Earning some supplemental income is a great feeling. This money – which you don’t normally have – can make a huge difference in your life if you choose to spend it in the right way. But don’t go straight to the mall just yet. If you’re wondering how to spend extra income in a responsible way that can benefit your future, we’ve compiled the perfect list for you to consider.
1. Accelerate Loan Payoff
Whether you have an auto loan, home loan, personal loan or student loan, using your supplemental income to pay them off can help you save money down the line, especially if you have a high-interest rate. The faster you pay down your loans, the less you will pay in interest over time. If you contribute just a little extra money every month towards your loans, you can shave months or years off your loan repayment.
2. Save for Retirement
Use your supplemental income to contribute more to your retirement plan, especially if your employer matches your contribution. This is an immediate return on investment. If your employer doesn’t offer a retirement plan, it’s a smart idea to start an individual retirement account. Investing in your retirement is always a good idea. You don’t want to reach retirement age without having the funds to actually retire comfortably.
3. Create or Contribute to an Emergency Fund
Do you have a fund set aside in case of an emergency? If you don’t, start one! You might become ill, lose your job or get into a car accident – it’s always a good idea to be prepared. Save your supplemental income until you have money to last you at least three to six months. If something happens and you can’t work, that money will keep you afloat while you figure out your next move.
4. Contribute to a College Fund
It’s no secret that a college education can cost a lot. If you have children, do them a huge favor by allocating your supplemental income towards a college fund or 529 plan. Imagine giving your child the ability to graduate college debt-free. When you invest the money in a 529 plan, the small amount can grow into thousands of dollars years later.
5. Pay Off Credit Card Debt
If you have a mountain of credit card debt looming over your head, do yourself and your credit score a favor by using your supplemental income to pay off your credit card debt. Start by paying off the credit card with the highest interest rate and then work towards cards with a lower interest rate. Once you pay off your credit card debt, keep one or two credit cards with a low-interest rate and good rewards program and make an effort to pay them off every month.
6. Invest in Home Improvement Projects
If you’re a homeowner, you might wonder how to spend extra income on your home. Investing your supplemental income on home improvement projects can help you build equity in your home and customize it to your liking. Consider remodeling your kitchen or master bathroom, or making your home more energy-efficient. It’s also smart to enhance your home’s exterior to increase its curb appeal should you find the need to sell down the line.
7. Maintain Your Car
If you dread visiting the mechanic because they remind you of scheduled maintenance for your vehicle, consider setting aside your supplemental income for scheduled car maintenance. This will help you take care of your car without the high stress of coming up with the cash you need for the different maintenance services.
8. Save for a Down Payment on a House
Buying a home is a great investment in your future, so start putting your supplemental income towards a down payment on a house. If you’re a first-time buyer, you need to save a minimum of 3.5% as a down payment on a house, although this will require you to purchase mortgage insurance. The more money you save towards a down payment for a home, the less your monthly mortgage payment will be. Consider visiting a lender to find out how much money you should save and what you can afford on your income.
9. Invest
If you’re wondering how to spend extra income and actually make money, consider investing. Whether you want to become the silent owner of a business or get involved in the stock market, investing your supplemental income is the perfect way to get your feet wet. Since your extra income is cash you normally don’t have, you won’t be risking as much if you lose it. Before you start buying random stocks, though, it’s wise to speak with a professional and determine which investments will provide the biggest returns for you.
10. Buy a Freezer
If you use your supplemental income to purchase a freezer, you can store months of food at a time. Start buying perishables in bulk and then using your large freezer to keep produce and meat fresh for months to come, especially if you purchase items during the months when they’re cheaply available. This will save you money in the long run, making your purchase a complete return on investment.
11. Purchase a Fuel-Efficient Car
If you’ve wanted to upgrade your car to something that’s a bit more fuel-efficient or perhaps electric to save money on gas, save your supplemental income to use as a down payment for a new car – or buy the car outright. Investing in a more fuel-efficient or an electric car can save you thousands of dollars in gas.
12. Buy Solar Panels
If you own a home and live in a sunny area, save yourself thousands in electricity bills by using your supplemental income to pay for solar panels. Not only do solar panels increase the value of your home, but they help you save money on utilities – if you own an electric car, you’re basically driving around for free. There are also other solar products out there that can benefit your home, like solar outdoor lights, swimming pool water heaters and much more.
13. Invest in Your Health
If you don’t have the best health insurance because you can’t afford the higher premiums, or you’ve been putting off a certain procedure for a while, use your supplemental income to invest in your health. You can use your extra income to upgrade your health insurance plan or use it for co-pays and prescriptions. Having the funds to pay for healthcare when you need it can help you visit the doctor stress-free.
By the way, investing in your health isn’t just limited to healthcare. Use your supplemental income to join a gym, hire a personal trainer, work with a nutritionist, go to therapy or even see a massage therapist or acupuncturist.
14. Invest in Your Pet’s Health
Owning a pet isn’t cheap, especially if they run into health problems down the line. If you’re a pet owner, save your supplemental income for your dog’s next teeth cleaning or your cat’s next exam. Even if your pet doesn’t have health issues right now, the last thing you want to worry about is how you’re going to pay for treatment.
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