🤷🏻‍♂️ Where to put extra cash

So you’ve been reading this newsletter which means you’re widening that Expense-to-Income Gap and finding yourself with extra cash on hand.

But what should you do with it?!

If you’re in this boat, congratulations. You now have “rich people problems.” 🤑

Even if you don’t feel rich, the fact that you’re creating excess cash that needs to be put to work … this IS one of the biggest problems rich people solve.

This is where the real wealth is generated – when your money, starts working for YOU.

What To Do With Excess Cash – Order of Operations 🧮

Please note: this assumes you’re already taking advantage of any full employer matching (401K, HSA, etc).

1) make sure your emergency fund is adequate & liquid. 💧

Rule of thumb here is minimum 3 months of living expenses.

Personally, I like to keep a healthy margin in checking to cover unforeseen larger auto-drafts and bills …

and keep the rest of emergency funds in a HYSA (High Yield Savings Account, a friendly cousin to our favorite, HYSH – High Yield Side Hustle) … more to come here.

2) pay off dumb debt. 💪🏼

If you’ve been around this newsletter long, you know the difference between dumb debt vs. smart debt.

Short version: smart debt is used to acquire assets designed to appreciate in value + ideally throw off cash flow (e.g. real estate, cash-flowing business).

Everything else (most debt), you want to get rid of because it just holds you back.

A major potential exception: if you can save cash for downpayment to get into a smart “house hack” … this could delay certain debt pay off plans (assuming it reduces your living expenses and doesn’t require a lot of unexpected capital expenditures).

3) determine your “excess cash” holding vehicle. 🚙

Once dumb debt is behind you, you’re really ready to cook. 👨🏻‍🍳

Until you know exactly what you want to invest in, it make sense to use a HYSA as your default holding vehicle.

At the time of writing, a good HYSA is paying in the 5% interest range. This beats the everloving SOCKS off standard checking accounts at big banks. 🧦

Here’s a 40 second video I made on HYSA’s with 3 options you can check out.

The HYSA should at least try to offset inflation, but don’t get too cozy here … after taxes, you’re lucky to be holding neutral with the way “true inflation” has been running these days.

Another cool thing about using a HYSA is that it removes that cash from your consumer spending mindset. It’s already earmarked for investment.

💡 Inspiration: One of our Net Worth Coach members has recently created such a large Expense-to-Income gap, he’s opening up his first HYSA to hold that extra cheddar. 🧀🧀

This brings us to step 4.

4) deploy capital opportunistically. 😯

I talk about freedom and optionality a lot. Here’s a tangible example of what it looks like…

When you’ve widened your Expense-to-Income gap (+ free of dumb debt), you now have the freedom to invest opportunistically.

This is the fun stuff.

Maybe you’re a fan of investing in stocks or currencies you consider to be undervalued … or maybe you want to methodically trickle additional capital into index funds.

Or like me, maybe you want flexibility to capitalize on a real estate or business opportunity you find especially juicy. 🧃🧃🧃

Personally, I’d be looking for relatively low risk opportunities with the potential to earn me at least 10% on my money (ideally, a lot more than that) … for me to feel good about taking it from a safe HYSA.

Bottom line: extra cash is a blessing you’ve worked hard to generate. Now, make sure it’s working hard for you.

This is what creates multiples in your net worth.

👉🏼 Next issue, I’ll tell you more about my favorite way to deploy cash opportunistically.

In your corner,

Blake Bozarth

P.S. If you’ve been enjoying this newsletter, is there somebody else you could forward this to who’d also get value from it? They can subscribe for themselves right here. 👈🏼 📨

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