If you've ever found yourself with a sudden infusion of extra cash, you've probably imagined all the ways you could spend it. It's natural to want to splurge. But deciding what to do with extra cash shouldn't just be about immediate fun if you can help it.
By now, you've probably either received your tax refund (if you're getting one this year), or you're waiting for it to arrive. Maybe you get paid biweekly and happen to get a third paycheck in a month once or twice a year. Or maybe you just got lucky and won the lottery.
But before you give into the temptation to withdraw all of the cash and go on a weekend spending spree, consider some of the advice from financial experts who not only share strategic things you can do with the money, but also easy ways to grow the cash. Here are five ways you can do that.
1. Pay off debt
Before brainstorming a list of vacations or fun items to spend your extra cash on, certified financial analyst Doug Carey recommended that people consider using that money to pay off high-interest debt, whether on a credit card balance or from a personal loan.
"By reducing your debt, you'll save money on interest charges and improve your credit score, which can help you qualify for better rates on loans in the future," he said.
2. Invest in your retirement account
If your goal is to grow your money over a long period of time, Carey suggested investing it in a retirement account, such as a 401(k), IRA, or Roth IRA.
Carey shared that the money you put in today will grow overtime with compound interest.
Plus, he said that these accounts offer a range of tax benefits, where some contributions are tax-deductible or tax-deferred.
3. Fund your emergency savings account
One of the ways you can save money in the future is to make sure your emergency account is fully funded now.
Certified financial planner Hanna Horvath said that if you dipped into your emergency fund this year, putting your extra cash back into that account is a good way of replenishing it for two main reasons.
First, it can help you stay out of debt in the future. And second, if you put the money in a high-yield savings account, it can earn interest.
4. Let the money earn interest
It might take you some time to decide what to do with extra cash. Either way, that money can still grow if you're strategic about where you put it. Certified financial planner Jim Eutsler shared that you can park the cash in a high interest rate environment, such as a high-yield savings account or a CD.
With a CD, you can plan out how long you want to leave the money alone and just wait for it to earn interest at a fixed rate.
5. Invest in yourself
If you're looking to spend a portion of your money on something personal, Carey recommended finding ways to use the money so you can invest in yourself.
"This could mean enrolling in a course or program to learn a new skill, investing in your health by joining a gym or hiring a personal trainer, or even starting your own business," he said.
While it might not seem like a quick return on your investment, Carey said that the future payoff could be substantial.
"By investing in yourself, you can potentially increase your earnings potential and improve your quality of life," he said.
Jen Glantzis the founder ofBridesmaid for Hire, a3x author, the host ofYou're Not Getting Any Younger podcast, and the creator of the Pick-Me-Up andOdd Jobs newsletter. Follow her adventures on instagram: @jenglantz.
