6 Things You Must Do If You Direct Deposit More Than $5,000 a Month

When you’re earning a small amount each month, allocating your money can seem like a no-brainer because so much of it ends up going toward expenses. Once you hit that higher income milestone, however, more opportunities are at your disposal — and with it, the pressure to wisely manage your finances.

But fear not, experts say all you need is to adopt some savvy money moves.

“If you have a direct deposit of more than $5,000 a month into your bank account, you’re in a prime position to not just manage, but actively grow your wealth,” said Andy Chang, founder and CEO of The Credit Review.

Below are some strategies to make the most out of your higher income.

One of the first things you should do when it comes to setting up your finances, according to Jake Hill, CEO of DebtHammer, is to come up with a plan for how your money will be distributed. 

“This is where your budget comes to play,” he explained. 

For example, determine how much will be needed for things like rent, car payments, insurance, debt repayment and other bills, as well as how much will be needed for things like retirement savings and investing. 

“However much money is left over for strictly savings, make sure you are using a high-yield savings account in order to get the most out of that money.”

Experts note that one of the first steps to a financial plan is to ensure that there is a sufficient emergency fund built up in case of an emergency or layoff. 

“Typically, a good emergency fund will be large enough to fund three to six months of living expenses,” said Justin Rush is a certified financial planner at Nemes Rush.

Dennis Shirshikov, head of growth at Awning, says optimizing your emergency fund is a must.

“When you’re direct depositing more than $5,000 a month into your bank account, it opens a plethora of opportunities and responsibilities that, if managed wisely, can significantly bolster your financial health and future security,” Shirshikov said.

“Traditional wisdom suggests having three to six months‘ worth of expenses saved, but for higher income levels, adjusting this to a more nuanced understanding of one’s financial obligations and lifestyle can provide a more tailored safety net.”

“Once your income rises, paying off debt should be a priority,” said Rush. “Make sure all credit card balances are paid off in full each month to avoid interest charges.” 

For those with outstanding credit card debt, he advises coming up with a monthly plan to chip away until it’s fully paid off. 

“The same can be said for high-interest student loans.”

While older generations can rely on pensions and social security to fund a happy retirement, Rush says younger generations have no such luck. 

“Make sure that you’re contributing a sufficient amount through retirement plans at work,” he urged. “Some employers will even match employee contributions up to certain percentages.”

At the very least, he says to make sure you’re contributing enough to max out any potential match. 

“For those with no employer retirement plan, consider setting one up yourself. For example, a traditional IRA (Individual Retirement Account) can provide a tax deduction while also providing a vehicle for retirement savings and tax deferred growth.”

Ann Martin, director of operations at CreditDonkey, advises that if you direct deposit over $5,000 a month, it’s time to start automating your savings. 

“Those with an income at this threshold are in a good position to build an emergency fund or beef up their retirement savings, and automation makes that process easy,” Martin said.

“Simply decide on an amount you can afford to save each month based on your budget and create an automatic transfer for this amount. Your savings will be out of sight and out of mind while having a chance to grow.”

“Beyond the standard 401(k) or IRA contributions, this income level allows for exploring nonstandard options like real estate investments, or even angel investing, which, while riskier, can offer substantial returns,” said Shirshikov.

“Remember, the goal is to balance risk with the potential for growth, and diversification is the key to achieving this balance.”

Moreover, he says to consider leveraging your $5,000 income for financial planning with a forward-looking lens. 

“For example, a colleague of mine once shared how they used similar financial positioning to fund an education savings account for their children early on, significantly reducing the burden of future educational expenses.”

This proactive approach, he says, not only secures your immediate financial health but also lays a foundation for generational wealth.