For many people, the concept of having more money does not exist. And it’s easy to see why. Living costs have become very expensive on a wide scale. And for low and even moderate incomes, there is often no money left at the end of the month.
But if you are in a better financial situation, you may be in a position to have money left over at the end of the month after accounting for all your bills. And if so, here are some places to consider stashing that cash.
1. A savings account
The economy is pretty strong right now, but you never know when things could take a turn for the worse, resulting in massive job losses across the board. And you also never know when you will encounter an unplanned expense, whether it is a car with a bum engine or a water heater that refuses to heat.
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That’s why it’s so important to have money set aside for emergencies. And the best place to put money is in a savings account. That way, you’ll have access to it at all times, and you’ll earn less interest on your money along the way.
Plus, today, savings accounts pay handsomely. If you look at online banks, you can easily find an APY of 4% or more. So if you have $10,000 set aside for emergency expenses, that means for the year, you have the potential to get a cool $400 in your savings, if rates don’t fall.
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And to be fair, they probably are Carry On fall, which we’ll get to in a bit. But even then, you need money for emergencies. Even if interest rates aren’t as generous later in the year, it’s more money in your pocket nonetheless.
2. A CD
The Federal Reserve has raised interest rates 11 times between March 2022 and mid-2023. And because of this, rates on savings accounts and certificates of deposit (CDs) have been raised.
But during its last four meetings, the most recent of which took place at the end of January, the Fed chose to hold off on its rate hikes as inflation slowed. That said, the CD rates currently available may not last long. And once the Fed starts cutting rates, which could happen later in the year, CDs can start paying off. many just a little.
So now is a good time to open a CD. But don’t just rush to open one at your existing bank. Instead, shop around for the best rate you can find.
Also, you can upgrade a few CDs instead of locking up all your money for the same term. Cashing out a CD early usually results in a financial penalty, so it’s best to stagger your CDs strategically.
Let’s say you have $6,000 to put into a CD. Instead of opening a 12-month CD tomorrow, consider opening a $2,000 6-month CD, a $2,000 9-month CD, and a $2,000 12-month CD. This way, you have money coming out at different intervals.
3. An IRA
It’s hard to focus on long-term savings when you’re probably struggling to pay the bills right now. But if you’re in a position where you can set aside money for your future, then it pays to put some money into an individual retirement account (IRA).
The great thing about traditional IRA contributions is that they protect some of your earnings from taxes. So if you contribute $2,000 this year, that’s $2,000 in income that you don’t pay taxes on. If you fall into the 22% tax bracket, that $2,000 contribution will save you $440. Additionally, you can invest $2,000 inside your IRA and ideally grow it to a larger amount over time.
It’s hard not to spend your entire paycheck when expenses are high. But if you have extra funds available this month, consider a savings account, CD, or IRA.
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