What To Do With Your Money

Spend it! Yay!

No, no no! Too much spending now and you won't have any money left when you need it later.

Person balancing a coin on a finger next to a piggy bank and a calculator.

Budget

The first step is to budget: work out what you need to spend (for food, rent, travel, and so on.) and set aside money for each of those.

Note: our examples may not match your life ... so please use your own costs as we go along.

Example: start with $700 for a week

$100 for food
$210 for rent
$45 for train fares

That comes to $355 and you are left with $345

Then put some money aside for things you will need to pay for soon:

$30 toward the next electricity bill
$20 toward your phone bill
$15 into your clothes budget
$25 toward your insurance

That comes to $90 and you are left with $255

Then put some money aside for fun things:

$30 for one restaurant meal
$20 for snacks during the week
$20 for a movie night

That comes to $70 and you are left with $185

Tip: get the money as cash and put it into marked envelopes so you aren't tempted to use it for other things:

Three paper envelopes containing cash, labeled Phone, Movies, and Clothes.

Emergency Money

There are times you need extra money. Something needs fixing. Or you suddenly have to travel somewhere far. Having some emergency money gives you a good feeling of confidence.

$20 for the emergency fund

You are left with $165

Pay Off Debt

Debt (particularly Credit Card debt) has high interest charges. Your best "investment" is to pay off that debt

You have a credit card debt of $600? Put your $165 straight into that.

It will save you a lot of interest later on. In a few weeks you will have no debt and can think of doing other things with your money.

Employer Matched Retirement Savings

Some companies will match your investment in retirement savings (up to a certain amount). This is like free money!

You put $50 into retirement savings, and your employer also puts in $50. That's $100 in your name!

This is one of the best investments if it is available.

Future Fund

There are things you want to do in the future. Study at University. Go on a vacation. Buy a house.

Set up investments for those!

No debt to pay off? Put your remaining money into savings.

You could put the money in:

a bank savings account
stocks and shares or unit trusts
property (a trust, or buy something and rent it out)
a small business project (maybe with friends or neighbors)

Each choice has a different return (how much you get back) and different risk (chance of losing money). Bank savings is usually safest but grows slowly. Stocks/property/business can grow more, but can also go down, and may have lots of costs.

Learn about investing.

Retirement

You may want to retire one day. It takes a LOT of money to do that. Better start saving now.