Key takeaways

  • Extra cash from a refund, bonus or other source should be put toward high-interest debt first, such as credit card debt.

  • Yes, you can treat yourself, but a better strategy is to put most of your additional funds to work in a savings or investment account.

Wherever your extra funds might come from — a tax refund, an inheritance, a bonus at work or even just a buildup of money in your checking account — here are a few financially savvy ways to use them.


1. Pay off debt

If you have a significant amount of debt, consider putting your extra money toward paying that down or off. “So many individuals carry credit card debt or school loan debt. Using extra cash to pay down debt is a great way to improve your financial future,” says Susan Albrecht, senior vice president and head of Advisory Consulting Services at U.S. Bank. She advises tackling high-interest debt first. 


2. Boost your emergency fund

Another way your additional funds can help improve your finances is by increasing your savings. Albrecht suggests prioritizing an emergency fund: “You want to have at least three to six months’ worth of household expenses covered so that you don’t have to use credit or tap your retirement fund if you have an unexpected event.” 


3. Increase your investment contributions

If you’re already debt free and comfortable with your savings, consider adding to your investment accounts. Albrecht says a good place to start is increasing your contributions to your employer-sponsored 401(k), 403(b), or individual retirement accounts (IRA). Consider working toward a goal of contributing at least 10-15% of your pre-tax salary each year to your retirement accounts.  

If you’ve maxed out those contributions, consider opening or adding funds into investment accounts such as health savings accounts (HSAs), brokerage accounts and robo-advisors

It’s smart to sit down with a financial professional to determine what might be best for your specific situation.


4. Invest in yourself 

“When it comes to investments, one of the best you can make is in yourself,” says Albrecht. If you want to save for your or a family member’s education, she suggests opening a 529 plan.  

“If you have entrepreneurial dreams, you can use your extra cash to jump start your business and turn your dreams into reality,” Albrecht adds.


5. Consider the timing 

When and how you end up with a cash surplus can impact what you decide to do with the money. For example, if you receive an inheritance after a loved one dies, it’s likely coming at an unexpected and emotional time. In this case, you should take your time and consider putting the money aside until you’re ready to deal with it. Interest-bearing accounts, including money market accounts or certificates of deposit (CDs), can be a good option for short-term saving. 

You can also gut check your budget to see if you have any big expenses coming up. If you pay your car insurance every six months, for example, could you use extra cash to get ahead of those payments?

Your extra money may also come in the form of a graduation gift or a holiday bonus. While these are meant to be celebratory gifts, it’s still smart to consider all your options before making an impulse buy. 


6. Go ahead and treat yourself

While there are a number of financially prudent ways to use extra cash, it’s also okay to spend some of it on something fun — just be sure to think it through.  

A good strategy is to put the money into a savings account and take some time to consider how you want to spend it. You may decide to treat yourself with a small part of it, but use the rest to pay down debt, invest or simply keep saving.


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