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Extra Cash? Managing Cash Surpluses!

A Cash Surplus

Don’t you just hate when you have a ton of extra cash lying around and you don’t know what to do with it? Like do I go to Italy or buy another boat? Am I right?

Skipping the cringe for a minute, while most people are living paycheck to paycheck there are times where we run into extra cash. Don’t believe me? I’m sure you’ve experienced an influx of cash because of one of these events:

  • Tax returns

  • Bonus payout at work

  • Financial gift

  • Lottery/scratch off wins

  • Gambling wins

  • Inheritance/life insurance policy payout from deceased family member

This is what I mean by extra cash. It’s not always life changing money. Most of us don’t have that kind of cash. But I believe it’s always best to have a plan before spending your extra cash.

With all that in mind… let’s talk about managing extra cash.

Managing Extra Cash

It is tempting to just buy a nice new pair of shoes or that 64’ flat screen TV with the extra cash you got from Uncle Sam. But doing that doesn’t help you financially in the long run and it certainly doesn’t help with any of your current financial goals. I will always recommend having a strategy when extra cash comes your way. Before you swipe your card, sit down and really think about the best use of the money.

For unexpected cash income I usually have a standard set of rules for myself. I always give 10% of it to my church as my tithe, if you’re not a Christian this obviously doesn’t apply to you. This is just a me thing because God blessed me with it, and I want to bless my community in response. After that I shoot to always keep another 10% to put into some form of savings or investments. 

The remaining 80% I sit down and review my financial situation. I usually go through my laundry list of things I know I could throw money at to feel better. I won’t bore you all with that, but it usually sounds a little something like this:

  • Are there debts I am aiming to pay down quickly?

  • Are there outstanding bills for medical work that I can pay off entirely?

  • Do I want to take a portion of it and splurge on something nice for myself or my family?

  • Do I have a trip I am saving for and want to set this aside for that?

Once I determine how I want to use my money, then I feel comfortable allocating it. If I decide to use it for debts and other bills I will pay those first and then use whatever remains for myself. This is all personal preference and up to you to decide what your priority is, but having a plan is always better than frivolous spending.

Pitfalls of Extra Cash

Depending on your situation, there may be times of the year you can expect to receive extra cash. If you’re younger and have family members who like to give money during holidays then you can expect extra change then. If you’re a common recipient of the federal and state tax returns, then of course you can expect to get that money back too. However, banking on the extra influx of cash when it’s not guaranteed can be a huge pitfall. Do not ever add expected cash inflows to your budget for the year. And do not use it to plan out debt financing strategies. 

Also, if you put off resolving debts or paying people back because you’re expecting extra cash you can fall into the same problem. You are never guaranteed extra income. Bonuses may not be paid, tax laws can change, and those scratch offs may not be a winner. Do not plan your life, expenses, or budgeting around extra cash. Act after the cash is received, not before.

My opinion here but spending the extra cash without a plan or strategy is another huge mistake. I call this frivolous spending and it can eat away at the additional income. Frivolous spending leaves you wondering how all your money disappeared so quickly and with nothing to show for it.

If you take anything away from this post, I hope it’s that you will plan out how to spend extra cash in the future.

Author’s note: This is a not-blog blog. There will be no long-winded introductions, no weird backstories from childhood memories, and absolutely no pointless paragraphs of text about things you’d rather have a “skip to the important stuff” button to bypass.

I hope my posts are helpful. I try to break these things down in a way that is easy to read and understand. I appreciate any feedback on how to improve, so feel free to leave a comment below. If you are simply enjoying the content, I’d love to hear about that as well!

Disclosure: I am not a licensed financial advisor. I have an accounting degree and am a business major with a certification in finance, but I am not a legal expert. These posts come from my personal experience, learning through trial and error, working in the banking industry for nearly a decade, and seeing the fruitfulness of this advice in my own life.

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