So you’ve got a little extra money on your hands. Perhaps it’s one of those months with an extra pay period, or your side hustle is finally kicking off and actually bringing in a bit of cash — whatever it is, you’ve got a little extra money, and it’s burning a nice little hole in your pocket.
What do you do with it?
Sure, you could have a treat yourself moment and buy that cute little bag or snazzy new golf club you’ve been eyeing up. Or maybe you take it and put it towards your happy hour fund this week and celebrate with your friends.
But maybe, just maybe, there’s a smarter something you could be doing with that extra money. But what is it?
Add It To Ye Ol’ Emergency Fund
If you haven’t yet started an emergency fund, extra money is as good a time as any to get on it. If you have started one and it’s not quite at that 3-to-6 month of covered expenses, then the extra money could help bump you closer to your goal.
An emergency fund is an important finance tool to have, regardless of who you are and how much money you regularly bring in. Emergency funds help cover true financial emergencies like the loss of an income or the sudden need to take an extended period of time off work.
And using your extra money can be a great way to add to your financial security and build that emergency fund!
Pay Off Some Debt
Let’s say your emergency fund is nice and solid, or you simply have some impending debt that’s keeping you up at night. Using your extra money to help reduce some of that debt can be a great way to take a load off your mind.
This is especially a good idea in cases where your debt is high interest. If you have outstanding debt on a credit card, that would be my personal choice for where to put it. But extra money can be used to pay off any type of debt — just make sure you take into consideration any penalties you might incur from adding extra cash to payments with set time limits, such as your mortgage or car payment.
Other Ways To Use Your Extra Money
While the above two are my personal top choices, if you’ve got nothing of consequence there, then it’s dealers choice! Assuming your emergency fund is topped off, and your debt is paid then there are a few ways you can use your extra money (or simply places to put it) that are more financially savvy then spending it on a new pair of shoes.
Add It To A Savings Goal
Perhaps you’ve earmarked your calendar next year for a relaxing winter vacation somewhere hotter than Idaho in December. If that’s the case, then adding your extra money to that savings goal might be a great plan.
You can use your extra money towards a savings goal, such as your vacation or really anything else, and it’ll help you get that much closer to the end game.
Put It Away For Retirement
Yes, you do need to be saving for retirement regardless of how old you are. So if you have a little extra cash, it might be a nice idea to put it away for that future 65+ snowbird plan you’ve been scheming up.
Chances are you aren’t reaching your yearly retirement maximum contribution, so this can be a good way to add to that goal and make your extra money work for you! If you have reached your maximum, then one of the other two options is probably a better game plan.
Speaking of making your money for you, investing your extra money this month could be a great way to put it to something that will (hopefully) bring you long-term gain.
Never invested before? Why not start now!
What do you do when you have a little extra money? Share in the comments below!
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