5 Things to do When You Start Actually Making Money.

If you’re lucky enough in life, you’ve hit that weird spot where you’re not living paycheck to paycheck anymore, but you also don’t qualify as “wealthy”.

You know that you have extra money at the end of the month, and that you can afford things like going out to eat without worrying about the cost. You also aren’t planning a month-long stay in Bora Bora. But…maybe eventually you do want to get there. Or at least as close to a private yacht in Bora Bora as you can get. You know about the stock market, maybe have dabbled a little bit with The Motley Fool's lead, but is that going to be enough? Do you have to sock away every extra dollar you make until then? Or, should you invest it all in the market and hope for the best?

The answer is, it’s neither of those things. You can have your cake and save some money too. Here’s how:

ONE

Pay Down your Debt, Including Those STUDENT LOANS.

Millions of Americans struggle for years to try and get out from under the crushing weight of debt. It can become an endless cycle of fees and interest. But paying off those high-interest credit cards or paying down your student loans can significantly improve your financial outlook. Take a look at your credit card balances and figure out a paydown strategy that works for you. If you have student loans, figure out whether you have private or federal loans. If you have federal, see if you qualify for consolidation or a program like PAYE (pay as you earn repayment plans). If your student loans are private, see if you can refinance at a lower rate now.  

Create a Real Budget

A budget is just having a plan on how to spend your money.

Take a look at your cash flow, the money that flows into and out of your bank account. Pay attention to where the money that is left after paying bills is going. And then prioritize, do you spend more a month on eating out than you want? Make an adjustment. Enjoy going to a movie every month, make sure to allocate some cash to do that. Include things like setting aside money for your debt, savings and lifestyle. If you’re already budgeting then make sure to take an in depth look at your plan once a quarter to make sure nothing gets away from you. 

Fund that Emergency account, Retirement and Savings

Some experts will recommend having 3-6 months worth of necessary spending (rent, mortgage, utilities, etc) in your emergency fund.

An emergency fund is set aside to cover unexpected surprises that can occur, such as a job loss, medical or dental emergency, urgent home or car repairs, or unplanned travel expenses. These funds are usually kept in liquid accounts like a money market or savings account. 

Invest in your FUTURE

This is the time to catch up on or continue to take advantage of retirement contributions. If your employer offers a 401(k) with matching benefits, this is basically free money. Max that out if you can, you will see immediate return on your investment with the match and gain a tax advantage you can use during retirement.

If your employer does not offer retirement benefits, it will pay big time to speak with an advisor about setting up & funding your own retirement account. After you have saved what you want into your emergency fund and started contributing to your retirement, it’s time to start saving for anything and everything else. Buying a house, having a child, planning a wedding, that trip to Bora Bora, they all will come from here. This is the money that will be set aside for a reason other than living. Speak with an advisor about what that looks like for you, because there are several investing options available that can help you grow this money while you save. 

Have Fun

You work hard for your money, so don’t forget to enjoy it.

Prioritize your savings goals, but don’t forget to have fun with the rest. It might be even more enjoyable knowing that you aren’t going to feel guilty about spending it since all of your ducks are already in a row.

Another thing to keep in mind as your income grows is a quote I once read, “When you raise the ceiling, don’t raise the floor”.  Try your hardest to show restraint when your salary rises by not allowing your expenses to go up too. And at some point in the near future, if you haven't already, hire yourself a financial planner.

While you may not have a ton to invest at the moment, you probably can afford to have a professional create a plan for you and help you stick with it. Your future self is depending on you now.

-Sylvia McCormick Burns (Co-founder Oakview Wealth Solutions)