Here are some ideas on how to create a spending plan with additional income
Get a little something extra in your paycheck recently? Whether it's extra income from an annual bonus at work, a raise, or money from a tax return, getting this kind of extra money doesn't happen all the time, which makes it all the more tempting to spend quickly.
You've probably heard of the things you should do with that extra cash in hand, and you definitely know the things you want to do with it, which might leave you wondering what to do with the extra cash. Here are some tips to help you decide what to do with the extra money.
1. Start by making a spending plan before you get the money
Whether you want to spend it all, save it all or something in between, make sure it's on purpose. Having a plan in place for the money, before it's in your account, can help you resist the urge to spend it before you have it, or overspend. Money can disappear fast, especially when you're not keeping track of where and when it's being spent.
2. Does your plan align with your priorities?
Making decisions about your money should feel good! You should align your money with your priorities. Maybe that means a combination of saving and splurging, or maybe you pay down a debt. The point is, you decide how to use that money to meet your goals and make progress in the direction you've determined.
3. Build up savings
Get a jump start on saving and planning for your future. Here are just a few options to think about when it comes to your savings plan:
- First, consider these different savings buckets.
- Beef up your emergency fund to help protect your budget from the unexpected, like car or home repair. Calculate how much you need here.
- Consider options for saving for your retirement through your employer (typically a 401k) or on your own (an IRA). Already saving? Think about bumping up your contributions.
- Put extra money in your Health Savings Account (HSA) if you are anticipating any upcoming medical bills.
4. Focus on your debt repayment
Make a list of all your debts, their interest rates and the remaining balance. Then, prioritize your payoff strategy, either focusing on your highest interest rate or lowest balance first. When you pay off one debt, roll the amount you were paying on it to the next one.
5. Invest in yourself
Interested in starting a side gig or pursuing a new business opportunity? You can invest in your future by upgrading your laptop, taking that accelerated skill course or getting new headshots.
Enjoy your hard earned money by making a plan you feel good about. While most prudent savers balance spending and saving, remember it's all about putting your money towards what's most important to you.