Every Dollar You Make Has a Job: How to Break Down That Paycheck

financial planning

Cash Flow, Financial Planners, Financial Planning, Income, Saving, Spending, Stocks, Bonds, Mutual Funds

You have a job. You work hard, day in and day out, and for that, you rightfully expect to be paid. But if your money is lazy and isn’t working as hard as you are, then you may need to make some adjustments.

Every dollar you make has a job to do, and each job is different. If our world was filled with police officers, but no judges, everyone would be in jail. You should make sure your money is all performing the different jobs it was meant to.

The Difference Between Your Net and Your Gross

Gross pay is your entire salary. Net is what is left after you pay out everything that needs to be deducted. Some of your money will stay, and some will go, just like some people can telecommute for work, and some do a lot of traveling.

Working at home is fun. So is your net pay (usually). After paying your bills—your taxes, mortgage, utilities, car payments, groceries, etc.—what you have left is what you can play with. Much like a stay at home mom—after taking care of the house, the meals, and all the other mandatory adult things, then she has time to play with the kids and have fun. What kind of fun can you have with that discretionary money, if there is enough of it?

What To Do With What’s Left in Your Net

This is where the fun begins or decisions can be overwhelming. Talking to a financial planner might be your best bet if you have questions about what you should do with your discretionary income.

Other than spending your money on whatever you desire, you have many different saving options. Your advisor might talk to you about investments and an emergency fund. Some things you might discuss include:

Stocks

Buying stock is the opportunity to become part of company, reaping its benefits when it does well. As a stockholder you can earn dividends when they are paid and/or look for a company that is expected to grow well.

Bonds

A bond is loaning money for the sake of earning interest paid at intervals for a period of time. You don’t own any part of the company, but you are paid interest usually at a stated rate for a stated period of time.

Mutual Funds

Mutual funds are a group of investments sold as a package. They can be stocks, bonds or a combination of both. The theory is that the volatility is lower than individual stocks and good for investors who want a lot of diversity in their investments but perhaps don’t have a lot of money to buy the individual holdings in the fund.

Alternative investments are another investing option, but this is the sort of thing chosen by hedge funds and the wealthy investor.

As you can see, even money that is sitting around has a job to do.  If you are going to work, you’d better make sure the money you bring in is doing the best job it can for you!

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