Every day, you make decisions on what to do with your money. You can:

  • Spend it.
  • Give it away.
  • Save it for a rainy day or a big purchase.
  • Pay down debt.
  • Invest it.

There are plusses and minuses involved with your choices, no matter which moves you make. If you understand the implications of those trade-offs, however, you can make the best decision for you and your family -- both for today and for the future.

Net worth or cash flow?
One of the most routine trade-offs you face is whether to improve your net worth or your cash flow. For instance, say you bought a car with a 0% interest, five-year loan with a $400-a-month payment. If you have some extra money at the end of the month, you could use it to pay down the loan faster. Doing so would help free up the $400 base payment that much quicker, thereby helping your cash flow.

On the other hand, it wouldn't help your net worth much. After all, your car's value doesn't depend on how much you owe on it. Even taking that extra cash and saving it in a savings account at 2% interest would boost your net worth more than accelerating your repayment.

In this case, it may seem like the "best" answer is to save the extra money. In isolation, that's true, but it's only half the story. After all, life happens.

Have your property taxes, food, energy, and medical insurance costs skyrocketed in the past couple of years as ours have? Largely thanks to those spiraling bills, our available cash after core expenses has actually dropped in the past couple of years in spite of raises. We had previously chosen to take on low-interest purchase loans to preserve our existing savings. When the costs of standing still started rising faster than our income, however, it tipped the balance in favor of paying down the debt.

Short term or long term?
It's critical to have enough cash flow to make ends meet every month. If you've got life goals that you can't meet out of your ordinary cash flow, though, you've got to plan for them, too. Do you want to help your kids with their college expenses? Would you like to retire someday?

If you have costly goals like these that are several years away, you have to be willing to invest some of your cash flow now in order to fulfill them later. Otherwise, you won't have the money when you really need it.

While the stock market fluctuates, over periods of time it can generate extraordinary wealth. Of course, the day-to-day moves can be brutal. When you take a long-term view and have a decent investing strategy though, your returns will very likely trounce what you'd get from a savings account. Getting those higher returns would let you reach your ultimate goals all that much sooner.

Compare your guaranteed return from the bank with the actual returns you would have seen investing in these well-known companies:


10-Year Total Return

10-Year Annualized Return

Kellogg (NYSE:K)



Honda Motor (NYSE:HMC)



Johnson & Johnson (NYSE:JNJ)



Tiffany (NYSE:TIF)



Caterpillar (NYSE:CAT)



American Express (NYSE:AXP)



Harley Davidson (NYSE:HOG)



The higher your return, the easier it is to reach your long-term goals. Of course, there's no guarantee that you'll find the Harley Davidson of the next decade. Even so, investing in the next Kellogg still gets you to your goals faster than a savings account.

Think outside the box
You've got choices to make with any cash that comes your way. Of course, if simply making ends meet now is your chief priority, those future goals may seem more like pipe dreams. Fortunately, all hope is not lost. As my colleagues Dayana Yochim and Shannon Zimmerman point out in Motley Fool GreenLight, there are probably hundreds of dollars hidden in every paycheck you earn.

To find your hidden cash and learn to make the best use of it for today, tomorrow, and the rest of your life, take the next 30 days to try GreenLightfor free. You have nothing to lose, and it just might help put your financial future on a more solid footing.

At the time of publication, Fool contributor Chuck Saletta owned shares of Johnson & Johnson, and his wife owned shares of Harley Davidson. Johnson & Johnson is an Income Investor recommendation. The Fool has a disclosure policy.