Prioritizing your seasonal income

There’s a lot of commerce happening at the end of the year. That’s why quite a few people pick up extra, temporary work during the holidays. Retailers need the extra help getting through to the end of the year, so it’s a great time to make extra money if you’re so inclined.

But what do you do with that money? Some people use the extra money to fund their holiday spending. That’s pretty reasonable, but is it the best way to spend your extra funds?

Your priorities are your own, of course, but most experts agree that the smartest use of extra money (during the holidays or any other time of the year) goes in this order:

1 | Bring all living expenses current

Top priority should always go to making sure your living situation is stable and secure. That means making sure your mortgage or rent is up-to-date and that all of your utility bills have been paid. Having adequate shelter is a fundamental human need, so if you’ve fallen behind in any of these categories, make it your priority to get caught up.

2 | Catch up your secured debts

After your mortgage, your largest debt is usually your car loan. When you fall behind on your car loan you run the risk of having your vehicle repossessed, which can severely harm your ability to continue earning an income. Additionally, while a vehicle isn’t really an investment (you can’t really expect to make money by selling your car later), it does represent a sizable accrual of equity. Losing your car means losing all the money that you’ve poured into the car over the years. That’s why it’s important to make sure any possessions purchased on a secured loan are current.

3 | Catch up your unsecured debts

If your living situation is stable and your secured debts are up to date, your credit cards and other unsecured debts are next on the list. Generally speaking, defaulting on unsecured debt won’t result in a loss of property, but the damage caused to your credit rating and the possibility of future wage garnishments could put you in a very difficult financial situation for years to come. So if you’re behind on these kinds of bills, now’s the time to play catch-up.

4 | Manage repairs

Nothing sets you back financially faster than an unexpected disaster. Fortunately, there are certain things you can do to mitigate the possibility of these disasters happening. By taking preventative steps you can avoid small problems becoming big problems. That goes from home repairs, car repairs, and even your personal health. If you’ve been putting off any of these small fixes because you didn’t have the money, temporary seasonal income is good opportunity to address those issues and prevent a potential major disaster.

5 | Building savings

If the bills are paid and everything and everyone is in good health, then your next step is to work on building your savings. Having a solid base of accessible cash is crucial in case you’re ever faced with an unexpected financial emergency – including major repairs, large medical debts, or sudden joblessness. Most experts agree that you should try to have 3-6 months’ worth of income available in savings.

Of course, if you’ve already addressed all five of those areas then you should feel pretty confident that you’ll make smart choices with whatever income is left over.

Jesse Campbell is the Content Manager at MMI, focused on creating and delivering valuable educational materials that help families through everyday and extraordinary financial challenges.

  • The Consumer Federation of America (CFA) is an association of nonprofit consumer organizations that was established in 1968 to advance the consumer interest through research, advocacy, and education. Today, nearly 300 of these groups participate in the federation and govern it through their representatives on the organization's Board of Directors.
  • The National Council of Higher Education Resources (NCHER) is the nation’s oldest and largest higher education finance trade association. NCHER’s membership includes state, nonprofit, and for-profit higher education service organizations, including lenders, servicers, guaranty agencies, collection agencies, financial literacy providers, and schools, interested and involved in increasing college access and success. It assists its members in shaping policies governing federal and private student loan and state grant programs on behalf of students, parents, borrowers, and families.

  • Since 2007, the Homeownership Preservation Foundation (HPF) has served as a trusted, neutral source of information for more than eight million homeowners. They are partnered with, and endorsed by, numerous major government agencies, including the U.S. Department of Housing and Urban Development and the Department of the Treasury.

  • The mission of the U.S. Department of Housing and Urban Development (HUD) is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD works to strengthen the housing market in order to bolster the economy and protect consumers; meet the need for quality affordable rental homes; utilize housing as a platform for improving quality of life; and build inclusive and sustainable communities free from discrimination.

  • The Council on Accreditation (COA) is an international, independent, nonprofit, human service accrediting organization. Their mission is to partner with human service organizations worldwide to improve service delivery outcomes by developing, applying, and promoting accreditation standards.

  • The National Foundation for Credit Counseling® (NFCC®), founded in 1951, is the nation’s largest and longest-serving nonprofit financial counseling organization. The NFCC’s mission is to promote the national agenda for financially responsible behavior, and build capacity for its members to deliver the highest-quality financial education and counseling services.