will be there for us to use. It will mean that we will have it there to use immediately rather than having to use a loan from a provider such as Omacl.co.uk to pay for whatever it is that we need money for. Savings interest might be very low, but having some in an instant access account can be handy. However, you may also want to tie some up in a notice account or a fixed rate bond so that you get a better return on it but can still get hold of it if you need it.

Invest

When you invest money you actually buy something with it in the hope that it will increase in value significantly by the time you want to sell it and get the money back. This is often stocks and shares where you are buying part of a company or multiple companies hoping that they will prosper and increase in value so your share becomes more valuable. However, you may also choose to buy a house, art, antiques, currency or other things that you hope you can make money from. Investments are risky though as the item that you buy could go down in value as well as up. In fact, you will find that most items go up and down in value and so it is wise to hold on to investments for a significant amount of time, such as at least a decade, to ensure that the fluctuations in price are smoothed out and hopefully it has increased in value. It is a risk though as there will be some things that will not increase in value and some will decrease. You may even lose all of your money if you invest in something really risky.

Spend

Another alternative is to spend the money. It can be the tempting thing to do. You might want to go on a holiday, leave your job and live off the money, buy a bigger home, new furnishing and electronics. This is something which is commonly done but the problem with it is that the money then runs out. It is spent and might even be forgotten about pretty quickly. So be careful if you do decide to spend it and think about whether what you are buying is worthwhile and will last or whether you will end up with lots of items that break or get out of date and nothing really to show for the money.

There are pros and cons to all of the options so it is worth thinking hard about what to do. It is wise to put the money in a safe savings account to start with and then think hard about what option you want to go for. It might be wise to take a risk with some of the money but not all of it. You may want to spend some of it but try to keep some in case you need it for the future.

Overdrafts

Is it Wise to use my Overdraft?

Many of us have an overdraft option as part of our current account. This will allow us to borrow money easily if we need it. Basically, if we withdraw money, use a cheque or have a direct debit or standing order leave the account and there is not enough money in there to cover the cost, then we will be able to use our overdraft facility to borrow it. But is this a wise thing to do?

Cost

The cost of the overdraft is a really important thing to consider. The charges and interest will depend on the bank that you are worth. However, you will tend to find that you are charged a monthly fee as well as interest on what you have borrowed. This interest will be charged each day you are overdrawn and so how much you pay will depend on how long it takes before you get it repaid. Overdrafts do tend to be an expensive way to borrow money and so you may find that it could be better to organise a different type of loan if you can.

Convenience

An overdraft can be very convenient. You do not need to organise it as once it is set up, it will always be there for you to use. This means that you will be able to borrow money whenever you need it which can be extremely useful. However, this convenience can be a problem as you may just use it without considering what your other borrowing options are. You could therefore find that you will end up paying more for your borrowing than necessary because you use this more convenient method.

An overdraft can also be considered to be convenient because there is no repayment schedule. You can repay it whenever you want. When money is paid into the account it will automatically repay the overdraft first. This means that you do not have to worry about finding the money to make the repayments or make sure that you have the money needed to pay them which can be easier for some people than having to find a fixed amount each month to repay, like you tend to with other loans.

Repayment

An overdraft is automatically repaid when you put money into your current account. This makes repayment easy in a way as it happens without you having to think about it. Some people will prefer this to having to make a regular repayment and have to remember to do so and make sure that you have enough money to do so. However, you may find that your money just seems to disappear as it repays the overdraft and you therefore do not have as much to spend as you had hoped. You may also find that you do not pay money into the account that often and you then forget to repay it.

Value for money

It is worth looking at your overdraft in terms of how well it provides you with value for money. You need to think about the balance of the cost and convenience and think about whether you think that it is worth getting one. There are other loans that are quick to organise which might be better or you may already have a credit card, which could allow you to borrow at a lower rate. It is really important to careful compare all of your options, so not only looking at the interest rate but also at any other costs, including late repayment fees to decide which option will be the best one for you.

Conclusion

Therefore it can be useful to have an overdraft and to use it at times, but you need to be careful. It is wise to be aware of how much it will cost you and why alternatives are available. Keep a close check on how much money you have in your current account so that you do not go overdrawn by mistake. It can be difficult, because current accounts do not tend to pay interest on a balance, you do not want to keep too much money in there as you will not get interest on it, but you also do not want to go accidently overdrawn as you will have to pay.

If you do want to borrow money then having the overdraft there can be convenient. However, it is wise to consider all of your options so that you can decide whether this is the right option for you or whether there are alternative methods of borrowing that would be cheaper for you. Make sure that you plan things really well so that you are aware of the costs, repayments and things like that so that you can pick the option that will be the most convenient for you but will also give you good value for money.

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