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. We often act as objective counsel for our clients, so feel free to call to discuss options.


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. 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. 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 pay off once you get it right. If you do have a business, you may want to inquire with us about a Business Protector Session, if we have not looked at your business together yet.

  3. 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. 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 + 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 friends that will build and strengthen those bonds. Before you go, be sure to come in and meet with us for a Family Wealth and Legacy Protector 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. As your trusted advisor, 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 Law Office of Benjamin Diederich, centrally located in Southwest Riverside County, in the city of Menifee, and serving the surrounding cities of Murrieta, Temecula, Wildomar, Lake Elsinore, Riverside, and Corona. 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 and Legacy Protector 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. Begin by calling our office today to schedule a Family Wealth and Legacy Protector Session and mention this article to find out how to get this $750 session at no charge.