If you've made responsible financial decisions over the years, it's likely that you have accumulated some excess savings. But once you meet your initial savings goals, where should you direct the cash that's left over? If you're not sure what to do with your extra cash, take a look at these smart ways to put your money to good use:
Prepare for the unexpected
First, it's important to set aside enough money to cover unexpected emergencies and expenses. Use your extra cash to pad your emergency fund with enough savings to cover at least three to six months of living expenses, which includes housing, utilities, food and other essential payments. Keeping backup cash in an easily accessible account creates peace of mind and will prevent the need to withdraw from your retirement account or sell long-term investments before you're ready.
Set savings priorities
Once you've built a substantial emergency fund, you can start thinking about using your excess cash to fund other savings goals. Maybe you want to save up for a vacation property or help fund a grandchild's college education. Knowing which long-term goals matter most to you will help you determine your funding priorities.
If you're sitting on a healthy amount of excess cash, you might be missing out on valuable opportunities to build wealth. Put your extra savings to work for you by investing in a low-risk savings vehicle such as a money market account, share certificate or Individual Retirement Account (IRA). These options tend to offer higher interest rates over traditional savings accounts, allowing you to grow your money as you work toward building long-term wealth.
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