If you are working in direct sales, you probably worked long and hard to grow your business and start turning a profit. Most people start direct sales barely making enough money to pay their own bills, so don’t worry if this is your situation. After a little time and a lot of hard work, you may be excited to find you have made it to a place where you have extra money once your bills are paid. Now you may be questioning how to spend your extra income. The best way to see significant returns from all your hard work is to invest. To many that’s a scary word, but when you get the right financial education about investing, it’s not as scary after all.
saving and spending (Photo credit: 401(K) 2013)
Pay Off Your Debts
One way of taking advantage of your direct sales profit is to pay off any debts. You may have borrowed money to start your business or have debts from other sources. One of the best uses of your extra income is to pay down that debt. When you pay off that debt, you will no longer need to worry about making monthly payments on time or paying late fees and interest.
Save Your Money for Retirement
As the cash starts to mount, planning for the future should be a major focus. Being self employed is hard, because you don’t automatically have the option to contribute to your employers retirement accounts. You need to have the motivation and self control to plan this yourself. An Individual Retirement Account or IRA makes a great long-term investment of your profits, but you must be in it for the long haul to avoid premature tax penalties. Your financial planner can help figure out what’s best for you and how much you can afford to contribute each month. If you don’t have these options, find a bank or another safe place to start saving for your future if your budget allows.
SEP Plans are specially designed for a self-employed person and their eligible employees. Your maximum contributions to this plan is the lesser of 25% of your gross earnings per year. Your contributions to this plan are tax deductible and therefore, this is a good option for people who have extra profits. This type of plan works the same way as an IRA, so remember, don’t contribute too much because there will be penalties for early withdrawals.
Invest in Stocks and Bonds
When those dollars start rolling in, as great as it is, it can also be overwhelming. Then you start wondering how you can make your well-earned money work the hardest for you. One investment vehicle that can really bring in the cash is stocks. Take some time to absorb a little education about stocks and see how they can enhance your investment portfolio. Another way is to consider investing in bonds. This is where a good professional investment expert comes in handy to help you find the best bonds to invest in at this time. Research each stock before you invest and make sure you put your money into a variety of different stocks in case one were to crash.
Invest in Your Children’s Education
A state sponsored college savings plan called a “529 Plan”, has no income limits and the contributions are made after taxes and are non-deductible. Withdrawals are tax-free when the funds are used for higher education. An Educational IRA is also available, however there are income limitations. If you have children to support, starting their college fund now is a good idea. This will keep you from going into debt later. You can also start a simple savings account in your child’s name and contribute to that whenever you have extra money in your budget. This one you don’t have to submit your money on any set schedule.
A key factor to remember when investing in mutual funds is diversification. There are several hundred different mutual funds in which to invest, so don’t put all your money in one. Allocate your money to different types of funds so that no matter what the market is doing, you are still getting returns on your investment. Make sure you hire a fund manager so that you know of your fund’s performance in the market.
No matter where you live, there are ways to start saving your extra direct sales money. It is a great feeling when you start seeing success and find you have paid all your bills and still have some left over. There are a variety of ways that you can invest or save your money for future use. Do your research and find one that works best for you and your financial situation!
Note: These are options available in the Unite States. If you live elsewhere, please talk to your bank or investor to find out what options are available to you.