More than 70% of Americans feel their financial situation could be improved. They feel more vulnerable than they’d like and would like to have more money in their accounts. And, honestly, who can’t relate? 

Most of us would enjoy an added bonus in our budgets and could think of several ways to spend the cash. But if you happen to get extra cash, you want to make sure to use it in a financially responsible way. Not spending out of control, instead of using it to better your overall situation for years to come. 

It’s hard to know the best ways to use surplus cash but we’ve compiled a list of seven great options that you can feel good about. 

1. Lower Debt

One of the biggest downfalls for people in their financial health and stability is debt. It’s so easy to borrow money to make a purchase now thinking you’ll be able to pay it off quick and move forward. But oftentimes people get stuck in a trap of debt because of interest rates and other added fees. 

Debt comes in so many forms that it’s almost inevitable in today’s society. You can go into debt by going to college, buying a car or home, needing medical help, or using a credit card. 

It’s easy and can add up quickly. And it also has a serious negative effect on your financial future. 

The first major repercussion is that too high of a debt amount can lower your credit score. This makes it harder for you to get financing in the future for other purchases, even if you can technically afford those. 

It also continually costs you more money to carry over that debt for a long period of time. The interest adds up until you end up paying way more than you originally borrowed. 

Using your cash surplus to make any progress in paying off debts is a great way to improve your financial future. 

2. Invest in Real Estate

Once you have a cash flow surplus, it’s likely that you want that to continue. No one is going to be disappointed if at the end of every month there’s a little bit more in their bank account. The trick is to find ways to use that cash flow to your advantage. 

A great way to do that is to invest in real estate, which includes property, your personal home, rental properties, or commercial buildings. If you can secure a piece of real estate with your extra funds, you now have a safety net to fall back on. You can sell that if you find yourself in a pinch or you can wait until its value goes up and sell it for a profit whenever you’re ready. 

Real estate isn’t a sure bet and you should definitely consult an expert when trying to make these kinds of decisions. But it can be a great opportunity with benefits for years to come. 

3. Add to Retirement Funds

Even if you are doing great right now with your financial situation and have all of your needs met, you still may not be secure enough. You have to think about the future, especially for your retirement plans. 

The truth of the matter is, if you want to be able to continue to live the way you have been, you have to have a retirement fund. 

There are several different types of retirement funds you can choose from based on your specific situation and desired outcome. The most common are 401k, IRAs, and SEPs. A 401k is done through your employer, the money is automatically taken out of your paycheck and sometimes matched by the company. An IRA is a fund you manage completely on your own and is often used to supplement 401ks. SEPs is more similar to a 401k because it’s through your employer but has fewer restrictions. 

It’s important to understand your options and pick the one that fits best for you. Retirement funds are built piece by piece over time, so any extra you can add-in will be a great benefit to you in the long run. 

4. Make Smart Purchases

While it would be nice to never have to spend your money and to be able to save every extra penny. But that’s not realistic. There are purchases we each need (and let’s face it, want to in some cases) to make to live a comfortable life. 

The best way to make these larger purchases and not regret them soon after is to take your time. 

Snap decisions and impulse purchases often lead to spending outside of your means (and going into more debt). Instead, if you’re thinking about purchasing an item do all of the research you can. Look for the benefits and the disadvantages, other brands, and read reviews from actual customers. 

Then when you have a cash surplus, you can confidently use it to make a larger purchase. You won’t get that sick feeling of knowing you shouldn’t have bought it because you spent the time to make an educated decision and waited until you had the money in hand. 

5. Buy Stocks or Bonds

Another way to stretch your cash flow surplus as far as possible is to invest it in the stock market. If done right, this can literally make you more money down the road. 

Investing in the stock market or with bonds is very similar to purchasing real estate. You purchase at a certain price with the hope that when you’re ready to sell it later on it will have increased in value and you’ll make a profit. 

But with this type of investing there’s no tangible item for you to possess. Instead, you own portions of a company or product. 

The trickiest part of investing wisely is to choosing the right companies to buy. This is where working with a professional comes in handy again. They’re trained in all of the nuances of the stock market and follow it very close. A professional investor can help take a look at your specific situation and find you the right fit to make the most money. 

6. Increase Savings 

A very obvious option for handling surplus cash is to put it into your savings account. This is a huge benefit because it keeps you from spending it. We’ve all been there where we think we’re saving the money in our checking account until we make a decision only to realize we’ve spent it bit by bit. 

Adding money directly into your savings account takes all of the guesswork out of the situation and keeps it safe. It also doesn’t mean you can’t change your mind and decide to use it elsewhere later. That means it’s there when you need it. 

Everyone has a different philosophy and way of handling savings accounts, so it’s helpful to take a critical look at the plan you have to see if it’s working well for you. Some prefer to have one account for all savings needs. While others opt to separate out accounts based on the intended use of the money. 

Whatever your savings plan is, it’s always a good idea to build your stockpile in case of an emergency or to try to reach a financial goal sooner. 

7. Create a Plan 

The most important thing you do is to make sure your cash surplus doesn’t become a cash deficit. It’s easy to see that you have extra money and think you can spend it however you want until it runs out. And then you’re in trouble because you spent too much. 

This is why it’s critical to develop a plan for any surplus cash. Preferably, before you even receive it. 

Making a solid plan beforehand takes all of the guesswork and emotion out of the situation. When the money is hypothetical it’s easier to make rational and responsible decisions about it. When you actually see it in your bank account it’s hard not to want to treat yourself and buy whatever you want. 

In the end, making smart financial decisions allows you to better live the life you want and enjoy it. YOu’ll be able to afford more of those want items when your needs are taken care of. 

Best Ways to Use Your Surplus Cash

Any surplus cash is a luxury these days and can be difficult to spend in a responsible way. It’s much easier to purchase that wanted item instead of saving it for a rainy day. 

But using your money wisely is always the better option. You’ll feel more secure and prepared for the future. You’ll have the ability to take care of yourself in an emergency or if your circumstances change. And you can feel confident that you’re prepared to handle any major purchases that you do decide to make. 

Having a solid financial foundation makes all of the difference in today’s world and will help you be able to enjoy life more. If you’re interested in learning more about smart finances, check out our other articles today!