Dear Jackie Cheapster: I’ve been brown bagging it to work, and have been saving about $200/month. What should I do with that extra dough?
Lurve,
Mister X
Dear Mister X,
First off, congrats on saving that money! That takes a lot of discipline. As for what to do with that extra cash, I would spend some time thinking about what kinds of goals you have for the next year, whether it’s a creative goal, paying down debt goal, or related to a major life event such as moving or getting married.
Put It In Your Proverbial Piggy Bank.
The easiest thing to do is to set up an automatic withdrawal on a recurring basis (i.e., every other week, or once a month) and put it in a separate account from your savings. The harder that account is to get to, the better. I personally like to have a separate account for my savings goals. Another thing you could look into is SmartyPig, where you can automate your savings, ask your friends and family to contribute toward your goal, and get a sweet gift card once you’ve reached your goal. I learned about this through the Empowered Dollar blog and plan to open an account in the new year to save toward a new (snooooze) car.
Pay Down Debt
If you have credit card or student loan debt, you can put the $200/month to make some headway. If the interest rate on your credit card debt is higher than your student debt, which is usually the case, then I recommend paying down the credit card debt first, it will save you money on the long run. If you want to focus on your student loan debt, if you are paying more than the minimum, put it toward the principal amount, not toward the interest. If you put money toward the principal, you’ll lower the amount of interest, saving you money in the long run.
Spend Some, Save Some.
If putting it all toward savings or paying off debt feels like a total downer or restricting, then feel free to spend some on pure awesome fun, and save the rest on a grown-up money goal. I personally have little pockets of “free cash” that I have the liberty of spending as I please: Merv, my doggy-piggy bank, where I cash in my chump change. About once a year I head over to one of those Coinstar machine to cash in for an Amazon gift card that I can spend on whatever I please. If you opt for a gift card there’s no fees involved. Maybe you can divvy up your savings so you don’t feel as if you’re living a boring, deprived existence.
Have a pressing money-related question? Shoot Jackie Cheapster an email at Jackie[at]cheapsters[dot]org.
