Once you’ve covered your emergency fund and short-term expenses, holding on to excess cash can hold you back. But knowing what to do with that money takes clarity and intention.
In this post, we’ll walk through a tactical framework for putting extra cash to work. These are the same steps I covered in my recent livestream on this topic. If you missed it, you can watch the replay here:
👉 Watch the replay on LinkedIn
👉 Watch the replay on YouTube
Step 1: Confirm your cash baseline
Start by separating “true cash needs” from the money that’s just sitting idle. Here’s a simple breakdown:
- Emergency fund: 6 to 12 months of fixed expenses
- Short-term expenses: Any known costs in the next 12 to 18 months
- Cash buffer: 1 to 2 months of expenses in checking
Everything beyond that is considered excess. That’s where planning begins.
Step 2: Categorize the purpose of the extra cash
Not all excess cash should be invested right away. Start by giving it a role:
| Purpose | Recommended placement |
|---|---|
| Near-term purchase (1–2 yrs) | High-yield savings or CDs |
| Tax payments for equity/bonuses | Separate tax savings account |
| Known large expense (2–5 yrs) | Conservative investment or bond fund |
| Long-term growth (5+ yrs) | Brokerage or retirement account |
Avoid mixing long-term cash with your short-term reserves. Clear separation creates better decisions.
Step 3: Prioritize cash allocation
If you have multiple goals or obligations, start with a priority list. Common examples for high earners include:
- Max out tax-advantaged accounts
- 401(k), backdoor Roth IRA, HSA if eligible
- Fund brokerage for long-term goals
- Retirement beyond 401(k)
- Education savings
- Future lifestyle investments
- Pay down low-interest debt (case by case)
- Depends on emotional comfort and opportunity cost
- Invest in yourself or your business
- Coaching, systems, career leverage
- Give or set up intentional gifting
- Donor-advised funds or recurring giving
Step 4: Build a cash flow automation system
Once you allocate your current cash, build a system so new income flows automatically:
- Save and invest on a schedule
- Route bonus income intentionally
- Set aside taxes in real time
- Keep your checking account lean but stable
I shared the full system I use with clients during the livestream replay, linked above.
Final Thought
Leaving money in cash might feel safe, but unused cash is a missed opportunity. Once your short-term needs are met, the next step is to give every dollar a job. The more intentional you are with your income, the less you’ll feel stuck—even as your responsibilities grow.
👉 Watch the full livestream replay on LinkedIn
👉 Watch it on YouTube
