What should I do with my money? This is one of the most common questions that clients have when they come into financial planning work. And, for better or worse, it’s a question I really can’t answer for them! 

Lurking beneath this question is another, more central one: Am I doing the wrong thing with my money? And that’s where I can give you a more definitive answer: No! Obviously, there are some important, widely agreed-upon moves to do that are not financially wise (think: credit card debt or not saving anything). But the ultimate answer of what you should do with your money is deeply personal.

To help get to the real answers, I like to reframe this question for my clients: What do you want to do with your life? Where are you headed and what direction do you want to take it in? After your basic needs are met (see this), then what? 

For some, feeling secure is paramount. For others, planning for a major future life transition is the priority. Sometimes the focus is on having the right home and environment. Other times, people simply don’t know, which is totally normal and okay! In that case, we plan with lots of flexibility in mind should an idea pop up in the future.

Bottom line: Put intention behind what you do with your money – even if you don’t have a clear sense of the “what” yet. 

The “Shoulds” of What to Do With Your Money

Plenty of financial gurus will tell you what you “should” be doing with your money. But sometimes what you choose to do won’t be the optimal choice, according to the experts. The right thing to do is what’s right for your own situation and, most importantly, your own well-being. 

Here are some common financial moves that may seem “optimal” but aren’t always the best match for your intentions: 

Foregoing a Safety Net

Having a safety net often means having a certain amount of cash sitting in a savings account with little to no return. Ideally, we want to have those hard-earned savings grow. But if you have unexpected expenses or your other investments go south, the lack of a safety net ends up being not so safe (or financially optimal)! 

The Fast-track Investment Strategy 

Another seemingly optimal financial option is having an investment strategy that is not diversified or is almost 100% in stocks (the fastest growing asset class for most people). Investing where you’ll earn a lot of money quickly sounds like the best move to many people.

But while a 100% allocation to stocks sounds like a highly profitable bet, the likelihood is that you’ll get cold feet at some point. The best investment strategy keeps you invested, even if your portfolio might grow less over time. 

Paying Off Your Mortgage Quickly

The impulse to pay off your debt as fast as possible can be tempting, especially when it comes to a looming mortgage amount. The financially optimal decision may be to pay your mortgage according to schedule, leaving you with money to live your life. 

What are some examples of things to do with your money?

Now that you’re getting the idea, a question remains: How do we move your money to support your life vision? Here are some examples of what aligning your money with your intentions might look like.

Owning the place you live – or not

Many people, especially those entering the latter part of their careers, want to think about owning the place where they live. When people ask what to do with their money, owning property is a top answer. Owning a home is also the alternative to “throwing money away” on rent (which I don’t think is always true, by the way). 

Home ownership is one of the biggest wealth builders for families. It’s considered a type of “forced savings” because of the low, but steady, home price appreciation. Owning a home can bring an incredible sense of security for people not only as the literal roof over their head, but also because they’re building up wealth. 

But the dream of owning a home isn’t always what it seems. First, you have to get your hands on the amount of money you need to afford a home. Second, you need to know what you should spend on a home given your situation, lifestyle, and goals. Those amounts can end up being two very different numbers. The truly optimal financial decision balances owning a home with being able to still do the thing you enjoy – like traveling, saving for your future self, and more. 

If owning a home doesn’t line up with your intentions for your money, you may choose to rent instead. This isn’t a bad decision! Renting can open up a very different and flexible planning strategy. Instead of a home, your biggest asset lies in the strategy for your savings and investments. This means you’ll need to be more intentional with the money that you would otherwise use for a down payment. If you invest that money wisely, you’ll still end up with a large asset, just of a different type. 

Changing careers or starting a new business 

The idea that someone will be at a company for 20 or 30 years is less and less common these days. With bigger changes in jobs and careers comes a lot of financial worries, too. And the hardest job or career move often involves making less money, not more. 

Again, this isn’t necessarily a bad thing! We simply need to figure out what the change in income actually means for your life. And with clients, I’ve found it’s not uncommon to make more money in a career change for something more fulfilling. So what might this look like? 

First, we start with understanding what the transition may look like and what it may cost in terms of time and money. Do you have savings to support the transition? Or do you need to come up with a plan before you make the leap? It’s also helpful to picture what life may look like after the switch. This helps us understand if the ‘cost’ of the switch means investing in additional schooling or a permanent change in lifestyle (up or down). Then, we bridge the gap and come up with a game plan for how to execute on it. 

Planning for your future self 

Intertwined with this goal is the question: What am I actually saving for? Maybe you want to stop working completely at a certain point or just want the option to work less. We define what that looks like in broad terms, and then estimate how much you need to save each month (and how to invest it) to have that option. 

Considering this amount of money in your planning is critical to keeping true to your intention. But keep in mind that your ability to save might ebb and flow over time. For example, you might not save money toward this goal while making a career change or starting a family. And that’s ok. Putting context (rather than pressure) around your goal will help you achieve it. 

Go on vacation (or other experiences that enrich your life) 

This is a fun and less intimidating one. Yes, big picture financial items are hugely important. In my mind though, planning for the experiences that build a rich life is equally as important. In fact, spending on experiences is proven to be a fantastic (and happy-inducing) use of money. They are, dare I say, priceless. 

First, we imagine what an ideal year of spending on travel or experiences may look like – it’s ok to dream big here! Next, we estimate a monthly savings number and automate that amount into a special account. That money is then used every time you want to have one of those exciting, endorphin-inducing experiences.

If you have enough cash flow each month to do this, great. But even if you don’t, we can still set aside some amount so that these experiences are part of your financial focus. 

Remember, your financial situation will ebb and flow over time. If you already have the “muscle memory” of saving for trips and things that make you happy, you’ll be able to increase that amount easily when your cash flow increases. Use these experiences as a counterweight to just saving up for a future lifestyle change or bigger goal. They give you a tangible reward after working hard to build up savings; plus, planning for experiences adds more flavor and fun to your money!

My message is simple. When you ponder the question of what to do with your money, first think about what you want out of life. Try to make a connection between the money in your life and what it can bring you. And lastly, not every monetary decision you make may align with what the gurus tell you that you “should” do. In their eyes, your financial decisions may not be “optimal.” But that doesn’t matter. What matters is that your money plays an optimal role in enriching your life. 

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