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

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

The best thing you can do with leftover money after expenses are paid is to focus on financial goals such as paying off debt, saving, or investing.

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. Per capita, Americans had 45,343 U.S. dollars of disposable personal income in 2021.1

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, 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, personal loan options, bad credit loans, or online 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. 

More Tips

StrategyDescriptionPotential BenefitsConsiderations 
Automated SavingsSet up automatic transfers to a savings account.Ensures consistent saving; builds savings without effort.Determine an affordable amount that doesn’t impact monthly necessities.
Debt Snowball MethodAllocate extra funds to the smallest debt first, then move to the next smallest.Quick wins boost motivation; reduces number of debts faster.Might not always be the most cost-effective method for high-interest debts.
Flexible Spending Accounts (FSAs)Contribute to FSAs for healthcare or dependent care expenses.Tax advantages; reduces taxable income.Use-it-or-lose-it policy; plan contributions based on anticipated expenses.
529 College Savings PlanInvest in a 529 plan for future education expenses.Tax-advantaged growth; can be used for various educational expenses.Investment options and rules vary by state.
Charitable ContributionsDonate to charitable organizations.Supports causes you care about; potential tax deductions.Ensure the charity is reputable and understand tax implications.
Renewable Energy InvestmentsInvest in solar panels or other renewable energy sources for your home.Reduces energy bills; environmental benefits; potential tax credits.Initial investment can be high; consider long-term savings vs. upfront cost.
Disclaimer: This table is for informational purposes only and does not constitute financial advice. Individual financial situations vary; it’s recommended to consult with a financial advisor before making significant financial decisions. The effectiveness of each strategy depends on personal financial goals, risk tolerance, and current financial circumstances.

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.

FAQ: What To Do With Money Saved After Monthly Expenses Are Paid

How can I effectively use a regular checking account for managing leftover money?

A regular checking account is ideal for immediate expenses and short-term savings. Consider transferring a portion of your leftover money to this account for daily expenditures or upcoming bills.

What are the benefits of putting money into a high yield savings account?

High yield savings accounts offer higher interest rates compared to regular savings accounts. Putting money into these accounts can maximize your cash savings through compounded interest, making it a great option for building an emergency fund or saving for specific goals.

Can I use a money market account for emergency funds?

Yes, a money market account is a good choice for emergency funds. It typically offers higher interest rates than a regular checking account and provides easier access to funds compared to other investment options.

How does the Federal Deposit Insurance Corporation (FDIC) protect my savings?

The FDIC insures deposits up to $250,000 per depositor, per insured bank, for each account ownership category. This means your cash savings in a bank account, including checking and savings accounts, are protected against bank failures.

Should I focus on paying off credit card debt with my surplus funds?

Yes, prioritizing credit card debt repayment is wise due to the high interest rates associated with credit cards. Reducing this debt can save you money on interest and improve your credit score.

How can I use leftover money to reduce my mortgage payment burden?

Consider making additional principal payments on your mortgage with your surplus funds. This can reduce the total interest paid over the life of the loan and potentially shorten the loan term.

Is it advisable to open an investment account with my leftover money?

Yes, if you have a stable emergency fund and manageable debt levels, opening an investment account can be a good way to grow your wealth. Be sure to understand the risks and choose investments that align with your goals and risk tolerance.

What should I consider before transferring money from a checking account to an investment account?

Ensure you have enough funds in your checking account to cover regular expenses and any potential short-term needs. Only transfer funds that you can afford to invest for the medium to long term.

How do interest rates affect my decision to save or invest surplus funds?

Interest rates impact the return on savings accounts and the cost of borrowing. When interest rates are low, it might be more beneficial to invest in higher-yielding options. Conversely, when rates are high, saving might be more attractive.

What strategies can I use for allocating leftover money among different accounts?

A balanced approach is key. Allocate a portion to immediate needs in your regular checking account, some to savings for short-term goals, and consider investing a part for long-term growth. Regularly review and adjust these allocations based on your financial situation and goals.

Conclusion With CreditNinja 

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. To learn more about managing your money, check out CreditNinja’s Dojo!


  1. Disposable income per capita U.S. 2022 | Statista
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