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What Should You Do With Your Savings?

  • March 01, 2021

Step 3

If you’re in the position to have a little cash left over at this point, a lot of options open up.

The best explanation of how to handle money I’ve ever come across is this flowchart from the Personal Finance subreddit. In clear, unambiguous terms, it shows you what you should do with your money depending on where your finances are, and how to plan for the steps to come. It generally mirrors what a good book on the subject will tell you and what most advisers would recommend.

You may also be wondering, given all the recent coverage of “meme stocks” like GameStop and AMC, if you should invest in individual stocks. Time and time again, all the data show that investing in low-cost index funds is the surest path to financial independence. It’s not the most exciting way to invest, but it is, in the long run, the most reliable. (That said, if you want to gamble a few bucks you’d be fine losing, have at it. Just never gamble more than you’re OK losing.)

For more advice on investing, check out Smarter Living’s Young Person’s Guide to Investing, and if you’re interested in hiring a professional adviser, read up here on how to find one.

If you’re in the position, also perhaps consider donating to those affected by the pandemic — here’s some advice on the best way to do it.

Step 4

Erin Lowry, author of “Broke Millennial Talks Money,” said she and her husband were able to save a surplus over the last year because social events, like weddings, and a planned international trip were all canceled. They used that extra money on a major purchase: a car.

“Truly, it was an emotional decision based on the feeling of being trapped through the peak of the pandemic in New York City and that once things opened, even slightly, it didn’t feel like we had a safe way to visit loved ones,” she said. “It turned out to be a prudent decision in several ways, but it’s also a decision we knew we could reverse by selling the car.”

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