Picture this: That work bonus has finally hit your account. Your side gig is taking off. Or you get an unexpectedly large tax refund. Now you have an extra $5,000—or close to it—in the bank. (Nice.) What could you do with it? A sudden influx of cash could provide opportunities to improve your financial situation. But only if you use it wisely.
“If people get a surprise $5,000, theres a tendency to think of it as bonus play money,” says Aliya Padamsee, CFA®,1 CFP®,2 a director of financial solutions at Fidelity. “But think about using it as an opportunity to get ahead, not to stay in the same place.”
How you might want to use the money depends on your financial status and goals. Here are some options to help you decide what to do with $5,000.
Got Cash Just Sitting There? Here’s Your Action Plan!
We’ve all been there – maybe you got a surprise bonus, a tax refund landed in your account, or you’ve just been good at saving lately. Now you’re staring at that extra cash wondering “What should I do with this money?”
Trust me I know the feeling! Last year, I received an unexpected inheritance and spent weeks debating what to do with it. Should I splurge on that kitchen renovation I’d been dreaming about? Pay down my mortgage? Or just let it sit in my checking account earning basically nothing?
If you’re facing this “good problem,” I’ve researched the smartest moves you can make with your extra cash right now Let’s dive into some practical strategies that balance immediate satisfaction with long-term financial health.
Why Timing Matters When Handling Extra Cash
Before we jump into specific strategies, let’s talk about timing. When you receive extra money matters almost as much as how you use it.
For example, if you’ve just received an inheritance during an emotional time, it might be smart to temporarily park those funds in a money market account or CD. This gives you breathing room to think clearly about your next steps without making impulsive decisions.
Similarly, if you know big expenses are coming up (like annual insurance premiums or college tuition), using your cash surplus to prepare for these predictable costs can prevent future financial stress.
I’ve learned this lesson the hard way. After receiving a year-end bonus, I immediately spent it on a lavish vacation. Two months later, my car needed major repairs, and I had to use credit cards to cover the expense. Had I set aside some of that bonus, I could have avoided the high-interest debt altogether!
6 Smart Ways to Use Your Extra Cash Right Now
1. Tackle That High-Interest Debt First
It might not be exciting, but paying off high-interest debt is often the most financially savvy move you can make with extra cash.
Think about it: If you’re carrying credit card debt at 18-24% interest, paying it off is like earning that same rate on an investment – guaranteed! In today’s economic environment, that’s an incredible return you won’t find anywhere else.
Priority debt to tackle:
- Credit card balances
- Personal loans
- Variable-rate student loans
- Payday loans
Once you’ve cleared these balances, make a commitment to yourself: pay off any future credit card charges in full each month. This simple habit can save you thousands in interest over your lifetime.
2. Build Your Emergency Fund (Or Beef It Up)
Life is unpredictable – job losses happen, medical emergencies arise, and cars break down at the worst possible moments. Having a solid emergency fund is your financial safety net for these inevitable curveballs.
Financial experts typically recommend keeping 3-6 months of living expenses in an easily accessible account. If you don’t have this saved yet, your extra cash could be the perfect way to start or strengthen your emergency fund.
For maximum benefit, consider putting this money in a high-yield savings account or money market account rather than a traditional savings account. These options often offer significantly better interest rates while still keeping your money liquid for when you need it.
3. Boost Your Investment Portfolio
If you’re debt-free and have your emergency fund covered, investing your extra cash could help grow your wealth over time.
A good place to start? Increase your contributions to retirement accounts:
- Boost your 401(k) or 403(b) contributions
- Max out your IRA contributions
- Consider a Health Savings Account (HSA) if eligible
Already maxing out your retirement accounts? Opening or adding to a brokerage account might be your next move. This gives you more flexibility than retirement accounts while still potentially growing your money through the power of compound interest.
I remember when I first started investing outside my 401(k). I was nervous about market volatility, so I started small with a diversified ETF. Over time, watching that investment grow gave me the confidence to expand my portfolio further. While investing doesn’t provide instant gratification, it’s been one of the best financial decisions I’ve made.
4. Invest in Your Personal Growth
Sometimes the best investment isn’t in the market – it’s in yourself. Using extra cash to enhance your skills or knowledge can pay dividends throughout your career.
Consider:
- Taking a certification course relevant to your field
- Enrolling in classes to develop new skills
- Funding professional development opportunities
- Investing in education for yourself or family members
If you’ve been dreaming of starting a business, extra cash could help you launch with less debt. Even a small investment in your entrepreneurial goals can reduce the need for loans as you get your venture off the ground.
5. Plan Ahead for Big Expenses
Got major expenses on the horizon? Using your cash surplus to prepare for these costs can prevent future financial stress.
Common upcoming expenses worth saving for:
- Home repairs or renovations
- Vehicle replacement
- College tuition
- Wedding expenses
- Planned medical procedures
By setting aside money now for these known future costs, you avoid having to rely on credit when these bills come due. This proactive approach to financial management can save you significant money on interest and fees in the long run.
6. Yes, You Can Treat Yourself (Wisely)
I’m not gonna pretend every dollar needs to go toward practical financial goals. Life is meant to be enjoyed, and sometimes that means treating yourself to something special with your extra money.
The key is balance. Instead of blowing your entire windfall on a splurge, consider allocating a portion (maybe 10-20%) for something fun while directing the rest toward your financial goals.
Some reasonable treats might include:
- A weekend getaway (not a luxury international vacation)
- An item you’ve been eyeing for months (not an impulsive purchase)
- An experience that creates lasting memories
- A small home upgrade that improves your daily life
One strategy I’ve found helpful: deposit your extra cash into savings, give yourself a 30-day “cooling off” period, then decide on a small treat while keeping most of the money working toward your larger goals.
How to Decide What’s Right for YOUR Money
The “right” choice for your extra cash depends entirely on your personal financial situation. Here’s a simple decision framework I use:
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If you have high-interest debt: Focus on paying this down first before considering other options.
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If you lack emergency savings: Build this up to at least 3 months of expenses before moving to other priorities.
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If you’re behind on retirement savings: Increase your contributions to catch up.
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If you’ve covered the basics: Split your extra cash between investing for the future and enhancing your current quality of life.
Remember, you don’t have to choose just one option. You might decide to put 50% toward debt, 30% toward your emergency fund, and 20% toward a small treat. The proportions depend on your specific circumstances and priorities.
Common Mistakes to Avoid With Your Extra Cash
I’ve seen friends make these mistakes (and made some myself), so learn from our errors:
- Letting the money sit in a low-interest checking account. Inflation will erode its value over time.
- Making impulsive purchases without a plan. That temporary happiness fades quickly.
- Investing without understanding the risks. Don’t put money you’ll need soon into volatile investments.
- Telling everyone about your windfall. This can lead to uncomfortable requests for loans or gifts.
- Forgetting about taxes. Depending on the source of your extra cash, you might owe taxes on it.
Real-Life Examples: Smart Ways People Have Used Their Extra Cash
Case Study 1: The Debt Destroyer
My friend Mike received a $5,000 bonus and used it to completely pay off his credit card debt. The interest he was paying (around 22%) was costing him over $1,000 annually. By eliminating this debt, he essentially gave himself a $1,000 raise every year going forward.
Case Study 2: The Emergency Fund Builder
After Sarah got a tax refund of $2,800, she realized she had no financial safety net. She opened a high-yield savings account and deposited the full amount as the beginning of her emergency fund. Six months later, when her refrigerator unexpectedly died, she was able to replace it without using credit cards.
Case Study 3: The Balanced Approach
When Carlos received a $10,000 inheritance, he split it four ways: $5,000 went to paying down student loan debt, $3,000 to his Roth IRA, $1,000 to a weekend trip with his partner, and $1,000 to a coding bootcamp to enhance his career prospects.
The Bottom Line: Be Intentional With Your Money
Extra cash doesn’t have to mean fleeting joy followed by regret. With intentional planning, that money can become a stepping stone toward achieving your financial goals and improving your quality of life.
Whether you’re tackling debt, growing your savings, investing in your future, or treating yourself to something special, having a clear plan makes all the difference.
I’ve found that taking a balanced approach works best for me – addressing financial priorities while still allowing for some enjoyment in the present. After all, financial well-being isn’t just about having the most money; it’s about using your resources to create a life you love.
What will you do with your extra cash? Whatever you decide, make it a conscious choice rather than letting inertia decide for you!
Ready to Get Started?
If you’re feeling overwhelmed by the options, consider speaking with a financial professional who can help you evaluate your specific situation and create a personalized plan. Sometimes an outside perspective can help clarify your best path forward.
Remember, the goal isn’t perfection – it’s progress. Every smart decision you make with your money brings you one step closer to financial freedom and peace of mind.
What’s your plan for your extra cash? I’d love to hear your thoughts!
Get on solid financial footing
Have a cash buffer. At minimum, consider keeping at least $1,000 in an easily accessible account at all times. That way, you wouldnt have to skip paying other bills or rack up credit card debt to pay for an unexpected expense, such as new brakes or a dental procedure.
Pay down high-interest credit card debt. Do you have balances on your credit cards? That answer could help determine what to do with $5,000. Interest accrues on cards each day theyre left unpaid, so making a big payment right away could pay off. If you have debt across several credit cards, consider putting more money toward the one with the highest rate first.
Build your emergency savings
Emergency savings is a reserve of cash you can tap in case of, well, an emergency. Whether you already have a small amount of cash set aside or nothing at all, its wise to dedicate at least a portion of your extra cash to building a stash.
After your $1,000 cash buffer, Fidelity suggests working toward saving 3 to 6 months of your essential expenses (think: major bills and necessities) to help cover you if, for example, you lose your job or have a hospital stay. “If youre single with no dependents and a stable job, 3 months of savings may be enough,” says Padamsee. “But its smart to have 6 or even 9 months of savings when you have a family or youre the sole earner in your household.”
It may be convenient to store your emergency savings in your regular bank account. But it is generally a better idea to keep it separate. That way, you avoid dipping into emergency savings for other expenses and goals. Since you may also want to consider cash equivalents for savings goals less than 3 years away, these options can work well for emergency savings and short-term savings goals:
High-yield savings account. Ordinary bank savings accounts usually provide a low return on your money, think: well under 1% annual percentage yield (APY), aka under 1% of your balance in interest per year.3 You could earn more interest on your money with a high-yield savings account, which tends to offer rates several times higher than a bank savings account APY.4
You wont have to worry about losing your cash in any accounts that are backed by the Federal Deposit Insurance Corporation (FDIC), which insures up to $250,000 per depositor, per insured bank, for each account ownership category. But you may be limited to a certain number of withdrawals each month.
Money market account. This account type typically combines savings and checking account features. The interest rates for money market accounts (which are not the same as money market funds in brokerage accounts) are slightly higher than savings accounts. Some banks offer much better rates, but you may need to maintain a certain balance to receive them.
You may be able to withdraw from your money market account using a debit or ATM card, which could simplify paying for large emergency expenses. One downside: You may face fees if you withdraw more often than the monthly max.
Money market fund. Money market funds are a type of low-risk mutual fund that are less prone to market fluctuations than stock or bond funds. They are often used as a holding place for assets while waiting for other investment opportunities to arise, such as in the core position for your brokerage account. You could typically earn a return similar to that of a high-yield savings account.
However, an investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund. Similar to other mutual funds, you’ll likely pay a small percentage of your investment as a management fee.
What Can I Do With Cash Now? – 10/21/25 | Market Sense | Fidelity Investments
FAQ
What should I do with cash right now?
- Use extra cash to tackle financial goals, like paying off high-interest debt, building an emergency fund, or boosting your investments.
- Consider investing in personal or professional growth, whether it’s taking a course, starting a business, or saving for future expenses.
How to turn $1000 into $5000 in a month?
- Stock Market Trading. …
- Cryptocurrency Investments. …
- Starting an Online Business. …
- Affiliate Marketing. …
- Offering a Digital Service. …
- Selling Stock Photos and Videos. …
- Launching an Online Course. …
- Evaluate Your Initial Investment.
What is the best place to put cash right now?
High-yield savings accounts. Overview: A high-yield savings account at a bank or credit union is a good alternative to holding cash in a checking account, which typically pays very little interest on your balance. The bank will pay interest in a savings account on a regular basis.
What is the $27.40 rule?