Working a Lot of Overtime? Here Are 5 of the Best Things to Do With That Extra Money
Working overtime means more time away from your personal life. However, it comes with the added benefit of extra cash flow. If you are working a lot of overtime, you might be pondering how to use that extra money. The first piece of advice is what not to use it on.
Do not add overtime pay into your income category. By this, I mean, if you regularly make $800 per week, don’t include overtime pay in that calculation and say you make $1,000 per week. By doing this, you are saying that your standard income has increased, therefore you can afford more expenses. In actuality, you happened to make more from the overtime, but this can be stripped from you at any time. If you start renting an apartment based on your income plus overtime income, you might suddenly find yourself not being able to afford it.
Another way not to spend your hard-earned extra income is on frivolous things such as a new TV when you already have a working one. Sure, it is a nice feeling to splurge and buy yourself the best and biggest, but that feeling of happiness will lose its luster quickly.
So instead of spending your extra cash all in one day, there are a number of different ways in which you can use your overtime cash.
Add It to the Rainy Day Fund
One of the best things to do with this money is to put it towards a rainy day fund. No matter who you are, what your profession is, there will come a time in your life where it is going to rain. Unfortunately, when it rains, it usually pours.
Rainy day funds are your lifeline when something catastrophic happens. For example, your roof collapses from damage and somehow there was a loophole in your insurance where they don’t have to cover it. The health of you or a loved one could deteriorate and surgery is needed in order to maintain better health. Deductibles and out-of-pocket expenses aren’t cheap and if you have to pay for it all in one month, the rainy day fund will be your best friend. Another time this fund can come in use is during a period of unemployment. Sure, filing for unemployment benefits helps, but it isn’t the same as a full paycheck, especially if you’ve been getting overtime.
The hope is that you will never need to use the money in this fund. Hopefully, the stars will align and you will avoid catastrophe altogether. However, it disaster does strike, a rainy day fund can help get you back on your feet much faster than if you didn’t have one.
Another great way to use your extra overtime money is to invest it. You don’t have to follow the stock market in order to invest wisely. Picking the next booming stock shouldn’t be your goal. However, high-value, stable stocks are a great way to see your investment increase. Check out online investing sites such as Betterment or Wealthfront. These online investing sites let you manage as much or as little as you want on your investment.
If you’d rather not gamble on the stock market, open up a Roth IRA and add in any overtime pay you receive. You’ll be surprised just how quickly the account will accumulate and, eventually, lead to a fruitful retirement.
Spend It on an Experience
As stated earlier, buying material items has been proven to not increase happiness. However, there is research that experiences can create a prolonged happiness that material possessions simply can’t.
Let’s take that big, shiny, new TV for example. You buy it and enjoy the heck out of it for possibly the first week. You gradually begin adapting to it and the luster it once has eventually disappeared. There will always be a bigger and better TV coming out.
However, if you spend your money on an experience such as a vacation or a unique activity, that becomes a part of who you are. So if you finally take that trip to Hawaii or Paris that you’ve been talking to, that experience becomes a part of who you are. If you use your overtime money to go horseback riding for the first time, that also becomes part of who you are.
Further Your Education
Another great use of your overtime pay is to use it towards furthering your education. This doesn’t mean that you have to go back to school to get your bachelor’s, a master’s, or a doctorate. While you certainly can do those things to improve yourself, you can also take MOOC’s (massive open online courses) in areas of education that interest you most.
I have seen courses ranging from programming to wine making, solar energy to graphic design, and much, much more. So whether you want to receive further accreditations such as a bachelor’s or simply want to know how to use a DSLR camera, your overtime money will be well spent.
Save It for Your Dream Job
Finally, another great use of your overtime money is to save it for your dream job. What does this mean exactly? First, you need to ask yourself if the job you are currently working, is what you want to be doing 20 years down the road. If the answer is “yes”, feel free to stop reading. If the answer is “no”, you should start thinking about what you are truly passionate about. Maybe, you’ve always wanted to own your own restaurant. Start putting that overtime money towards that dream because you are going to need capital to start any type of business.