What to Do With Extra Money in Savings

Let's start with, CONGRATULATIONS! You have a budget. You’ve stuck to it and now you have a savings account that actually has money in it. This success deserves some serious recognition. You have been:

–Tracking your expenses. 

–Cutting out the frills.

– And saving money. 

Fellow ADHD friend, you are amazing.

So, now what? You definitely don't want to leave that money sitting there (hello, temptation). So let’s start by setting up your emergency fund.

Saving for an Emergency

Yes. I recommend having an emergency fund before you begin paying off your debt. Say what?!!! 

That’s right. You need to build your financial fortress before paying down your debt. You want, and deserve, the peace of mind that comes from knowing you have money for when you break your leg, your dog eats who knows what, and your pipe bursts and floods your neighbor's yard.

Having an emergency fund means that you won’t need to use your newly paid-off credit card to pay for the inevitable; an unforeseen expense.

And, yes, I know that you are under the impression that you will never have an emergency (hello, ADHD brain). You are a superhuman that is immune to all things unplanned. You will never break anything. And your car? It will never break down. Your job? Nothing there will ever change. Catch my drift?

 I like to call it the ‘Life Happens Fund’ because life will happen, and this account will keep you from using your credit card when it does.

Ideally, you will have 3-6 months of all of your expenses saved. If you are single, with a job that isn’t stable, go for six months. If you are in a two-income household with stable jobs, three months should do. 

And when that account is where it needs to be for you to sleep well at night, it’s time to move on to the debt. 

Use the Snowball Method to Pay Credit Card Debt

Remember the snowball debt payoff method (listen here or read about it here)? That is how we are going to pay those pesky credit cards off.  Look at your debt and list all of your credit cards (and car payments and student loans and, well, everything but your mortgage) from the lowest balance to the highest balance. Take all of your extra money from your budget and apply it to the lowest balanced debt every month. When that card is paid off, apply the extra balance PLUS the minimum payment from the paid-off card to the next lowest card. See where I’m going with this? Each card paid off means more money going towards the next debt. Before you know it you will have joined the debt-free club!

And somewhere in this process, you are going to want to think about retirement.

Pick an IRA or a Roth IRA for Retirement

Now that you have an emergency fund and your debt is paid down (or off, it’s up to you), it’s time to start saving for your retirement. 

Let me guess: you don't think that you will ever retire. You won’t have enough money, you can’t plan, and, again, you are invincible. Hello, ADHD brain! I am here to say you are going to want to change the way that you work as you age. Maybe that will look like working less, but at some point, it will look like not working at all.

Because you will absolutely get old, and at some point, you will have to stop working. So let’s plan for it!

–IRA (Individual Retirement Account). This is a pre-tax account that you put a certain amount of money into. Essentially, this means that the government returns the taxes that you paid on the deposited funds at tax time (hello, tax return). You then pay taxes on that money when you withdraw it after age 59½. If you withdraw the funds before that age you pay a 10 percent early withdrawal penalty, so you want to make sure that an emergency fund is set up so your retirement money can stay there.

–Roth IRA. In my opinion, this is often where your money wants to be! The money you deposit is taxed now so that you don’t have to pay taxes later. This is helpful for quite a few reasons; I go in-depth on that in this podcast. Learn the nitty-gritty about how much you can contribute here.

And now comes the fun part! It’s time to save for that vacation.

Save for Goals

It’s time! You have worked so hard to get to this point. So dream big, because you get to start pre-funding upcoming goals. Some ideas include:

–Saving for a down payment on a house.

–Setting aside money for yearly vacations.

–Redoing your basement, landscaping, kitchen…

Set up separate savings account for each dream and decide how you want to allocate your money. Saving towards your ‘Why’ is what it is all about and it is fun. Watching the money add up is far more satisfying than those new shoes!

Celebrate Your Financial Success

Don’t forget to pat yourself on the back. Your mindset is changing, and your budget reflects that! Your financial fortress is strong. You are sleeping better at night, knowing that your budget has your back. 

And you are ready for a financial advisor! Book your free call here, and let’s maximize your money mojo together. 

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Together, we can make money fun.