Extra money is a blessing for most people – but not for everyone. There are some who don’t know how to make proper use of additional income, and in some cases, their finances might even end up worse in the end as a result of that. It might sound strange, but it’s a very real occurrence, and it happens more often than you might think.

It’s particularly prominent among people who’re used to living with less money, and suddenly find themselves with a lot of extra cash on hand. They often don’t know what to do with that money in order to utilize it in the most efficient way possible, and end up wasting most of it on senseless things. And once they’re back to their standard finances, they realize that they’ve developed some habits which are now very harmful.

How Much Is Too Much?

Of course, you should always aim to have some extra money saved up. Anything can happen in your life, and you must be prepared for the worst. But at the same time, there is a reasonable limit to how much you should be aiming to save. After a certain point, building up your savings more becomes detrimental and doesn’t make much sense. That point varies from person to person though, and some are going to hit it much faster than others, because they have access to better income.

The general rule of thumb is to aim for something in the range of 6-12 months’ worth of your standard monthly expenses, everything included. That way, should the worst happen and you find yourself out of a job and with no source of money, you should at least have enough saved up to comfortably get through that period.

Investment Opportunities

Investing your money is always a good way to spend the chunk that’s above your savings threshold. There are many ways to put your money to work these days, especially if you explore what’s available online. Try to be reasonable though, and don’t just jump at the first opportunity that you come across because it promises good returns. Be patient, and if you’re not familiar with how investing works in general, try to take things slowly at first.

You’re going to make some mistakes at that level, this is pretty much guaranteed. What’s important is that you learn the right lesson from each of those mistakes and integrate that knowledge into your next investments.

Keeping Your Money in Circulation

Your money must keep flowing at all times. If you let it sit idly for too long, that’s a waste – it’s pretty much the equivalent of keeping it in your savings account. It could even be worse, if the money is held in a checking account where it gets no interest at all. If you notice that you’re accumulating larger sums of money that you’re not doing anything with, take steps to correct that as soon as possible. But remember what we said above as well – be slow and patient, and don’t jump to things that you could regret later.

Cashing Out at the Right Time

Some types of investments are not meant to last forever, and will eventually dry up. If you keep involving yourself with them for too long, you’re going to start burning through your money. Learn to recognize when you need to back away, and take the opportunity when it’s available. You should also avoid the mistake of falling for the “sunken cost fallacy”. In other words, believing that just because you’ve invested a lot of time and/or money into something, you should not give up on it.

Because that’s how you end up in an even worse situation, and any experienced investor or entrepreneur is going to tell you the exact same thing. You need to spot the opportunity to back off when it arises, and take advantage of it.

Help When You Need It

Last but not least, remember that you’ll sometimes be unable to deal with everything you want to do on your own. Especially if you want to make some more complex or risky investments. In those cases, you might need help in the form of extra funding or something along those lines. Make sure that you know where you can get this help in advance though. When it comes to something like a loan, you should be familiar with the local market, and know which lenders are worth working with.

This will save you a lot of time if you eventually get into a situation where you need extra money fast. And of course, be prepared to deal with any strings that come attached to that loan. It doesn’t matter if it has a shorter repayment term or something along those lines, you have to repay it without any delays or extra fees incurred, if you don’t want to jeopardize your investment operations as a whole.