When it comes to money management, the COVID-19 pandemic changed people’s habits and budgets in varying ways. From stimulus checks and expanded unemployment benefits to reduced commuting expenses, many people experienced some degree of shifting in how they accumulated, spent and saved money.
For those who’ve consistently found that they have extra money after taking care of their monthly expenses, figuring out what to do with the excess cash isn’t a one-size-fits-all approach.
However, there are some simple ways to manage your extra money for the short-and-long term.
Expand Your Emergency Savings
If the pandemic has taught us anything when it comes to money, it’s that financial situations can change quickly. Millions of Americans experienced some level of job loss due to the pandemic, while others had to scale back their work hours to help their kids with remote schooling, straining their budgets.
If you find yourself on the other end of the spectrum and have excess cash, using it to boost (or start) your emergency savings is an excellent option.
One easy way to get started is by opening a money market account. You’ll receive a debit card and online and mobile access, and if you link the money market to your checking account, you can quickly transfer funds between both accounts.
Invest in Your Retirement
If you are already contributing to a retirement account, great! Consider using your extra cash to increase your contribution. If you have a 401(k) through your employer and they match, try to get as close to or beyond the matching threshold to have free money from your employer invested into your retirement.
Other great retirement options include opening a Traditional IRA or Roth IRA, both of which have different sets of withdrawal rules and benefits, so talk to a financial advisor about your retirement goals and investing options, and to understand important steps for retirement planning.
Invest in Your Home
Throughout the past year, people have changed the way they use their homes. Whether working from home or discovering that they enjoy having a weekend oasis that doesn’t require travel, homeowners are discovering new and unique ways to reinvest in the property.
Have a home improvement project of your own in mind? Consider using your home’s equity to secure a home equity loan or home equity line of credit (HELOC) to fund some or all of the project. Then, use your excess cash to make the monthly payments, enabling you to complete your project without dipping into emergency or other savings accounts.
Save it For Taxes
If you find yourself owing money to Federal, State or Local governments each year, consider saving your excess money specifically for those payments. You may also be able to make changes to your withholdings on IRS.gov, depending on your preferences.
And with advance Child Tax Credits now providing millions of families with half of their annual credit with a monthly payment through the end of the year, you can manage these payments to best fit your tax situation, including stopping the advance payments if you want to claim the full credit on your 2021 tax return.
Using any of these simple steps, or some combination of all of them, you can use excess monthly cash to reinvest in your future, your home or save for expected or surprise expenses in the future.
Shari Kruzinski is Executive Vice President, Director of Retail Delivery at WSFS Bank. Her career spans more than 30 years in the banking industry and with WSFS. In her current position, Shari leads overall market strategy, client development and sales management for the Bank’s retail branch network and customer contact center.