Here are the best ways to use your gift money, ranked from most important to least important:
- Bad Debt - Pay off bad debt. This means paying off credit cards with high interest rates.
- Insurance - Make sure you have auto, health, disability, and renter’s insurance expenses covered. If you have a significant other who depends on your income, add a life insurance policy to the mix.
- Starter fund - You need some money set aside for day-to-day living expenses. This includes rent, groceries, gas, and cell phone. This account should have two to three months of living expenses all the time.
- Emergency fund - Set aside some money for car repairs, doctor and veterinarian visits, job loss, or travel due to a family emergency.
- Down payments - Depending on where you live, you may have to think about buying a car or making a down payment on a house.
- Student loans - If you have private loans, pay them off before federal loans.
- Long-term savings - Plan for retirement by investing in a Roth IRA (individual retirement account) if you have earned income.
- Vacation - Thinking about going somewhere exotic to celebrate your accomplishment? If you can afford it, there’s value in experiencing the world.
If you have questions about the best way to save or invest your gift money, talk to the professionals at Sun Federal CU.