If you’re like me, you’re always looking for the best way to manage what you have and what you’re responsible for. And let’s be honest, there are very few things that will thrive if they’re completely left alone anyway. Houses have to be lived in and cleaned. Plants have to be watered and exposed to the sun. Vehicles have to be driven, even if just once every week or two. Lawns have to be mowed. You have to eat nutritious food, drink water, wash your body, and brush your teeth. Because what happens when these things don’t happen? Things fall apart, they breakdown, or get out of control. There is chaos and even sometimes decay or death when things are not managed or not managed properly. Don’t think of your finances as any different. Take care of it, manage it well, get advice and seek help when there’s something you don’t know how to do. If you leave your finances alone, you might be dealing with chaos later.
Now, if you’re in the US, you know that families with incomes under certain thresholds have received three stimulus checks over the past year. If you’ve been able to work over the past year, you may have received a tax refund as well. So, what’s the best thing to do with that money? First, make sure that your four walls are taken care of: food, shelter, utilities, and transportation. Once that’s secure, then what? What are some things that you can do to make sure this money is being used as well as it can be?
I have a few suggestions…
1) If you don’t have a rainy day or fully funded emergency fund, use this money to help fund it.
2) If you’re still paying on a mortgage, send this extra money as an additional principal-only payment.
3) Invest it. Save it toward your 401K or IRA. Or, if you’re already setting aside 12-15% of your income toward retirement, consider saving it toward a prepaid or 529 plan for your children’s or grandchildren’s college, or invest it in a mutual fund instead.
4) Consider paying ahead on your utility bills. I’ve done this over time by sending an extra $5-10 to the utility company when I pay by bills every month – nothing major – and now have about 2 months of advance payment or credit lined up. Now, whether you have a fully funded emergency fund or not, you do not have to do this. In fact, everything I’m mentioning here is totally up to you. I’d started doing this (paying a little extra every month) years ago before I learned about fully funding an emergency fund, but I continue to round up my water and electric bills every month now. If the bill is $72.38, I send $75. Later, if I can’t pay that bill that month for whatever reason, it’s taken care of via pre-payment without my needing to touch my emergency fund to cover it.
5) Set it aside for birthday or Christmas gifts. Rather than putting that gift on a credit card, pay cash for it.
6) If you’re saving up for a new home, add this money to what you’re saving for your down payment. Or consider using it to invest in an income property that will start paying you over time.
7) Saving up for another car? Add this money to what you’re saving for your down payment, or even better, save this money and keep saving until you’re able to pay cash for your next car.
Are you seeing the theme? 🙂
8) Are you at a point in your life where you can take some time off for a vacation? Don’t get a loan. Don’t leave the charges earning interest on credit cards. Plan your vacation and pay for it in cash. I do advocate for using credit cards for things like this and taking advantage of the rewards that come with doing that (I have a card that gives cash rewards), but pay it off every month. Or if the vacation is already taken care of, here is the extra spending money for your trip.
9) Does your vehicle or your home need a major repair or are you wanting to do home improvement or renovation? Use this extra money to help pay for it.
10) Put it toward expenses that only come up once or twice a year – car insurance, homeowners or renters insurance, HOA dues, etc.
11) Are you still trying to pay off credit card debt or a student loan? Use this to help pay down that debt.
12) So many people are still dealing with so much. Whether Covid is with us or not, people need help. Even the Bible says that the poor will always be with us (Mark 14:7). If your family is still able to manage, do not forget to give to help someone else. Nothing is too small when it’s given from the heart.
This list is by no means exhaustive. There are a ton of things you can do with extra money. Think about your individual situation and tailor it to what you need. And don’t be shamed into not doing what you want if you’re able to do it. If your and your family’s needs are met, you have a fully funded emergency fund, and you want to take a vacation, GO and have a great time! If you want to give your entire stimulus check to someone who is in need, GIVE! Everyone is in different places in life. Don’t compare your situation to someone else’s.
What else would you recommend someone do with extra money? I want this blog to be a helpful community. Leave your suggestions in the comments. Let’s help each other!