I would use free cap money in one of several ways. Here are the options depending on your team situation:
1. Sign one year deals on free agents or upgrade where needed. If there is a free agent upgrade, to say a backup or something, you can use that cap room to get a better player, and that one year deal means that he won't burden you next year. (of course, you also cannot re-sign him). But say, you have $10M cap room and there is a free agent backup QB you want, you could even overpay to ensure you get him, knowing it's not going to affect you next year.
2. Sign backup players to longer term deals and use cap room to cut players. Same example. Let's say you want this backup QB to be your backup for the next three years, you sign him to a three year deal at a reasonable rate, but now you have too many players on your roster, and your current backup QB is signed for 3 more years. You can use your excess cap room to absorb the cap cost of cutting your current backup.
3. (too late now) Use cap room for trades. Sometimes teams put contract year players on the trade block (or other players with albatross contract they want to get rid of for cap reasons. Maybe you can use your cap room to take on a wildly overpriced player for one year to help with your playoff push.
4. Extend your own players. Instead of waiting until the last sim of the season to do extensions for your current players, do them early to help you get a head start on cap planning for next year. You could even contemplate extending players not coming up on a contract year, if you think there will be long term savings from a deal.
5. Save your cap room. Just keep your sheet clean and go after the big money free agents next offseason.
Obviously, your team situation matters. If you are a playoff team making a push, you might use your cap more aggressively. If you are building up, you might lean toward saving and roster building slowly.
