4 Smart Ways To Make The Best Of Surplus Cash

By | April 18, 2019

Wondering how to put extra cash to good use? We’re here to help you use it wisely and gain momentum with your finances.

Smart Ways To Make The Best Of Surplus CashBefore beginning, let’s talk about what we mean by surplus cash. It is the sum of money that’s left with you after covering your daily expenses. The way in which you handle your surplus money and where you decide to park it for steady returns is just as crucial as the management of your finances.

If you’re left with extra cash after paying for your fixed expenses such as rent, utility bills, and insurance premiums, we’ve listed a couple of things you can do with it.

Pay off your existing debts

The idea is to use any surplus cash in clearing off debt so that it doesn’t turn into a long-term obligation. High-interest debt is one of the major obstacles to growing your wealth.

But here’s the best part. If you’ve got extra cash to spare at the end of the month, use it to clear off debt. This is the perfect time to pay off your Credit Card outstanding dues. Clearing off Personal Loan balances is also a great idea! This way, you’ll save on the interest and also emerge debt-free faster.

Now, what do you do if you’ve got multiple debts to sort? We’ve got you covered. Here are two methods that you can try.

  • Snowball Method

Pay your smallest debt first then move on to the immediately bigger one. Gradually, as you begin to save more, scale up to the sizable debts.

  • Avalanche Method

Unlike the Snowball method, here you pay off your highest-interest debt first. Once sorted, you’ll end up paying less interest than you would otherwise. This is also a great way to cut down your debt really fast!

Additional Reading: Handling Debts 101: Ways To Become Debt-Free

Save for a contingency fund

Ideally, you must stash at least six months’ worth of income as an emergency fund. Even if you aren’t able to save up that much, don’t be disheartened as even a small emergency fund is better than not having one. Saving now will prove quite useful in times when you suddenly find yourself distressed for cash.

With surplus cash in hand, you can set up an emergency account. Even if it’s not a huge amount, you’ll still be able to handle minor financial commitments. For instance, you could put this to good use if your car breaks down, or you need to carry out household repairs, or if any medical emergency occurs.

If you’re still unsure about setting up an emergency fund, consider this scenario. Try to evaluate how long your money will last in the event that you are without a job for a few months due to a medical emergency.

Eventually, with no contingency fund and with dwindling earnings, you might even have to borrow credit to stay out of financial crunches.

On the other hand, with a substantial emergency fund, you can easily allow yourself some time to figure things out as you look for employment.

Additional Reading: The Importance Of Having An Emergency Fund In Place

Invest the sum against future requirements

The purpose of investing the extra money you have is to allow it to grow into a larger sum. However, before you pick any of the investment vehicles such as Mutual Funds, Fixed Deposits, stocks, or bonds, be sure to access the risk and yield involved in the investment product.

Before you begin, chalk out your financial goals. This will give you a clear idea of whether you should go for short-, mid- or long-term investments. The choice depends on the time frame in which you want to remain invested in the schemes to get an adequate return for your investment.

Additional Reading: Optimising Your Investments 101

If the surplus is quite a hefty sum, you can invest in different investment channels instead of putting all your eggs into one basket. Diversify your investments across multiple channels. Why you ask? Well, this way if you suffer a loss in one scheme, it can be compensated by the returns from another.

Additional Reading: Investments That Will Help You Save On Tax

Set up savings funds for financial goals

Just as saving for an emergency is crucial, having a good time is a must. Often, we tend to get too critical about our finances and overlook the entire journey of achieving other goals.

Besides financial goals of setting up a budget, emergency fund, and investment apparatus are in place, indulging in a holiday or splurging a little once in a while is important. This offers a much-needed respite from everyday life.

In your struggle to save money, it’s not surprising that you might have given up on an opportunity to spend on yourself. With a little extra cash in hand, it’s time to pamper yourself. Head to your favourite travel spot, renovate your home, or just enjoy a getaway with friends, the choice is yours.

Another way of spending the excess cash wisely is to save it for small financial goals. Need a new bookshelf? Want to get your own bicycle?  This extra bit of cash can come in handy for such small purchases so that you don’t have to dip into your savings.

Each time you have surplus cash in hand, set up a separate savings bucket. Having multiple such savings funds is quite a smart move as these can cushion the blow in times when you’re strapped for cash.

Additional Reading: Top 6 Savings Bank Accounts Of 2019

Apart from these time-tested ways to make your money work harder and get the most bang for your buck, there are several other ways you could put your money to good use. For instance, if you’ve got a side hustle or a small business on the side, you could invest the sum as capital for upgrading.

If you’re fiscally savvy and wish to park your cash in a financial vehicle with significant returns, consider investing in a Fixed Deposit. If you’re interested in other financial products, we’ve got plenty for you. Check us out!

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