What should you do with money left over after all monthly expenses are paid

By Matt Mayerle
Modified on May 12, 2023
what should you do with the money left over after all monthly expenses are paid

Wondering what you should do with the money left over after all monthly expenses are paid? Depending on your spending habits, you may have a significant amount of money left over after paying bills and taking care of your other financial obligations. When you have a bit of extra cash in your checking account, it’s nice to feel like you’re financially stable and secure.  

As an income earner, it’s crucial to set aside some fun money and enjoy your hard work a bit, but you should also always be striving to meet your financial goals. Here are some expert tips on how you can save money and make the most of your discretionary income! 

What Is Discretionary Income? 

If you don’t know your monthly discretionary income, don’t worry; most consumers don’t! Discretionary income, also known as disposable income, is any money you have left over after you pay all of your bills and other expenses. 

Keep in mind that your discretionary income is not the same as your gross income. Gross income, also known as your before-tax income, is how much money you earn before taxes are deducted from your paycheck. Paying taxes is something every American does and is planned into almost every individual’s income. 

Smart Ways to Use Your Discretionary Income 

Knowing what you should do with money left over after all monthly expenses are paid is not always easy. Suppose you have a bit of extra monthly income in your bank account. In that case, you may be looking to purchase discretionary goods and services. Companies that sell discretionary goods tend to look more and more appealing when we have extra income burning a hole in our pocket. But, instead of using the money left over from your paycheck frivolously, like going on an impromptu trip to New York City, consider utilizing your income and thinking about the future. 

Here are a few tips for making the most of your extra income. You may even end up with more money in the long run! 

Start an Emergency Fund 

The first thing you should do with any money remaining from your monthly expenses is put a portion of cash in your savings account. If you already have a healthy savings account, you may want to get a second account that is specifically an emergency fund. In the case of a personal budget deficit, you’ll be thankful to have a savings account to fall back on. 

Having extra money to pay for unexpected expenses like a medical emergency, sudden car trouble, or general economic downturns in your finances can be a huge financial relief. Also, if you find yourself going through job loss, a pay cut, or a pay reduction, emergency hardship financial aid in your savings account can help you get through those tough times. 

Focus on Any Existing Debt Repayment 

Increasing Personal debt can be stressful. Instead of making the minimum payments on debt like auto loans, car payments, or online personal installment loans, try to make larger monthly installments if you can. Then, watch your total debt shrink amid your consistent monthly payments. The more money you spend on debt payments now, the less money you’ll have to spend in the future! 

Start a Kids College Fund 

Perhaps you have a child you’d like to send to college. It’s never too early to start saving for higher education. Anything you can set aside now will benefit your child’s education in the future. You can even set up a CD Account, also known as a Certificate of Deposit, so your child can utilize your funding when it’s time for them to head off to college! 


Investing your money in another viable option when you have a bit of extra income. Real estate or even the stock market has the potential to bring in hundreds or even thousands of extra dollars a month. Think of how easy it would be to take care of each and every monthly bill in the future with additional income from investing! 

Establish a Retirement Account 

In a healthy economy, you may rely on social security to get you through your retirement years. But it would also be wise to have a personal retirement account to make sure you never fall into debt when you’re older. 

Basic Expenses to Pay off Before Spending Discretionary Income 

Before spending any money left from your paycheck, make sure you have your bases covered first. Taking care of regular bills, personal necessities, and other essential costs should always be a top financial priority for any income earner. When paying bills, make sure you have these necessary expenses paid prior to spending money on any nonessential expenses. 

Living Expenses

Paying living expenses should be a top priority when taking care of your monthly bills. If you’re late on a rent or mortgage payment, you run the risk of your credit score taking a decline as well as possible eviction. To ensure you always have a roof over your head, living expenses should be one of the first items you take care of when paying bills. 


Health insurance, auto insurance, and possibly other types of coverage are expenses that are a part of many people’s monthly bills. Being late on any kind of insurance poses the risk that your company may drop your coverage. To make sure you are ready in case of any type of emergency, always stay on top of your various insurance payments. 

Student Loans 

If you have any, paying student loans is another must-do when paying monthly bills. Sometimes, your monthly student loan payment is based on how much money you earn. So if your income ever changes, make sure you contact your lender to see if your payment could also change. 

Credit Card Balances

Credit cards are a common way for people to spend money regularly. If you have a credit card balance, either try to pay it off in full or at least pay more than your minimum amount due. If your balance is on the higher side, you could save money on interest fees by making larger credit card payments. Regardless of how you handle it, it’s essential to understand how interest rates work.

In Conclusion

Now you know what you should do with money left over after all monthly expenses are paid. And you may not always have money left over once you pay all your bills. But using that leftover money wisely when you do is crucial.

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