What Should I Invest My Extra Money In?

The 1996 book "The Millionaire Next Door," reported that about 80 percent of United States millionaires are first-generation wealthy. U.S. residents usually become wealthy by saving extra money every month and working additional hours or jobs in order to have money to invest. When sacrificing immediate desires for future wealth, they typically invest their money in appreciating assets or their education.

Education

According to the North American Military Financial Education Center, a 2008 Census Bureau report found that U.S. residents with bachelor's degrees earned an average of $60,954 annually compared to $33,618 for high school graduates. Individuals who lack a college degree may want to invest their extra money in education in order to make themselves more attractive to prospective employers. Employees who are established in a field may want to spend their extra money on certifications to learn new skills in order to receive a promotion or increase their prospects of finding a higher-paying job.

Stocks

According to Crestmont Research, the average long-term return from the U.S. stock market comes to 9.75 percent per year. Even small amounts of money placed into a balanced portfolio every month can add up to a large sum of money over time. Stockholders can profit from dividends, where a company will pay a share of corporate profits to a shareholder, and appreciation in the stock price of well-managed companies. Investors may choose to invest in a conservative mutual fund in order to limit their risk from industry-specific market swings.

Money Market

Savers looking for an extremely conservative investment may choose to place their money in a bank to receive a certificate of deposit (CD). The bank will provide the investor with a set rate of return over a set period of time with Federal Deposit Insurance Corporation (FDIC) insurance providing a risk-free return. As of March 2011, a Bank of America featured CD requires a $10,000 minimum balance for a 12-month term with an interest rate of .60 percent for the year. Alternatively, an investor can put their money in U.S. Treasury Bonds backed by the full faith and credit of the U.S. government for a .30 percent return a year.

Business

"The Millionaire Mind" book reports that 32 percent of 733 self-reported millionaires owned their own business. Small investments in a business can create large yields over time. For example, individuals may put extra money into retired collectibles every month that could appreciate in value, such as coins, stamps or sports memorabilia. They could invest extra money by creating a website to try to collect money off of ad revenues, or they could become an online merchant on a popular e-commerce site. Alternatively, they could invest in rental properties or fix up foreclosed homes and resell them for a profit.

References

• U.S. Department of the Treasury; Daily Treasury Yield Curve Rates; March 2011
• University of Maryland HSBC -- North America Military Financial Education Center; The Benefits of a College Education; 2008
• Bank of America: Compare Savings & CD Accounts
• Crestmont Research: Waiting for Average
• "The Millionaire Next Door"; Dr. Thomas J. Stanley; 1996
• "The Millionaire Mind"; Dr. Thomas J. Stanley; 2000