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.
Note: our examples won't match your life exactly ... prices and lifestyle are different all over the world, so use your own costs as we go along.
The first step is to budget: work out what you need to spend money on (food, rent, travel, etc.) and set aside money for each of those.
Example: start with $600 for a week
- $100 for food
- $110 for rent
- $45 for train fares
That comes to $255 and you are left with $345
Then put some money aside for things you will need to pay for soon:
- $30 towards the next electricity bill
- $10 towards your phone bill
- $15 into your clothes budget
- $25 towards your insurance
That comes to $80 and you are left with $265
Then put some money aside for fun things:
- $25 for one restaurant meal
- $20 for snacks during the week
- $20 for a movie night
That comes to $65 and you are left with $200
Tip: get the money as cash and put it into marked envelopes so you aren't tempted to use it for other things:
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 $180
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 $180 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 is $100 in your name!
This is one of the best investments if it is available.
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 $180 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)
Learn about investing.
You may want to retire one day. It takes a LOT of money to do that. Better start saving now.