What to Do with Discretionary Income?

Individuals without any plans for their discretionary income will most likely end up wasting it on impulse spending. Discretionary incomes refers to the money left after taxes and living expenses. it can be spent quickly on dining out, buying the latest electronics, gambling, or making unnecessary purchases week after week. The result is not knowing where the money went and having nothing to show for it. Most people use that money in such foolish ways. Some people choose to place that money in savings for emergencies, to go toward major purchases, or to pay for a vacation. Others place it directly into a retirement account.

Those interested in making it work for them will consider investing it. There are definitely risks involved that range from low to very high, but the potential for large gains is also evident. The first thing to do prior to investing any discretionary income is to give serious thought to personal comfort level with risk. That will determine what companies and sectors may be most suitable for each individual. Low risk investing includes stocks that are not directly affected by volatility. In energy, the yields of companies that own oil are related to the fluctuation in the price per barrel. The yields of a company that stores the oil are more stable because oil has to be placed somewhere, regardless of the pricing. New investors, as well as seasoned ones, can learn more here about energy investing.

Another key element to figure out is the amount of the discretionary income that will be spent on investing. A budget is important to keep things in perspective. It is easy to be tempted by a “sure thing” that never really exists. A tip on a stock or company is great, but investing beyond their means is how people lose the house when one stock plummets unexpectedly. Learn how to analyze reports, track stocks that capture your interest, and invest wisely. Another way to invest that income is to make home improvements to the property. Raising the value of the biggest asset owned can also pay off high dividends. Explore several options before making a final decision to prevent that money from disappearing.