Surplus Cash in the Bank, Put It To Work!

Susan Powers, CFA, CFP®, CPA, CPFA |

When you find yourself with a surplus of cash sitting idle in your bank account, it's time to strategize. Here’s how to put that money to work effectively, making every dollar count. Whether you’re eyeing investment opportunities, planning for future expenses, or simply wanting to boost your financial security, let’s explore some savvy moves you can make.

1. Maintain your Emergency Fund

First and foremost, ensure you have a robust emergency fund. This should cover three to twelve months’ worth of living expenses. It acts as a financial cushion against unexpected events like job loss, medical emergencies, or major home repairs. Keep these funds in a money market mutual fund vs. a bank savings account to take advantage of rates, typically 1-2% higher.  You can easily set one up online and attach it to your current bank for funding.  

2. Pay Off High-Interest Debt

High-interest debt, such as credit card balances, can be a significant financial drain. Allocating excess cash to pay down these debts can save you a substantial amount in interest payments over time. Focus on debts with the highest interest rates first and work your way down.

3. Invest in the Stock Market

Once the emergency fund is in place, be sure to keep adding to your long-term investments. The stock market offers various opportunities for growth, though it comes with risks. Consider low-cost index funds or ETFs, which provide diversification and have historically performed well over the long term. If you're new to investing, consult with a financial advisor to create a balanced portfolio that matches your risk tolerance and financial goals.

Having extra cash in the bank is a fortunate position but leaving it idle isn't the best strategy. By creating a plan that includes saving, investing, and spending wisely, you can make the most of your surplus funds. Prioritize your financial security, invest in your future, and don’t forget to enjoy the journey along the way.