So you have some extra income this month – congratulations! But knowing what to do with surplus cash is where things can get tricky.
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Some people seem to be born with a special gene that gives them financial superpowers. Whether it’s mastering the stock market or always knowing when and where to invest, these people can ignite both envy and awe.
Nobel Laureate and former child whiz kid, Robert Merton, is one of these people.
“My first entrepreneurial activity came when I was about eight years old,” says Merton. “I started a thing called the RCM Savings of Dollars and Cents Company, which was a depository bank. I went to family and friends, collected their money, was allowed to go with my parents to the local bank, opened an account which I earned interest on – more interest than I paid my people.”
Of course there are the obvious choices like putting spare money aside for a rainy day or into a retirement fund. A good benchmark, according to Merton, is to save around 20 percent of one's salary per month for retirement. If you find yourself with some extra income, use it to either to make up for months you haven’t contributed to your retirement goals, or just to get a leg up.
If you have saved more than 20 percent of your monthly salary and are looking for something different then congratulations! For those with confidence and security relating to their finances, extra income can present an opportunity to take more risks than you normally would.
It can be a good time to put it towards retirement, either to make up for months you haven’t contributed your goal or at all, or just to get a leg up.
With a growing focus on health, wellbeing, travel and cultural experiences, the question of what it means to invest has widened. Nobel Laureate Sir Christopher Pissarides has some softer suggestions. An advocate for lifelong learning, he sees some unexpected or extra money as the perfect opportunity to reinvest in yourself and stay competitive in an ever-changing economy.
“Lifelong learning is absolutely essential today because the type of knowledge that we require is changing so fast,” he says.
According to Pissarides, investing in one’s self can take a more relaxing form, too.
“We know that as incomes rise, and people become wealthier, they're looking for new stimuli in in their free time,” says Pissarides. “Artistic creation becomes important. Good theater, good music.”
“The two things that concern people the most are health and their appearance,” he continues. “So you can see if those are your first two concerns and you make some money in your life, that's what you are going to want to spend it on.”
Never one to pick favorites, we think a combination of reinvesting spare money and allotting some to a little rest and relaxation sounds like a pretty wise approach.
The Dollar Index (DXY) is now trading around 0.9% lower month to date, despite the volatility in markets. In part, this is because if higher tariffs weaken the US economy, the Federal Reserve has much more room to ease monetary policy than its counterparts.
With US tariffs surging from 2.5% to 25%, global trade and investment flows face a historic restructuring. Through an Emerging Markets lens, how are these times affecting places around the world?
CIO believes 2 April will likely mark a before-and-after moment for the global trading and financial system, estimating that the effective US tariff rate has surged to approximately 25%, up from just 2.5% prior to the US election. This figure may climb even higher in the near term, particularly if currently exempted sectors like semiconductors and pharmaceuticals are affected, or if the administration escalates its response to retaliatory measures from trading partners.
President Trump announced one of the biggest changes in US economic policy in a generation, and we could enter a downside scenario if the White House does not take active steps to reduce tariffs.
Markets have been digesting the impact of President Trump’s changes in US economic policy, with equities falling sharply, bonds and gold rallying, and the US dollar depreciating against most major currencies. In this note we consider some ways to not only manage volatility, but also to take advantage of it.
It's never easy to go through a market sell-off. When we see our hard-earned dollars dwindling in value, it's natural to feel anxious about what this might mean for our families and our ability to achieve our goals.
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