What to Do With Surplus Cash: Pay Down Debt, Spend or Invest?



When you come into a cash surplus from a company bonus, a tax refund, an inheritance or something similar, you might find yourself having to decide what to do with the money you receive.


Did you know that most people who win the lottery lose their winnings within 5 years? In fact, 70% end up bankrupt.


Why would that be?

Well, it’s because they don’t know how to answer the question asked here regarding what to do with surplus cash. As a result, they make their investment and spending and gifting choices on their own with no guidance at all, and are surprised to discover how quickly millions can disappear.


So, let’s start there. Depending on the amount of your cash surplus, consider consulting with one or more trusted advisors on what to do with the extra money.


If it’s not a large sum, but you still want to make sure you are doing the right thing with the extra cash, consider these factors:


1. High-interest debt


If you have debt that is higher interest than what you could earn with a fairly straight-forward investment, paying off your debt could be the highest leverage use of your funds. Be sure to be tracking each of your debts on a credit tracking worksheet so you can see at a glance whether to allocate extra cash to pay down debt OR if you should keep that money in play because the cost of your interest is low relative to what you can be earning with other investments.

2. Invest in your business


If you have a business that has additional capacity, and you know how to drive more sales with additional investments, you may want to put the money back into your business and ramp up revenue. Be careful though that you are not driving more sales without the capacity to deliver OR that you are not putting money into marketing when you don’t know how to convert your leads into buyers. If that’s the case, you may want to invest in developing sales systems in your business, which always pays off once you get it right.

3. Side hustle


If you don’t have debt, and you don’t have a business, you may want to consider investing in a business that you can run on the side (if you have extra time) as an additional source of revenue, diversifying your income and reliance on a job controlled by someone else. Side hustles are a great way to use your downtime to create more income for your family.

4. Max out your retirement account


If you’re out of debt, don’t have a business, and don’t need a side hustle, consider maxing out your retirement account. And looking into turning your retirement account into a self-directed account, so you can use the funds in your retirement account to invest in things like real estate, or cryptocurrency, and use your extra cash plus some of your time to start to get interested in the best ways to activate your retirement account rather than just having it invested in an ETF that you are totally disconnected from.

Finally, if you’ve got all that handled, consider a trip with your family of origin or your chosen family that will build and strengthen family bonds. Before you go, be sure to come in and meet with us for a Family Wealth Planning Session to ensure all of your ducks are in a row, in case anything happens while away.

If you are ready to plan for your future wealth, start by sitting down with us. At the Law Office of Keoni Souza, we can walk you step by step through creating a legal plan that will help you make great decisions during life by looking at what happens in the event of your death.


This article is a service of the Law Office of Keoni Souza, LLC, an estate planning law firm in Honolulu, Hawaii. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That's why we offer a Family Wealth Planning Session, ™ during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can begin by contacting our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $750 session at no charge.


DISCLAIMER: All information available at this website are for informational purposes only and is not legal advice. You should contact an attorney directly regarding your specific situation. Use of and access to this website or any of the email links contained within the site do not create an attorney-client relationship between the Law Office of Keoni Souza, LLC and any users or any other party.

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All information available on this website is for informational purposes only and is not legal advice. You should contact an attorney directly regarding your specific situation. The use of and access to this website or the transmission of information via email or through this website does not create an attorney-client relationship between the Law Office of Keoni Souza, LLC and any users or any other party. Transmission of information via email or through this website may not be secure, therefore confidentiality cannot be assumed.  By using this website or transmitting information via email or this website, the user agrees to this information being collected, stored, or transmitted to a third-party.

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