Many people use their checking account to keep excess cash. You may use it to receive your paycheck and pay your monthly bills. Although money in your checking or savings account is protected, to a certain amount, the former isn’t always a great place to keep substantial cash. For example, you may not want to leave over $5,000 in your checking account. That is unless you have a genuine need to stay fluid, of course. There may be better alternatives to put it to use. Here are ten powerful things you might want to consider doing if you have over $5,000 in your checking account.
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Apply Money to Your Debt
High-interest debt can be detrimental to your monthly budget. If you’re carrying any credit card debt, applying some of your extra funds to the debt may be advisable.
Don’t take so much that it will put you in a bind, but if you’re paying 20 percent or more, taking some of the cash to knock down the debt will be helpful.
Start Saving For a Large Goal
Do you have a significant goal you want to reach? Buying a house, a new to you car, home renovations are all expensive.
You could benefit by taking some of the funds in your checking account and stashing it in an online savings account.
Give Your Emergency Fund a Boost
A recent study reveals that only 45 percent of Americans have at least $1,000 in savings. Having an emergency fund is essential to financial stability and avoiding debt.
If your emergency fund needs some attention, you could greatly benefit by taking some of the $5,000 and putting it in savings. A high-yield savings account, such as CIT Bank, is best as they pay far better interest rates.
Put Money Away For Health Care Needs
Health care expenses can easily eat into savings, and they’re often substantial in cost. Paying some attention to a Health Savings Account (HSA) could benefit you.
If you qualify, contributions are tax deductible and a fantastic way to manage expenses.
Fund an Investment Account
How is your investing going? If you’re not active in your 401(k), or not doing something outside of it, you can put your money to far better use by investing it.
If you’re new to investing, the best investing apps for beginners have minimal fees and low minimum deposit requirements.
Consider an Alternative Investment
Stocks and mutual funds aren’t the only investment option on the table. You can also consider alternative investments to put some of your excess funds to use.
Peer-to-peer lending, helping fund a start up, and more are all investment options you can consider without taking too much from your checking account.
Upgrade Something in Your House
You obviously won’t be able to perform a major home upgrade with just $5,000. However, there are other upgrades you can consider to improve the value of your home, or simply get more enjoyment out of it.
Walk around your home and identify small things you’d like to change. You might be surprised at what you can improve on a limited budget.
Start a College Fund For Your Child
If you plan on your child going to college, you know it’s going to be a horribly expensive endeavor. Perhaps you could take some of the excess cash and open a 529 account for their education needs.
There is no federal tax benefit for contributions, but depending on where you live, you may receive a state benefit. As a further bonus, other family members can contribute to the account.
Invest in Yourself
Are all of your goals covered and you have no immediate need for excess cash? If that’s you, you might want to consider investing in yourself.
Some things to consider might include paying to get a certification that can help with career advancement. Alternatively, if you have a business idea that you would like to see get off the ground you could apply some funds to that.
Personal finance is personal for a reason. Our finances our relative to our specific situation. The first step is to look at your monthly expenses.
If your monthly expenses are approximately $5,000, then it’s likely best to do nothing.
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I’m John Schmoll, a former stockbroker, MBA-grad, published finance writer, and founder of Frugal Rules.
As a veteran of the financial services industry, I’ve worked as a mutual fund administrator, banker, and stockbroker and was Series 7 and 63-licensed, but I left all that behind in 2012 to help people learn how to manage their money.
My goal is to help you gain the knowledge you need to become financially independent with personally-tested financial tools and money-saving solutions.