When you’re deep in the trenches of trying to get your finances on solid ground, it’s hard to imagine ever having “extra” money. But there can come a time when you’ve paid all your bills and have money leftover.
It’s an amazing feeling to know that you have more than enough. But you don’t want to let all your hard work go to waste by not maximizing the extra funds. That means you may need ideas for how to best use that money.
So, let's dive into some ideas for how to use money left over after expenses!
1. Use money leftover to save for emergencies
It almost goes without saying (but I’ll say it anyway) that having money for emergencies should be a top priority. And many may already have plenty stashed away for those unplanned, unexpected costs that happen.
If you find yourself sitting on left over money after each paycheck arrives, the first thing to do is check the status of your emergency fund.
Types of emergencies to plan for
Emergencies aren’t things like a surprise sale but things that happen unexpectedly. You might experience a medical emergency that requires some out-of-pocket payment, or you have to have a repair person come in when your hot water heater explodes all over the basement.
A sudden plane ticket home to see family for a funeral, a surgery to save your beloved pet’s life, a new vehicle after yours gets totaled in an accident. These are all potential emergencies to prepare for. You don’t know when these disasters will strike, but you do have to expect they’ll happen eventually.
How much to have in an emergency fund
Your emergency fund can go through a few stages, so check into which level yours is at currently. Consider whether you have enough set aside for emergencies when you have money leftover from your paycheck.
Starter emergency fund of $1,000
Many financial experts recommend a starter emergency fund of $1,000. This isn’t enough to cover a very expensive emergency, but it’s a decent amount that can float you through until your next paycheck.
If you have money leftover after using your paycheck to cover expenses, the first thing to do is make sure you have at least a small rainy day fund like $500 or $1,000.
3-6 month emergency fund
Next on the list of ideas for money left over after expenses is to continue to bulk up your emergency cash. After reaching the milestone of $1,000 to cover small, one-time emergencies, you’ll want to gradually increase your savings to build a larger emergency fund.
Financial experts often recommend an emergency fund that equals between three and six months’ worth of expenses. This full emergency fund is intended to protect you from extreme hardship in case you get fired or downsized from your job. That money is enough to pay only the essential expenses, like rent/mortgage, food, and transportation.
You definitely want a buffer between your family and life’s trials. It’s not always possible to prevent sudden expenses, but you can work hard to save enough now, while you have left over money from your paycheck to do so.
More than 6 months’ expenses
Now, there are a few instances where saving above and beyond the six-month amount for emergencies is wise. If you’re a freelancer who earns an irregular income, for example, you may want to save up to 9 months or even a year’s worth of expenses.
You can also go with your gut on this one. If you have circumstances that make you anxious about having only a 6-month emergency stash, then put aside some of that left over money each month until you have a more satisfying amount.
Perhaps your job is very unique and could take a long time to replace, or if both you and your spouse have variable income, a larger emergency fund would be a great idea.
2. Use money leftover to pay off debt
Next up, once you’ve established an awesome emergency fund, you should check on your debt situation. Do you have credit card debt, student loans, personal loans, or any other type of debt?
One of the best uses of left over money after paying the bills is to pay down debt. You might do this while simultaneously saving for emergencies, to tackle both at once.
Debt avalanche: pay high-interest debt first
When crafting your debt reduction strategy, there are a few opinions out there. The most mathematically logical one is to pay minimum amounts on each loan, then throw any extra money at the debt with the highest interest. That’s called the debt avalanche.
Loans with high-interest rates will result in you paying more over time, so it makes sense by the numbers to pay those off first. Eliminating high-interest debt, especially credit card debt, is a great way to allocate your left over money each month.
Debt snowball: pay off smallest debts first
When deciding how to tackle your debts, you should pay minimum amounts, of course. But if you have money leftover from your paycheck, you’re probably already doing that. So now you can make a decision: debt avalanche vs. snowball.
Using the debt snowball method means that you focus on minimums and then knock out the smallest debt first. You ignore the interest rates and just look at the dollar amount owed. If you have a $500 debt, a $2,500 debt, and a $30,000 debt, you’d pay the $500 one first, no matter what the interest rate.
Whatever method you choose, or if you craft your own debt payoff plan, the key is just to get rid of debt so you can be free to pursue other things. So, use that money left over after expenses to pay off debt!
3. Invest money leftover for retirement
Once you’ve made sure you’re set for emergencies and your debt is gone (or you’re on your way), think about retirement. When you’ve got money leftover after expenses, don’t just spend it all on handbags or vacations. Consider your future self and plan ahead for her.
Retirement isn’t as far off as you might think! The earlier in life you start building up retirement savings, the more years your money has to grow. Even if you’re self-employed, you have retirement savings options.
Start a retirement account with left over money
Step number one in retirement planning is to simply open up a retirement account. If you’re a total newbie, don’t sweat it! You can open up a 401(k) or IRA to begin investing for retirement, and if not, an IRA is a great option.
My biggest regret from when I started my first post-college job is that I didn’t open a retirement account immediately. I wasted about five years, during which my money could have been growing instead of sitting in a checking account. So don’t make my mistake if you’ve got left over money to invest!
Max out your 401(k)
Assuming that your employer provides a 401(k), 403(b), or similar retirement account, a great use of extra funds is to max it out. If you’re already contributing, try to increase the percentage of your income contributed.
The 401(k) maximum contribution is $23,000 in 2024, according to the IRS. So if you’re putting less than that and you make enough at your job, increasing your contributions is a fantastic idea.
Obviously, the more you invest now will result in more money available later. Another plan for your left over money is to contribute at least enough to get a company 401(k) match, if available.
Some employers match contributions you make to your 401(k) account, essentially giving you free money. If you’re not taking advantage of a 3%, 4%, or other match, you’re leaving money on the table!
Open an IRA or Roth IRA
While not everyone is eligible to open a 401(k), the IRA (Individual Retirement Account) is a tax-advantaged retirement account for everyone. If you have money leftover to invest, an IRA or Roth IRA are wonderful tools to use.
You can open a traditional IRA, which means you may be able to deduct contributions from your taxes that year. Or try a Roth IRA, which can enable you to set money aside and avoid paying taxes on the funds when you eventually retire and withdraw them.
IRAs and Roth IRAs can be alternatives to employer-sponsored plans, or they can be additions to 401(k)s, 403(b)s, and 457(b)s. All of these resources offer different benefits to the saver, and they help you prepare for your golden years.
Begin investing in real estate
Now, not everyone is up for this one, but real estate is another avenue for retirement investing. If you have enough money left over after expenses and you’ve exhausted your other retirement savings plans, you may want to add real estate into the mix.
Real estate investing helps you diversify, giving you a tangible asset to own that should increase in value over the years. If you buy a rental property and rent it out, you can eventually earn semi-passive income from it.
There are some passive real estate investments that provide income without as much up-front effort and money (investing in REITs, for example).
However, be sure to do your research and talk to experts who have invested in this way before diving in. There are risks in the real estate market, after all.
4. Use money leftover for your other financial goals
Having money left over after expenses can mean a lot of choices, and it’s important to consider other big financial goals.
These won’t all apply to you but think about these ideas and others that you might have in your future. Some of your excess funds could go towards these goals.
Fund children’s college
Any parent knows that saving for your child’s college is a major undertaking. And while we can’t predict exactly how education will look years from now, we can save something for our kids’ college.
Custodial accounts and 529 plans are useful savings vehicles parents can use to help prepare for their kids’ future. Think about your timeline (how long until your child will go to college) and how much you’d like to contribute. Some accounts are strictly for higher education, while others have a bit more flexibility.
Pay off your house early with left over money
Are you someone who would love the feeling of owning your home free and clear? You may use left over money from your paycheck to pay off your house earlier than required. Lots of people swear by the peace of mind they gain from having a paid-for house.
Homebuyers usually take out a mortgage, perhaps for a 15-year or 30-year term. This is understandable since a house is such a huge expense. But what if you could pay off your entire mortgage in just 10 years? Or go down from a 30-year mortgage to a 15-year mortgage?
If that idea appeals to you and doesn’t interfere too much with other financial necessities and goals, then paying off your house is a great idea. It may not give you as great of returns as the stock market. However, for many people, owning their own home is worth it.
Launch your own business
What's one of the most productive ways to use money left over after expenses? Start your own business! Perhaps you’re a budding entrepreneur, and you’ve got an incredible idea for a business.
You may set aside your left over money for your new business. Use those funds to rent office space, purchase equipment, or handle other new-business costs while you get it off the ground.
Giving to causes you care about can bring you great joy and fulfillment. So why not think about how your left over money can be used to help others?
I would bet that as soon as you saw the phrase “give generously,” your mind instantly came up with a half-dozen ideas of nonprofits, causes, or individuals you’d love to support. So why not dream big and let your growing wealth improve the lives of others?
Travel more with money leftover
Perhaps, like me, travel is pretty high on your list of priorities. If you have money leftover, you’d put every last cent into your travel fund if you could. So it’s definitely a great idea to use some of that extra cash to save for those trips you’ve been waiting to take.
Estimate how much your dream trip might cost. Then start saving $50 or $100 or more every month in a special travel account. You can watch that balance go up and get excited as you begin planning!
5. Put money leftover into having fun
Now, I know we already discussed travel, which for many of us is the ultimate fun builder. But let’s talk about ways to use left over money to simply have fun. As long as you’re handling the key necessary expenses and being responsible, your money is also a tool for enjoyment!
Increase your fun money budget
Many individuals and couples prepare their budget with a line-item for “fun.” You can plan ahead to use some of your left over money for whatever you think is fun. This could be something that no one else cares about in your family, but you think it’s awesome, so it’s a great use of your money.
Explore new interests
Often we get so busy as employees, entrepreneurs, moms, friends, spouses, and many other roles that we forget to explore our interests. If you have money leftover, what better way to use it than to learn a new skill or try something different?
Perhaps you’ve been waiting on taking that art class, attending a conference, or going on a family RV trip because of money. If you’re now in a comfortable place financially, this could be the perfect opportunity to spend a bit on whatever those hobbies or interests are.
Only you know what lights you up, but it’s healthy to spend a little on things that really matter to you.
Use left over money to splurge without guilt
Fun money shouldn’t cause guilt. Everyone needs a bit of release and relaxation. Plus, you should not have to explain every little purchase or expense, to yourself or anyone else. When was the last time you spent money on something that was a splurge and didn’t bat an eyelash?
No one needs to splurge 24/7, but that’s what makes splurges so special. You don’t spend money on these things all the time, so they make your day unique.
Think of small or big splurges that would really make you feel like a million bucks. This might be a new nail polish or a getaway with your friends. Whatever it is, plan for it and don’t feel guilty.
Put money leftover to good use and have fun too!
When there’s left over money in your budget, there are plenty of great ways to put it to use. First, you probably want to focus on urgent matters like your emergency fund and debt, but remember to make room for investments and fun as well.