Even if you don’t watch the news, you’ve probably heard something about the new tax reform bill that was signed in to law in December 2017. Like any tax bill, it’s got a ton of pages and complexities that only accountants can understand. One of the most relevant aspects of this bill is that it changed tax brackets slightly, so you may find yourself with a little more money in your paycheck than before.
Extra money is fantastic – but there’s only so much avocado toast a person can buy. Here are a few ways to get the most bang for your new extra bucks.
This is a no-brainer. If you’ve been holding off on investing because you just couldn’t afford it, you’ve got no excuse now! You don’t have to have hundreds of extra dollars to invest. In fact, there are a few great apps that can help you get started with an investment of only $5. Yes. Five dollars. Investing gives your money an avenue for potential growth, which is an awesome way to make your money work for you.
Max Your Retirement Potential
You should also make sure you’re maxing out any retirement match you get from your company. If you’re not, update your contribution right now when you’re not used to seeing that extra money from each paycheck. Once you get used to that extra money, it may be even harder to talk yourself into investing it. If you’re already a seasoned investor, consider meeting with a financial specialist about your newfound cash. With a lower tax rate, you may want to update your contributions to a Roth if you’ve been making tax-deferred contributions.
Pay Down a Debt
This may seem like a no-brainer, but if you have automatic payments set up on your student loans or any other debt, increase them a little bit. That way, you’ll pay off your debt faster and pay less in interest over time. It’s not the most glamorous way to spend your extra money, but it is one of the best long-term strategies for putting your extra money toward a brighter future.
Save for a Rainy Day
Your emergency fund might need a little boost, so why not use the extra tax reform cash as the fuel? A cushion of 3-6 months of expenses is good to have in case your life takes an unexpected turn. If your emergency fund is already well-stocked, consider putting your extra cash into a health savings account or other tax-advantaged account for unexpected expenses.
Enhance Your Entertainment
People tell me all the time that they cut cable to save money, but they miss their favorite TV shows. I had the same feeling – which led me to SlingTV. With a little extra cash in your pocket, you might want to try out SlingTV. It’s the easiest way to get access to your favorite cable channels without the cable price tag, with way more flexibility than any cable provider you can imagine.
Jump Start Your Career
Having a little extra money is great, but having a lot of extra money is even better. If you want to accelerate your career, a little extra money can go a long way. Consider taking a class or getting a certification if it’ll help you learn a new skill or become more valuable to your employer. Or, if you’re ready for a big change, spend a little money to have a professional upgrade your resume and LinkedIn profile.
Launch A Side Hustle
If you’ve been dreaming of starting a side hustle, let the extra money in your paycheck be your seed money. Buy equipment or supplies, launch a website, and put yourself out there! A side hustle can be a great way to make money by doing something you’re passionate about.
Save for a Vacation
Science tells us that experiences make us happier than things. You may be tempted to run to the mall and treat yourself with your extra money, but before you do, why not consider saving it for a vacation? Set aside a little bit of money from each paycheck, and you’ll be surprised how quickly it adds up. And if you have the diligence and patience to do that, you definitely deserve a vacation!
So many people I know end up ditching their gym membership with the goal of working out at home for cheaper, but then they don’t follow-through. If you’ve sacrificed your health for your budget, I’m giving you permission to add it back into your life. There’s some social accountability and convenience to having a gym membership or going to fitness classes, and if you need that to get you back on track, then go for it. Your health is a valuable asset – so if a little extra money can help you stay healthy, then it’s totally worthwhile.