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99 things to do with extra cash

99 things to do with extra cash

| August 17, 2018
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Prioritization is a big part of financial planning. We almost always have lots of needs, wants, and wishes but rarely enough to fund everything 100%.

A call from a soon to be new father got me to thinking; people could use some help prioritizing. He wanted to do something for the child that I said should be about #100 on his list of priorities. 

So for fun, I'll attempt to brainstorm here. Of course, your unique situation needs to be reviewed carefully. This is just a thought exercise for you if you find yourself with some extra dollars above your day-to-day needs. 

See some glaring omissions? I’m happy to update the list, please just let me know!

1. If you have a retirement plan at work, contribute enough to get the full match

If you are lucky enough to get a match at work, this is free money. Do everything you can to get this quasi-raise. Usually, it means you have to put in at least 6% to get 3% from your company, but it varies.

2. Pay down high-interest credit cards

This might be controversial, but I'd rather pay down 20% interest debt before putting money in an emergency fund at 2%. You can usually run up the credit cards again if you have an emergency and don’t have the cash. Pay highest interest rates first, and try to keep them paid off each month.

3. Build up an emergency fund

This is best done in a separate FDIC insured money market account. It will probably have a higher interest than your bank can offer (see bankrate.com for options) and should have less spending temptation. Getting it up to three months of expenses are great, more if you have potentially volatile income, big possible future needs, etc.

4. Buy low-cost term insurance, if you need some

This protects your family in case you depart unexpectedly. It’s the responsible thing to do, and plus Murphy’s Law says if you get it you probably won’t die. 😊

5. Max out your Health Savings Account and don’t spend it

This is the only type of financial account where you get TRIPLE tax advantages. A tax deduction for contributions, tax-free growth, and it's tax-free when you take it out for medical expenses. So take advantage of the tax treatment if you can, and fund your day to day medical expenses out of pocket while working without using this account. Instead, invest the account in stocks and bonds for long-term If you have a long life, you could win big with this strategy.  

6. Put more into your retirement account at work, up to the max when possible

If you are doing pretty well financially, then you are getting taxed a decent amount too. The tax deferral available through your company retirement plan is a terrific opportunity. The idea is you will be in a higher tax rate now than later when you are no longer working, so take the tax cut and go for some tax arbitrage.

7. Complete your estate plan with a real live “LAWYER”

Don’t cheap out with online forms; you might mess something up, and you won’t be around to fix it. A lot is a stake here, and you don’t have to pay a ton. Get it done!

8. Regular Roth, or “Backdoor” Roth IRA

Getting money into a Roth IRA is an outstanding The money will never be taxed no matter how much it grows, and it doesn't even have required distributions when you get older. Doing backdoor Roth’s is legal, but can get complicated. Make sure your CPA and/or advisor is in the loop.

9. Buy disability insurance

Like life insurance, disability helps protect your family if something bad happens. It's actually more likely that you become disabled during your career than meet a premature death. This isn't cheap, and you might have coverage through work. Beware, however; the work policies often fall short if you are disabled for a long time. See a disability specialist for more info.

10. Do a home/auto/umbrella/etc insurance review

This might actually save you money, but you might need more coverage too, depending on how things have changed. I like independent agents since they can shop different carriers for the best value for your particular needs.

11. Invest in technology to make your life better/save time

I've seen so many wealthy people with old and barely working computers. Yes, I know that not wasting money is how they got where they are. But at a certain point, a $400 computer is worth it. Technology has changed so much, that even relatively small expenses like a large iPad can make a meaningful impact. Not only in enjoyment but in giving you back time otherwise wasted waiting on old tech. Plus, you might love the enjoyment of music during the family dinner from Amazon's Alexa, etc.

12. Save for the kid's or grandkid's college

529 accounts are great for this, and the sooner you start, the Be sure to put this behind retirement, however. The kids can get a loan if needed; nobody will give you a loan for retirement. All growth is tax-free if used for qualified expenses, and now can be used for some K-12 expenses as well!

13. Start saving in an after-tax brokerage account with stocks and bonds

One of the greatest financial opportunities in retirement is to control your tax bracket. This is something you have limited flexibility around when you are working. But if you save outside of taxable accounts at work, you can get withdrawal from both buckets and control your income tax. For example, money pulled from regular retirement accounts is taxed at ordinary income rates, which are generally high. Money pulled from after-tax accounts only is taxed on the gains, and usually at long-term capital tax rates which are usually lower. So pull a little from the account that "hurts", from a tax perspective, only until you are starting to get into a higher bracket. Then, take the rest from the other account at low taxes. Rinse and repeat annually with check-ins with your CPA.

14. Take advantage of other savings options at work

Do you have an employee stock option plan, executive savings plan, or another perk option at work? Look hard when you are presented with these opportunities. They might move the needle on your goals if used properly.

15. Go back to school

This might be an option depending on where you are in your career; it might help to get an advanced degree or certification.

16. Go on a bucket list trip, make some memories!

Travel spending is hard for me, but those memories will last forever, and studies show you get way more mileage from experiences than ""

17. Pay down non-deductible auto loans

These usually aren't tax deductible, so paying them down will usually mean a zero risk savings of whatever you are paying in interest. Caution, just because it's paid off doesn’t mean to go shopping, though. Drive it until the wheels fall off in my opinion.

18. Make extra payments to your home equity line of credit

This gives you more flexibility than paying off your mortgage; you can often take funds out later with a home equity loan if needed, not so with a mortgage. Plus, the interest might not be deductible anymore. 

19. Pay down college loans

These rates are usually reasonably high, and may no longer be tax deductible.

20. Buy long-term care insurance

This is a likely lifetime commitment, if you do it, so get a quote and do the math if it's of interest to you.

21. Pay down or make extra principal payments on your mortgage

If you have a low rate mortgage that you can still receive tax deductions on, you might take the chance of doing better with other investments. This is a personal choice depending on your risk tolerance. Plus, there is the emotional benefit of getting rid of the debt. 

22. Help a loved one out

For example, I've seen people buy homes for their parents, and then get some reduced rent in return. It could help both parents and kids, if they were going to otherwise be paying the rent to a third party. There are a lot of variations to this, but be really careful about loaning money to family. For smaller amounts, just consider it a gift rather than expecting it back.

23. Give to charity

Just be careful. If you are counting on the deduction to help because it might not be there anymore. We have ideas to help. Let us or your CPA know if you want to brainstorm and make it benefit you along with the charity, as much as possible.  Remember, structuring giving in a way that helps you, also helps you give more to your charities. 

24. Buy a boat or vacation property

Consider some financial modeling and even a “cooling off period” before taking this step. It could derail other priorities like saving for your kid's college or push retirement out several years. Maybe try renting instead.

25. – 94. Okay I confess, I’m out of ideas at the moment but I’m surely missing many!

26. Speculate in the stock market

Reaching your goals is serious business, not a game or entertainment like some of the financial media would like you to believe. For every success story I've witnessed I've also seen millions of dollars squandered and dreams unnecessarily Diversification has been proven to be one of the only free lunches in investing, feast away at the grown-up table and improve your odds of success.

97. Fancy life insurance or annuities

If you are approached with a sales pitch, type into google "are such and such life insurance or annuities good." See a trusted financial FIDUCIARY for clarification. They can be good, but often only for the uber-wealthy. 

98. Buy things other people are buying like tulips in the 1600’s

I have no idea where these things will go, but it's an option! I’ve met people who still think their Beanie Babies are valuable.

99. Buy a lottery ticket

I suppose this is harmless entertainment, but I think it actually harms lower-income people, and for you it might trigger aspirational spending thoughts that are potentially harmful.

Thanks for taking a look!

Tom Gartner, MSAPM, CFP®

 

This article represents opinions of the authors and not those of their firm and are subject to change from time to time, and do not constitute a recommendation to purchase and sale any security nor to engage in any particular investment or legal strategy. The information contained here has been obtained from sources believed to be reliable but cannot be guaranteed for accuracy.

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