What to Do with Your Extra Money

Figuring out what to do with extra money you may have is a nice problem to solve.

Don’t we all at least sometimes wish that we could win a windfall that sets us up financially for the rest of our lives? A windfall, by definition, is unpredictable and unexpected. It could be a lottery win, a sudden inheritance, or a trust fund that you didn’t know existed! While windfalls are rare, we do come across extra money from time to time. The extra money can come from your raises at your job, a nice bonus at the end of the year, your side hustles, and tax returns. Whatever the case may be, it is important for us to be smart about the extra money and use it wisely. Today, I want to show you 12 different ways you can use your extra money to make it work for you instead of bringing you down. Let’s begin!

Looking for ways to earn extra money? Check out my blog posts to learn how to make 1000 dollars fast in a week and how to make money online without paying anything!


Before we start talking about the different ways you can use the extra money, it is crucial to get some pre-work done.

1. Verify that the extra money is real

The first thing you should do, before you do anything, is to double and triple check that the extra money is real. If you think you have won a lottery, you need to make sure that you actually are the recipient of the prize money! If you think you got a bigger than expected tax refund, triple check that you have provided all the information and that all the calculations were done correctly.

2. Understand the conditions

Are there strings attached to the extra money you received? Did the generous giver specify how you can access and spend the money? While this may not apply to cases like your extra earnings or a lottery, it could be very important to cases like a trust fund or investment into your business. Make sure you understand the conditions. You do not want to break the rules because you may be at risk of losing the money altogether.

3. Calm down

After verifying it is true (ideally you should already have the money on hand instead of just a promise), the next thing you need to do when you get hit with an unexpectedly large sum of money, is to CALM DOWN. Don’t run around tell your friends and your neighbours about the good news. Jealousy is a real thing. Not to mention that you could also make stupid decisions, like promising to invest in the 3-day-old business of your neighbour’s 10-year-old son, at the heat of the moment. Of course, I am not saying that 10-year-olds can’t run successful business. Here is a list of companies founded by young entrepreneurs!

I do think it is okay to tell your most trustworthy inner circle. Let’s be honest, you want to share! But make sure the people you are sharing the news with are genuinely on your side and will not take advantage of your newly found fortune.

4. Leave the money in the bank and don’t touch it for at least a few months

This step applies especially if you have received a large sum of extra money. The reasons are multi-fold:

  • This is all too new and too exciting! You need some time to calm down.
  • You are probably having an adrenalin rush every time you see the extra zeroes in your bank account. At this moment, you may be more prone to making impulsive decisions that you may regret.
  • You will want to think long-term and plan on how you want to spend the extra money.

I recommend that you delay making any important decisions until you feel a sense of normalcy when you look at your bank account. However, instead of letting money sit in the bank earning no interest, I recommend that you put the money into a high yield savings account to get some interest while you plan. Even only a few months can bring in some extra money on top of the extra money you already have!

5. Don’t quit your job (at least not yet)

Even if you are one of those people who won’t want to work another day in your life as soon as you reach financial independence, you still shouldn’t quit your job immediately after you receive the extra money. Things are so new and exciting and strange at this time of your life, and you need some normalcy to keep you grounded.

Of course, you don’t just need your job for some normalcy. You will also need to figure out what to do after you quit your job. A lot of people dream about the day that they no longer have to work, but they forget about planning for the life after work. Although watching an episode of your favourite TV show may seem like a dream come true when you have a boss wanting you to finish updating the latest deck at 8pm, if you have all the time in the world and you can binge watch TV shows for however long you like, it may not seem as appealing anymore.

I recommend that you spend some time to plan what you will like to do once you no longer have to work. Will you volunteer for your favourite charity, pursuing your passion projects, or travel the world? You may surprisingly discover that working is not that bad, especially since you are no longer financially dependent on your job.

6. Reflect on your priorities

Are there things you have always wanted to do in your life? Maybe you want to own a house, travel the world, and donate to your favourite charity or artist. How do they rank on your own priority list? Will the extra money allow you to have them all, or do you have to pick and choose? Understand where you stand with your priorities will help you make good decisions on how to spend the money wisely.

Things to do with the extra money

Now comes the fun part. Let’s check out some of the ways I recommend that you do with the extra money.

1. Build up your emergency fund

If you don’t have an emergency fund, or only a small one that barely covers one month of essential expenses, then building up your emergency fund really should be the first step. You don’t want to have to borrow money at a high interest in an emergency situation!

Looking for a place to park your emergency fund or savings, you may want to consider EQ Bank. It offers Savings Plus Account, TFSA, and RSP; all of these accounts have one of the highest interests in Canada. Check out my EQ Bank review to learn more!

2. Save it

Extra money, regardless of the amount, does come in handy when you have a savings goal in mind, such as saving for a down payment. If you have a clear financial goal that you want to achieve within the next few years, parking the money in a high-yield savings account may be the best option you have. Although the return may be not as high, it offers the most flexibility and safety for your capital.

Of course, other than saving the extra money for specific short- and medium-term goals, you can also redirect your savings to beef up your retirement fund or education fund for your children.

3. Invest it

If you want to generate even more money, investment is a good way to go. Depending on how big your windfall is and your comfort level, you may want to either do it yourself, or hire a financial advisor for help. I recommend that you choose a mixture of savings accounts, certificates of deposit, guaranteed investment certificates, bonds and stocks to best balance between risks and returns.

Interested in learning how to invest? I recommend that you start with Acorns. For a limited time, Acorns is offering a $20 bonus when you make your first investment (can be as little as $5!). Sign up directly for Acorns here, or check out my Acorns review to learn more!

4. Real Estate

If you have a large sum of extra money, or extra money that comes in steadily every month (e.g., a successful and stable side-hustle), you may want to invest in real estate. Rental properties are a great source of passive income.

One thing you should keep in mind is that your principal residence is NOT an investment, but rather a liability. This is because you do not generate income from it, and you spend money maintaining it.

If you don’t like the idea of becoming a landlord (I mean, there are horror stories floating around on the internet), then you may consider investing in real estate investment trusts (REIFs). These are corporations that invest in income-producing real estate and are bought and sold like a stock. Investing in REIFs makes it possible for individual investors to earn income from real estate, without having to buy, manage, or finance any properties themselves.

5. Insurance

You may also want to spend some of your extra money on purchasing an insurance policy (or a better policy) for you and your family. Emergencies can happen, and you want to make sure that your family can be properly taken care of in case of an emergency.

Curious to know how much your premium will be? Get an instant quote with PolicyMe today!

6. Update your will

Although this may not be our favourite topic, it is nonetheless a crucial topic. Depending on how much you receive and how much you would like to leave to your heirs, it will be necessary for you to update your will. If you don’t have one yet, it is certainly now the time to get one done!

7. Better food

Another area that is definitely worth spending more money on is food. Whether you are a foodie or not, food still occupies a prominent position in our lives. It impacts so much of our daily lives and our health that we should really make eating healthy food a priority. You may want to consider switching to eating more fresh fruits and vegetables, and organic food if possible.

8. Upgrade essential areas of your life

Ultimately, there is a quality of life that we desire. If there is a piece of furniture at home that’s losing structural integrity, it is worth the money to change it now that you have some extra money. If you find yourself having to throw out blouses you wear to work every year due to their poor quality, you may consider buying a few investment pieces that last long.

One caveat to note is that the line between essential and non-essential can be quite blurry, and you could end up spending recklessly under the pretence of upgrading only the essential areas. One example can be going from a 10-year-old car to a luxury car that you never considered purchasing before your windfall. Another example may be purchasing a top-tier watch when you already have time-telling devices with your phone, your clock, or even a functioning watch. I recommend that you assess as objectively as possible the utility of each piece of new things you want to add to your life before purchasing.

9. Pursue your passion

Have you ever dreamed of becoming an actor or a sculptor, but lack the funding to travel to places for audition or take classes? With the extra money you have on hand, now may be a great opportunity to put the money to use for your passion. Having the ability to pursue your passion is a key step to obtain self-realization, so it is certainly an area well worth spending money on. You may also be able to build on the passion projects (e.g., a blog or a personal website) that you already have and make them bigger and better.

10. Brush up on your skills, or learn a new one

You may also use the extra money you have to brush up on your skills. For example, programming languages are always evolving. If you are in this space and loving it, you want to keep up with the changes. Taking an extra course on a new programming language can go a long way in terms of advancing your career and making yourself more marketable.

Alternatively, you can also use the money to learn a new skill. Coursea and Udemy are both great places to learn something new. You may be able to even pivot on your newly acquired skill and get a new job!

11. Share it with others

Sharing brings us joy. If you aren’t in need of all of the extra money you have on hand, you may want to share it with family and friends in need, or strangers who may benefit from some financial support. Purchasing gifts for the ones you love is a great way to build and maintain relationships and connections. Crowdfunding platforms such as Kickstarter, Indiegogo and GoFundMe are all great places to find valuable projects or causes that you can provide support on.

Of course, you want to make sure that you share responsibly. You do not want to encourage bad behaviours such as gambling, and you should do your research to make sure that you don’t get scammed!

12. Splurge a little

Of course, since it is extra money you earned either through your extra hard work or sheer luck, you can splurge a little. I like to adhere to the 80/20 rule: save/invest/be responsible for 80 percent, and have fun with the remaining 20 percent! As long as you balance your consumption and savings, you can enjoy the extra money you have without guilt.

Final words

Of course, the key to long-lasting success is not usually a windfall. Although extra money, whether it is 10K or 100K, can definitely help you, it is only with hard work and frugal principles can you obtain true wealth. But that’s not to say we can’t daydream a bit! And if you are one of the lucky ones, congratulations! You should really think hard about your extra money and use it wisely!