I read an interesting piece on a personal finance blog that said most people will have a leftover of 10% of their income every month. This leftover is after the usual expenses, saving plans and insurance payments. It is also after all the self-purchased reward presents.

I find this very insightful as I reflected on my own lifestyle. I find that after paying all the bills, and contributing to all the proper investment funds, I would have about 5% – 10% leftover every month.

What can I do with this leftover money?
In typical conservative financial planning, I could use it to pay up my debts, for example, credit card loans, car loans, or housing loans. This is not a bad idea since it would reduce the interest that you are paying on these loans. That results in a nett gain to your portfolio. Take for example a credit card loan that you are paying 12% interest in a year, if you managed to pay up the loan in 6 months instead of 12 months, you will have a direct savings of 6%! That is better than buying a low risk bond fund.

However, car loans and housing loans are currently at very low interest rates. Furthermore, your monthly leftover amount in relation to the size of your housing loan would not make a great difference to the repayment schedule. Thus, even if you paid it up, the small savings in interest rate multiplied by the small reduced repayment tenure, is not going to rocket your portfolio. Hence, the most beneficial would be credit card loans. Then again, habitual credit card borrowers never have any leftover money in the first place! So, in reality, your loans to pay up would probably be housing and car loans.

The next alternative is to invest this leftover money in stable funds like well managed emerging market funds or index ETFs. While this is a good idea, you will find that the returns will range between 10% – 15% of your extra invested amount. It will definitely help, but it is not the least bit exciting.

Turbo-charging your returns
Finally, I found this to be the best answer: Use that money to invest in good quality aggressive trading instruments.
Personally, when I have that little bit of extra money, I tend to spend it on a book that I did not really need, or going to a theatre performance that I did not really think it was worth the money. The most common one is taking a risk and trying out a new restaurant that is expensive, but does not look too good.

Why? Human beings tend to like to explore and try new experiences at the end of a boring work month. Let us use this to our advantage by trying out new trading instruments. You will get a thrill from the analysis and planning, yet there is also the opportunity of high returns.

If you went out to try a new restaurant and the food was no good, your money would have been wasted. On the other hand, if you had a theory about the movement of the Australian dollar and used that same money to invest, you may have got back a return or at least a valuable learning lesson! This also applies to using options and futures to leverage on the higher returns of hundreds of percent. However, you should only use your disposable capital!

Winston Ng, CEO, Forex Driving School. They conduct Singapore’s only structured 8-week Forex Mastery course that combines knowledge with a guided process through live currency market scenarios. It is only in a mentored live-trading environment will you learn to master and direct your emotions for the most profitable outcome. Beginner to advance traders attest to their amazing education process through the flood of testimonials and referrals to their sell-out monthly courses.