How to Decide Where Your Money Should Go

Should you save it? Spend it? Pay off your debts? Here's how to prioritize your finances if you have a limited amount of cash on hand.

Buckets of Money
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Let's face it: A lot of things you spend money on aren't exactly a lot of fun. It's not like you're going to show off the new brakes on your car on Instagram, or the fact that you finally have your student loan debt below the six-figure mark.

So it can be hard when you're dealing with a finite amount of money to feel great about funneling so much toward those less-sexy goals, when you'd much rather spend it on a vacation, a new car, or dinners out with friends.

And all those experts who advise skipping out on small pleasures, like your daily latte or avocado toast, might be missing the mark. "The whole idea of rice and beans, beans and rice is cool in theory, but it's just not realistic," says financial expert Aja Dang, on a recent episode of the Money Confidential podcast. She burned out on the savings front after she scrimped to pay off her credit cards, car loan, and student loan. "I didn't feel excited about everything that I had accomplished, so what I started to do was put aside money to treat myself—like a really nice dinner, or my very first goal was laser hair removal."

Read the full Money Confidential transcript

So how do you decide how to prioritize your financial goals when you have so many options and some seem a little less exciting than others? Start with these tips.

01 of 06

Decide what's truly important to you

Your priorities may not match up with what financial experts say—or what your friends are doing—but if something is incredibly important to you, keep it in your budget. "It's your money, it's your journey," Dang says. "You need to think about whether it's important enough to replace that money going to something that's more a quote unquote necessity, right?" So if brunch with friends on the weekend is essential for feeling good, carve out a small amount of your budget for it.

Just don't go overboard—you don't want to justify every potential expense and end up not achieving any of your financial goals.

02 of 06

Focus on one major goal at a time

It may feel like a good idea to put a little money here and a little money there—a little toward savings, a little toward your student debt—but it can be more effective to focus all your efforts on completing one goal and then move onto the next with that sense of accomplishment.

"I have worked with hundreds of people trying to pay off credit card debt who will pay a little extra on each card every month rather than put all their extra money towards one card at a time," says Lauren Anastasio, CFP and director of financial advice at Stash. "By choosing one priority and putting all of your energy towards it, you can stay focused and accomplish your goals sooner."

03 of 06

Get specific about longer-term goals

"Thinking about your future and envisioning what it could be like to live the dream life is essential to getting leverage on yourself to start prioritizing saving for it," says Julia Carlson, founder and CEO of Financial Freedom Wealth Management Group. "If you have a big dream—home, retirement, or vacation—that is pulling you towards it with every dollar invested, you will start getting excited about watching your money grow to realize your goal."

You might want to consider creating a vision board or making your screensaver something that keeps it top of mind—so your eyes are consistently on the prize.

04 of 06

Consider interest rates and returns

"Prioritize based on the type of debt that you have," Anastasio says. "If you have high-interest rate debt, like credit card balances, you will benefit from focusing on paying those off in full before starting to put money in an investment account. The amount of interest you're being charged is likely significantly higher than what you could expect your investments to return in the same amount of time. If you have a low-interest rate car loan or student loan, you can feel comfortable continuing to make the minimum monthly payment and put all of your extra cash towards investing."

05 of 06

Press pause before you purchase

"Pause before making a purchase, especially if you're shopping online," Anastasio says. "You may be very tempted to take advantage of discounts, so if you find yourself about to hit the checkout button, step away and revisit the site later. You can even try setting yourself an alarm to revisit in 24 hours—you may find the thrill and temptation to spend is already gone by the next day."

06 of 06

Don't beat yourself up if you go off plan

"It's easy to beat ourselves up if we deviate from our budget or accidentally overspend on a night out or holiday shopping," Anastasio says. "Managing your money is a skill you're building for the rest of your life, not a one-time endeavor. By being nice to yourself when your financial habits are imperfect, you'll avoid unnecessary financial anxiety or stress."

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