How should I use my money?

[duckybelkins]

I get roughly $150 a month. This is money that I can use for anything. All the other money I get is for groceries, school, bills, rent, necessities, etc. This $150 a month is the only money I get for anything extra.

I could easily spend this money on anything (I haven't bought clothes in a year). But I know it can be used in better ways, I'm just not sure *what* ways. I know the information is out there, I just don't know how to find it, you know?

So I guess, long story short, how would you use the money? Would you split up a certain percentage of it for saving/investing, shopping, charity? What kind of savings account should I put it in if I want it to make me more money over time?

Also, if anyone has any advice on how to pick charities for donating to I would greatly appreciate it! I know some charities use their money more wisely than others.

I've tried Googling all of this in the past but it's overwhelming and I get very confused very quickly.

[James]

Before talking about how to spend that money, can you talk more about your goals and priorities?  And also talk about your current financial situation, whether you have an emergency fund, etc.

[duckybelkins]

I'm a college student right now who is fully supported by my parents. The money I get is from rent and utilities that my boyfriend gives me. So I'm lucky that I have no current financial priorities but I also have no means if my parents lose their money.

I'm really really worried that my parents are going to lose their money and I feel useless that I'm not bringing any money in. Unfortunately, the time I don't spend working on school is usually time spent sleeping.

It feels weird to have financial goals when I'm not making any money, you know? But if I were able to start making more than $150 a month my goals would probably be as follows:

1. Try to save up enough money so if my parents do lose their money I'll be okay financially for at least 4 months. 4 months is enough time to get me through a semester and hopefully find a job. This way I won't have to drop out of classes halfway through the semester or whatever.
2. I'd like to, somehow, make enough money to cover my bills, at least the basics.
3. I'd love to somehow pay for my own schooling.

After that, I dunno! I know that I want to learn how to budget my money wisely and learn to live comfortably on as little as possible.

[alandjackson]

Since it sounds like it isn't your money and you have no way to support yourself, you though probably be saving 100% of it as a rainy day fund (and to purchase any extra necessities).

As a college student, paid jobs related to your field are a great benefit to your career and can boost your savings and give you a little fun money.

[James]

That helps a lot, definitely sounds like you need an emergency fund.  Time to add up all your expenses for 4 months, since that is your stated goal.  If all incoming money stopped tomorrow, what is all being spent that you would need to replace?  Add these things up to cover a 4 month period and you have your goal, and I'd suggest a separate savings account, not some checking account with money moving in and out and debit card access.  Might even want to put it at a separate bank just to keep it clearly set aside.

Your parents are paying for your freedom, not having to work gives you extra time for other activities.  The best way to honor that gift from your parents is to turn that free time into something productive.  Volunteering is perfect if you can't find anything else, I'm sure there are non-profits in the area that could use your help, and you would benefit greatly in the exchange.  You could also start looking for a very part time job and be really good at it.  That does a few things.  It gives you an "in" if you ever needed more employment, it gives you employment history and references for the future, it gives you a small amount of income you can throw at the emergency fund, and it gives you personal satisfaction.  You don't need to pick a job that pays well or is high stress, try to find something that is more like an internship, providing a small amount of pay in exchange for learning and doing something you enjoy.

[twinge]

If you are doing ANYTHING that earns you money anywhere (e.g., in the summer, on a Saturday etc) , I would put the equivalent of what you earn in a Roth IRA --maybe split 2/3 cash investment 1/3 stock index.  That way you are "holding" the space in a tax-advantaged account during these early years and yet you could still take it out in an emergency.  If you don't have an emergency, you have money in an account that can grow tax-free for a LONG time--and you can switch it to more aggressive market investments.

[duckybelkins]

Thank you so much for the advice! How do I go about putting my money in a Roth IRA? Do I just waltz down to a bank and ask about it?

[CNM]

My advice to you is to establish a rainy day fund and look for a job/internship/volunteer opportunity that relates to your major.  I was extremely lucky to have parental support so I could do an unpaid internship in international development when I was in college.  In fact, it really helped me decide that I did NOT want to go into that field when I graduated!

In any case,  opening a Roth is not complicated.  Most banks don't have Roth IRA or any sort of investment services.  I have my Roth at TD Ameritrade, primarily because I buy the investments (stocks, mutual funds, ETFs, etc) and they have a pretty low transaction fee for online purchases.  I used to have an account with Scottrade, and they charged something like $7 a trade.  There are a lot of options.  A Google search should give you a bunch of other options.

[James]

Like CNM said there are lots of options.  Nothing wrong with Vanguard for an obvious choice, but read up on options since you have your whole life ahead of you to invest.  That is another thing you can do with your freedom time...  :)


The reason twinge mentioned earning any money is that IRAs, including a Roth, require income to make contributions.  So if you earn X amount of dollars you can contribute X amount to a Roth, up to $5,500 this year.  It doesn't have to be the "same" money, you could earn the money in the summer and deposit money from your parents in a ROTH throughout the year, but it must be earned by employment some time during the year.