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What To Do With Extra Income


Have you been in a situation where you earned extra income and needed to decide what to do with it? This isn’t a regular occurrence, but given our recent move to Calgary for my husband’s work, we’ve found ourselves in this unique and fortunate spot. Even though I quit one of my three jobs for this 7-month field assignment, the benefits still outweigh losing my income.

My husband got a pay increase for this assignment and is being compensated for a 50-hour work week compared to his usual 40-hour week back home. In addition, the company leased us a car, takes care of our housing, and we receive a daily per diem to accommodate the higher cost of living. We were especially grateful to find friends who wanted to rent out our condo while we are gone. Our monthly expenses are simply groceries, entertainment, gas, and our phone bill (slightly higher with an international plan). Even though I’m not making much from working at Starbucks, we are still in a position where our income is greater than our expenses. So what will we do with the extra?

Double mortgage payments

I’ve seen many arguments regarding the decision to pay off a mortgage ASAP or not. In our situation, we had planned to have a 20% down payment for our home but due to various reasons, we ended up closing before we reached the full 20%. I hate throwing away money to interest; that’s why we worked hard to pay off $30,000 from student loans in 9 months. Our plan is to make our usual mortgage payment and add to that our renters’ monthly payment. Any extra income from my job and additional savings will likely go toward the premium as well. It should take about 7-8 months to reach the 20% mark and drop the PMI… just in time for us to come back home!

After that…

If the extra income continued, we would consider additional investing after we dropped our PMI. We don’t sound like an exciting couple by putting all our extra money toward a mortgage and not a sweet vacation. However, we are intentional to plan for fun! My husband and I are both savers, not spenders, so ever since we got married 3 years ago we’ve made sure to devote a monthly chunk of income into entertainment and vacation savings. Life wouldn’t be too exciting if we were debt free and bored! I can’t complain that we won’t have extra money to continue putting toward the mortgage or investing; these extra 7 months will save us a lot of interest in the long run.

What would you do if you had extra monthly income?



My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.


  1. If I had the extra income I too work work on paying down my mortgage but at the same time saving some of it as well. I would find a percentage for a certain amount to go towards the house and the other portion to savings/investing.

    • I haven’t gone too far into detail since its only 7 months of extra income but I’d be curious to see which scenario would save us more: paying as much as we can until we drop the PMI or split it from the beginning with savings…

  2. I’ve been throwing all of mine towards student loans. Expect them to be gone this month!

    • Nice!!! Getting rid of student loans was such an awesome feeling! Congrats on your hard work!

  3. I think it’s great to be unexciting. Actually, exciting to me is being out of debt and having lots of choices with my money. I think you’re very smart to use the money to get ride of PMI.

    • Thanks, Kim! It’s easy to stay in “get out of debt” mode once debt is gone but we’ve been able to allow ourselves to have fun and not be boring, debt free penny punchers 🙂

      • Penny pinchers 😉

  4. We’re just starting to think of this ourselves as income ramps up. I think we’re likely going to be boring and split it somehow between extra payments against our mortgage and investing.

    • Smart idea (at least in my opinion!) if you aren’t pressed or money or deadlines I’d make sure you allow some room for a little fun as well!

  5. I would look at the interest rates for the loans first. I would pay down higher rates first! 3 or 4 percent loans I would probably let ride particularly if it is a fixed interest rate.

    • That’s how we tackled our student loans. The snowball effect Dave Ramsey talks about really made our 2nd and 3rd student loan shrink quickly!

  6. Investing versus increased mortgage payments–which first, do you think? Perhaps depends on interest rates and the market.

    • Great question-I wondered the same thing in my repsponse to Jon at Money Smart Guides!

  7. I’d be tempted to spend the extra money, but I’d get a grip on myself and put it towards debt or investments where it would have a bigger impact!

    • We have been more lenient with entertainment but I’m still using our homemade excel sheet to track out spending/saving. We want to be confident going into retirement but we also want to live a little while we’re young and limber! There’s been plenty of free things to do and we even went on our first hiking trip last weekend.

  8. I couldn’t agree more with this. So many people end up spending their extra income frivolously, but it’s a great opportunity for saving and investing. It’s just a bonus, so pretend like it’s not there and pay off debt!

    • That’s exactly what we did when we got our first jobs out of college- keep living like broke college kids & put every penny to killin off student loans! We still have the college mentality 3 years later but we make sure to budget for fun stuff.

  9. I like your focus on nixing the mortgage debt. If not for the PMI reduction, but also to be free of a housing payment. The mortgage interest deduction benefit is over-blown…who in their right mind would spend dollars to save pennies? When you’re comfortable, buy more real estate and let your renters fund your retirement. Is housing less volatile than equities? Much more to say about this, but I like what you’re doing.

  10. Thanks, Hunter! That’s our current plan- stay in this condo until we outgrow it (5-7 years depending how many kids we have) and then rent it out. Since we live in a college town there is even the option to rent our place for a game day weekend during football season and make $1200-1400!! We plan to rent out a few big game weekends and simply stay with my parents who live 40 min away.

  11. In my opinion, paying off debt faster is always a great idea, even your mortgage. I would probably not put 100% of extra income toward a mortgage, but definitely some.

  12. We’ve been debating what to do with my income and haven’t come to a perfect solution. There won’t be much after tithe, retirement, overhead, and taxes, anyway, sadly! The question is what to do with that.

    • You are right- even when we see extra income it’s not as much after all you mentioned. Any graph on how interest works will show you that the little extra you save or use to pay off debt makes a big difference!

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