A reader asks what to do with her extra cash. Laura recommends an action plan called PIP that can solve just about any financial dilemma.
How to Manage Extra Money
When it comes to managing extra money, always consider the big picture of your financial life and choose strategies that follow my PIP plan: prepare for the unexpected, invest for the future, and pay off high-interest debt.
Review your situation at least once a year to make sure you’re still on track. As your life changes, you may need more or less emergency money in the bank or different insurance coverage.
When your income increases, take the opportunity to bump up your retirement contribution—even increasing it one percent per year can make a huge difference.
And here’s another important tip: when you make more money don’t let your expenses increase as well. If you earn more, but maintain or even decrease your expenses, you’ll be able to reach any financial goal you dream about much faster.
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