Here are some ideas, depending on your long-term goals and lifestyle:
Build an emergency fund. If you’ve been living life on the edge without an emergency fund, this is likely the first thing you’ll want to do with that extra money. Experts recommend having anywhere from three to six months of liquid cash handy.
Pay off credit cards. Getting rid of credit card balances is a good second choice for your list. The average household credit card balance is $7,400. At a rate of about 15% APR, you’d pay nearly $9,000 in interest making only the minimum payment—and take 305 months to pay off the balance.
Add to retirement savings. You can put up to $18,000 a year in your 401(k) in 2015 (an additional $6,000 if you’re 50 or older) and up to $5,500 in a Roth or Traditional IRA ($6,500 if you’re 50 or older). Putting away an extra $250—just a few dollars more than the average student loan payment—would mean $173,000 more at retirement.
Pay down your mortgage. Adding that same $250 a month to your mortgage means paying it off 5 ½ years early, and saving more than $25,000.
Boost your child’s college fund. Want to give others a head start, too? Consider funding your child’s college dream so he or she won’t have to worry about student loans in the future.
Save for a dream goal. So you’ve always wanted to go to Bali or Bora Bora. Now may be the time to start saving for your dream vacation.
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