More Money? Great, Now I Can Buy More Stuff!

Everyone who’s been freelancing for a while knows that there are ups and downs in a freelancer’s income. Though I don’t like the decrease in cash flow, I sometimes appreciate the downs because it means I get a bit of a break from working so much. Fortunately, even my “down” months bring in enough income to cover all my expenses, so I’m never depressed about that.

Recently, I had a big increase in freelance writing income and it’ll probably continue at least through the first few months of next year. Of course, now I have the joy of deciding what to do with the extra money.

What to do with extra income?

When you have a few months where your income increases, here are some smart ways to spend that extra money.

Get caught up where you’re behind.

If you’re delinquent on any bills, use the money to bring those accounts current. This is true for credit cards and loans as well as your utilities, cell phone, and other accounts. Waiting to get caught up will only make those accounts grow with interest and late fees. If you’ve been putting off car repairs or doctor visits because you didn’t have the funds, now is the time to take care of those things before any existing problems get worse.

Pay back people you’ve borrowed from.

If you’ve taken out a loan from family members or friends pay them back with the extra money. Sure, they’re more likely to understand if you need an extension on the loan, but they’re also less likely to loan to you again if you take too long to pay them back.

Put some money toward taxes.

As you make more money, you (generally) owe more taxes. Redo your estimated payment calculations to see if you’ll owe more taxes this period. If necessary, put some money aside to send to the IRS.

Leave some in your business account.

When your income fluctuates each month, you have to use the “up” months to help make up the income for “down” months. So, rather than spend all the extra income you make in a particular month, put some of it aside to supplement your income during months when you don’t make so much.

Pay off some debt.

I have a long-standing goal to pay off my student loan debt. I hope to get more aggressive with paying off this debt, but in the meantime, I always send an extra payment during months that I have some money to spare. If you have debts that you’d like to get rid of, use your extra cash flow to start making dents in that debt.

Save some.

I have a variety of savings goals: retirement savings, emergency fund savings, vacation fund, birthday party fund, and regular savings. Extra income is great for helping reach these savings goals.

Spend some.

How sad would it be to always spend your money on “responsible” things? I’m an advocate of having a little fun with your money, even if it’s just $10 or $20.

What do you like to do with your extra money?

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LaToya Irby is a full-time freelance writer and a graduate of the University of Alabama. She primarily writes about personal finance, freelancing, and other self-employment topics.

7 thoughts on “More Money? Great, Now I Can Buy More Stuff!”

  1. Good suggestions, except I’m not sure about paying off student loan debt early. Suze Orman says that’s a poor use of money, because the interest rate is so low that you’re better off sticking to the original payment schedule and investing the extra money or saving it. Of course she could be wrong. You’re a finance writer, what do you think?

    • That would depend on specific loans and investment options. Private loans might have higher interest than government loans for example, making it smarter to pay them off early. Depending on the date of first disbursement, the Direct Loans site says current rates range from 4.50% – 6.00%. If your savings account doesn’t pay more than that in interest, saving the money wouldn’t make much sense. And you’d have to be confident that any investment you make would return a higher interest rate as well — probably a better chance, although not everyone is interested in gambling with that money even if conservatively.

      Keep in mind that the article is also about giving options other than spending more just because you have more money coming in. And in that sense, paying down loans would still be a more responsible option than blowing more cash just because you can…. even if the latter might be more fun. 😉

    • DItto what Jenn said. Numbers-wise it may make more sense to invest when you can get a better rate of return, but money isn’t always about numbers. It’s often about emotions. I don’t like having this debt. And I won’t even consider borrowing money for graduate school unless I pay off at least half my undergraduate student loan debt.

      If you have some extra money and you’re choosing between making an extra student loan payment or spending the extra on fancy dinners and DVDs, then definitely make an extra student loan payment.

  2. Great suggestions – all make excellent sense to me (and heck, being responsible is kinda exciting in its own way… 😉 )

    How about investing in your business? Taking a few courses you couldn’t afford to take earlier, buying a faster computer or more fun (AND profitable) techie stuff, attending a conference…. etc. I find that I’ve been putting this stuff off (busy and with limited income). Not sure if you would consider it spending when you’re investing back into the business.

    • Investing in your business is a good one. Occasionally my boyfriend and I talk about investments and what we’d do with more money to “play with.” He invests a bit in Forex. My philosophy is that if I’m going to invest, I’ll invest in myself (and my business) first. Only when those investments stop showing a return in an overall income increase will I stop and invest it elsewhere. And I’ve consistently been able to see double-digit returns that way even without a whole lot of additional effort on my part. I don’t know any surer investment than that. That said, I’m sure it’ll top out somewhere eventually. And when that happens I’ll either dabble in Forex myself or invest in businesses I’m tied to in some way (ones run by colleagues and clients that I think have potential for example), followed by other tech start-ups as a last option.


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