Did you know that the average American has about $4,500 in their savings account? When it comes to excess cash, Americans do not have a lot to spend or save in general.
If you have leftover cash, you may be wondering what to do with extra money. Here are some ideas that you can implement today so that money does not go to waste.
Build an Emergency Fund
An emergency fund is important because you need it in case something happens that is financially debilitating. Common uses of emergency funds include car repairs, hospital bills, vet visits for pets, or job loss.
A good rule of thumb for an emergency fund is to have three to six months’ worth of savings. This means that if you are left without income, you can still survive and have a cushion.
Add Money to Retirement Accounts
If your job offers retirement accounts, you should definitely max out your contributions with any excess cash. Many employers will match your contributions up to a certain percentage, so reap the full benefits of the match program because it is free money in your retirement account.
Make sure to look on the Internal Revenue Service website before you put in contributions so that you do not exceed the maximum contribution limit every year. This could lead to hefty penalties on the amount that you went over.
Some of the most popular retirement accounts include IRAs, Roth IRAs, and 401(k) plans. You can also have multiple accounts to maximize your retirement and tax savings overall.
Buy Something on Your Wish List
Even though it is not a part of your financial plan, you should still treat yourself every now and then. With the extra cash, consider buying something that you have been eyeing for a while.
Maybe it is out of your regular budget range or you have not been able to justify spending the amount of money that it costs. However, with excess cash, you can remove that guilt and spend a bit of money on something that you will love.
Try Other Types of Investments
If you have maxed out your retirement and emergency savings, then you should definitely look at other investment options. Any amount that you invest will start to accumulate compounding interest, which can benefit you in the future.
For instance, digital currency has been on the rise in the past decade, especially with technology such as blockchain. You can also purchase NFTs, or non-fungible tokens, like this one from Bored Apes.
Know What to Do With Extra Money
If you have bonus funds, you should not have to feel pressured to spend them right away. With this guide, you can make a financial plan and use your extra cash wisely.
Want more advice and inspiration for your financial plan? Check out our site for tips and tricks to manage your money effectively.