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Make the Most of Extra Income

Make the most of extra income from a raise, bonus or tax refund by creating a spending plan for that extra money, before it hits your account.

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Make the most of extra income by creating a spending plan, before it hits your account.

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 pondering, "What do I do with this extra cash?" If this rings true for you, check out some of these tips to make the most of your hard earned money.

Try This

  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! Align your money with your priorities in life - maybe that means a combination of saving and splurging, or maybe you pay down a debt you've been working to get rid of. The point is, you decide how to use that money to meet your goals 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, interest rates, and prioritize a pay down strategy, either focusing on your highest interest rate first 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.
    Been wanting to start a side gig or pursue a new business opportunity? Invest in your future - upgrade your laptop, take that accelerated skill course, or get new headshots. Put some money into your development in 2018. Plan your work and work your plan.

Enjoy your hard earned money by making a plan you feel good about. While most prudent savers balance spending and saving, remember it is all about putting your money towards what's most important to you.

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Financial Friday is a series dedicated to financial education and actionable tips meant to inspire progress toward your financial well-being. Subscribe to Next Door® to get Financial Friday articles delivered to your inbox.

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