Whether you have a little extra money thanks to a side project that's finally paying off, a tax refund, a bonus, or an inheritance, you can find great ways to transform it into something significant before it sifts through your fingers like sand.
These 10 strategies can help you make that money ruffles, regardless of your preference for spreadsheets or free-spirited dreams.
An emergency fund is a stash of cash for unexpected life events, such as unexpected car repairs, medical bills, or sudden unemployment.
Setting up an emergency fund is a great way to spend that extra money because your financial peace of mind is priceless. Without this, an unforeseen circumstance could force you into credit card debt.
Your first aim should be to create an emergency fund equivalent to 3-6 months of living expenses. Save the money in a high-yield savings account (e.g., Ally or Marcus) to earn ~4% interest.
Pro tip: To resist the temptation, name your emergency fund account "Do Not Touch" or "Adulting Fund."
Index funds track markets (like the S&P 500) and spread your risk across hundreds of companies. Historically, low-cost index funds return ~7-10% annually. Directing your money into these funds is investing, not gambling.
The best place to start is platforms like Vanguard, Fidelity, and other similar ones that offer funds with fees under 0.1%. Additionally, set up automatic deposits into your index funds account to ensure consistency; remember, even $50/month grows over time.
Fun fact: $1,000 in an S&P 500 index fund in 1980 would be worth ~$130,000 today.
Paying off credit cards, payday loans, or anything with interest over 8% is another great way to use your extra cash.
A 20% APR debt costs you money. Eliminating it is a guaranteed ROI.
Monetizing a hobby or skill – freelancing, pet-sitting, or selling crafts on Etsy – is another excellent way to use extra cash. Monetized side hustles are a fantastic way to generate compounding income. A $500 investment in your side hustle could easily become $5,000 in no time.
No matter your hobby or side hustle, you can use various platforms, from Canva to Fiverr and other marketplaces, to find an audience willing to pay you. Remember to reinvest your profits to grow the hustle.
Pro tip: Test ideas cheaply and quickly to find what sticks.
Take courses, certifications, or workshops to boost your earning potential. A Coursera course could land you a promotion, while a coding bootcamp might pivot your career.
This involves giving your time, money, etc., to charities, mutual aid funds, or community projects. Whoever said money can't buy happiness probably hadn't tried giving it away. Giving without expecting anything in return can salve the soul.
Research charitable organizations using Charity Navigator or GiveWell, and remember that even $20 can feed a family via Heifer International or a local food bank.
Pro tip: Use employer matching programs to double your impact where applicable.
Allocate some of your extra cash to adventures, perhaps a weekend road trip, a cooking class, or a concert. Experiences boost long-term happiness more than material goods.
Easy: book your surprise trip or host a dinner party.
Fun fact: A study found people recalling vacations feel 34% happier than those recalling purchases.
Consider investing in comfort or value. For example, upgrade to energy-efficient appliances, a cozy reading nook, or smart home tech. A $300 bidet could add more daily joy than a $3,000 couch.
Use that extra cash to pay for gym memberships, therapy, organic groceries, or a meditation app. Preventative care saves future medical bills. A healthy person can earn more and enjoy life more.
You can start anywhere, but try Noom for mindful eating or Calm for mental health. If you're a remote worker, you could even buy a standing desk or ergonomic chair.
Pro tip: Health Savings Accounts (HSAs) are a great way to invest in your health because they offer tax-free growth, especially when paired with a high-deductible plan.
The idea is simple: surprise loved ones with personalized gestures, perhaps a framed photo, a handwritten letter, or a charity donation in their name. Mindful gifting is a great use of extra cash because it strengthens relationships, and joy multiplies when shared.
DeFi is a way to use cryptocurrencies like Bitcoin and Doge through decentralized platforms. Getting into the DeFi space can offer great returns and give you complete control over your investments. Just keep this in mind: high risk, high profit.
Not all projects have to be high risk, since the new crowdfunding platforms are providing a means even for ordinary businesses to get loans from numerous sources at once, which previously would’ve been rejected. One such platform is 8lends by Maclear, which engages in rigorous filtering through innovative methods and even attaches collateral in the event that borrowers default.
Pro tip: Use innovative methods to gain greater access to credit and profit opportunities.
Having more cash is a blank canvas. Paint it with safety (emergency money), investment (index funds), happiness (vacation), or giving (donations). There is no "best" choice. You have unlimited choices; filter them according to what aligns with your ideals.
In parting, here's your cheat code on what you do with extra money:
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