4 Smart Ways to Spend Extra Income

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Don't know how to spend extra income? Here are 4 ways to spend your extra money that still allow you to enjoy life without adding extra debt.

I’m not going to lie, it feels great to make extra income. But if you’ve started a side hustle or received a raise or bonus at work, how you spend the money may have a big impact on your finances.

Looking back, when I used to earn extra money in college and even at my full-time job post-college, my first thought would usually be about what I was going to spend it on. When I had extra money, I felt better about dining out more, splurging at Target or whatever else I did with the money.

It’s funny, because I can’t even remember what I did with my extra checks, side hustle income and work bonuses years ago and that’s a major red flag.

There’s nothing wrong with spending your money on what matters most to you, but if you have certain goals to improve your finances, you can also make some responsible decisions regarding how you want to use a portion of your extra earnings.

Here are four responsible things you should consider doing with your extra income.

1. Pay Off Debt


Being in debt can hold you back in so many ways. When you earn extra money, it’s best to use it to pay off more of your debt so you can get rid of it quicker.

When I was working a full-time job and side hustling, I was committed to using a large portion of my extra income to put toward debt repayment. I paid off thousands of dollars in debt by doing this in just 12 months.

Now, I’ve passed that philosophy onto my husband who has a car loan he wants gone ASAP. He recently started driving for Uber on the side and dedicates at least half of his earnings toward making extra payments on his car loan, then uses the rest for whatever he wants (right now it’s holiday savings).

We’re excited about this because at this rate, the car loan will be gone by this time next year.

2. Save More


Can your savings account use a little boost? Saving isn’t the most exciting thing to do with your extra money, but it’s worth it.

You can add to your emergency fund, contribute more to your health savings account or your retirement account, set aside more for tax payments, or save up for a big ticket item like a TV or vacation.

Even if you’re saving for no reason at all, the money will come in handy when you need it.

Sometimes we get into the habit of telling ourselves we can afford to buy more things when we get extra money. But in reality, we probably don’t need these extra things and would survive just fine without them if we didn’t have the extra money.

It takes a bit of mental willpower, but if saving is a priority for you, tell yourself that you don’t have any extra money to spend even when you do and throw it into a savings account instead.

3. Catch Up on Bills


If you’re behind on any bills or have some lump sum annual payments and fees coming up, using your extra income to cover these expenses is a great idea.

While you should be saving up all year-round for annual expenses like your auto insurance, car registration, licensing and recertification fees, annual membership fees and copays for annual doctor’s visits, it would be unrealistic to say you probably won’t miss something or fall behind if other unexpected expenses arise.

Instead of throwing your regular budget off course when these expenses come up, use your extra income to pay them off and stay on track.

4. Invest Outside of Retirement


If you’ve been wanting to break into investing outside of your retirement so you can grow wealth, having extra income can help you take action on your investing goals.

You can invest in real estate, the stock market, a new business, etc. to grow your money without having to risk your main source of income.

I’ve personally always wanted to get into real estate investing. I know it’s hard to save up the money to purchase a property when you have so many other expenses to cover and a family to take care of though. This is why I am interested in using extra income to put toward this goal so I can experiment with this type of investing and possibly create a passive income stream.

Don't know how to spend extra income? Here are 4 ways to spend your extra money that still allow you to enjoy life without adding extra debt.

Extra Income Can Be Powerful


Earning extra money can literally change your life if you use it responsibly. It’s perfectly fine to splurge and treat yourself every now and then, especially if you have the money, but if you’re focused, you can become financially stable much quicker.

It’s important not to succumb to lifestyle inflation when it creeps in and realize that extra income may not be permanent or consistent. It’s best to take advantage of your current situation by using the extra money to improve your finances and build additional streams of active and passive income.


How do you earn extra income? What is your favorite thing to do with the money? What helps you stay motivated to use the extra money responsibly vs. splurging on something spontaneous?

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Choncé is a freelance writer who’s obsessed with frugality and passionate about helping others increase their savings rate, eliminate debt, and work toward financial stability. She chronicles her journey with balancing motherhood, work, and finances on her blog, MyDebt