4 Sources of Extra Cash You Can Maximize
by Maurie Backman | Updated July 17, 2021 - First published on March 28, 2020
It pays to take advantage of windfalls.
If you're like most people with a job, you rely on your paycheck to cover your bills. Maybe that paycheck arrives every week, or biweekly. Or maybe it comes in once a month. But chances are, your paycheck from work isn't the only income you're privy to.
You probably come into extra money on occasion throughout the year, and if that's the case, it pays to make the most of it. Here are a few sources of added cash you should really capitalize on.
1. Your tax refund
Most people who file a tax return wind up getting money back from the IRS. Last year, the average tax refund totaled $2,781, which is certainly not a small amount of money. (To be clear, that was money received in 2019, but applicable to 2018 tax returns.) If you get a similar lump sum from the IRS this year, you can use that money to address your most pressing financial goals.
2. Cash gifts
Maybe you have a doting grandmother who likes to write you a large check for your birthday, or maybe your parents hand you a wad of cash during the holidays. Though that money may be intended to serve as a gift, the reality is that you may want to think twice before spending it on apparel, electronics, or other such luxuries.
3. A bonus at work
Workplace bonuses are not guaranteed. In some cases, they're based on performance. In other situations, they're based on how profitable your employer is. Either way, don't rush to spend that cash on leisure or a vacation -- you never know if you'll have a repeat the following year.
4. Dividend checks
If you have dividend stocks in an investment account, you may be privy to quarterly payments that can serve as a nice income boost. That offers you a prime opportunity to boost your savings or reinvest those dividends for added investment growth.
What can extra money do for you?
Clearly, it pays to use your extra sources of income wisely. But what does that mean? If your savings account balance leaves much to be desired, your first priority should be to build an emergency fund -- one with enough money to cover at least three months of essential living expenses. Once you have that cushion in place, you can use your extra cash to:
- Pay off expensive credit card debt
- Chip away at nagging student loans
- Pay off a personal or home equity loan
- Save for a down payment on a home or vehicle
- Start building a nest egg for retirement
- Buy furniture or other necessities
- Invest in continuing education to further your career
- Purchase a new laptop or equipment that could help you get a side hustle off the ground
- Get yourself better insurance -- life, health, or otherwise
No matter what you do with that extra money, recognize that when you get a windfall, you have a real opportunity to change your financial picture for the better. And while blowing that cash may be instantly gratifying, in the long run, you'll be thankful for having gone the more responsible route.
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