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Chelsea: Hi, I'm Chelsea

Lauren: And I'm Lauren

Chelsea: And we are...

Together: The Financial Diet!

Chelsea: And today we're going to be talking about what to do with a little bit of extra, left over money that you might have at the end of making your budget. Now for ease and clarity, we are going to be using $100 as an example, but it could be more or less. And also keep in mind that if you wanted to add this money to your budget you could look at as the money you get from one extra side job a month. 

Lauren: So for some of you that thought of having, you know, left over, discretionary money at the end of the month can seem insane because it's all too easy to run into Sephora or CVS and kind of just spend $50 in the blink of an eye. I mean, it's... I'm so guilty of that. So we're going to be providing you guys with some smart solutions with how to spend that discretionary income better. 

Chelsea: Now ideally, we would recommend that this money go one of three places and that's savings, retirement funding, or personal goals. 

Lauren: So how ever you're spending make sure you are spending with intention, I mean even if it's spending on a long awaited trip that you've saved up for make sure you're writing everything down, cutting corners where you can, and really kind of directing where your money is going to save it the right way.

Chelsea: Now with this imaginary $100 at the end of the month one of the first options of what to do with it is to invest it. Now if you're looking to invest this money, of course it's always important to consider things like the different fees, your investment goals, your risk tolerance, what you hope to accomplish with that specific money, but if you've never invested before one of the easiest places to get started is purchasing stocks in companies. And if you already have active investments, obviously you can decide where you'd like to allocate this money of course given those same criteria of the fees, the risks, the goals, etc.

Now if you're only working with a small amount of money every month, it might be good to consider brokerage accounts that offer ETFs, which are commission free. Now ETFs are exchange traded funds as we discussed in our previous investment video and we will link that in the description, allow you to dollar cost average, which means buying a fixed amount of a particular investment on a regular schedule regardless of the share price. And of course it's always an option to consult with a financial advisor particularly if this is your first time investing. So check out companies like Fidelity, Schwab, etc, but keep in mind that on top of their fees they may require that you have a minimum amount in your account in order to invest. But at the very least they will offer a lot of educational stuff for free online and always go in for an initial consultation. 

Lauren:So the second way you can spend your discretionary income at the end of the month is to pay down lingering credit card debt. You wanna focus on the credit card debt that has the highest interest payments. This can even apply to student loan debt and paying off debt with the highest interest rate. You can make a high monthly payment on student loan and if you do this for long enough you can actually reduce the amount of the repayment period.

Chelsea: There's no rule that says you have to pay the same amount every month and if you find yourself with a little extra money, do yourself a favor and throw it towards those student loans. 

Lauren: So for example if you have a debt of $20,000 that had a 5% interest rate and you just over payed $50 extra dollars a month on it, you'd reduce that repayment period from 10 years to 7 years and 8 months. That's more than 2 whole years shaved off and you'd save about $1,336 in interest.

Chelsea: So the third great way to use this extra money is to top up your emergency fund. Now of course we should specify that all of these other suggestions we're giving are operating under the impression that you already have your emergency fund because you definitely should, but if we're all being honest there are lots of reasons to kind of go into your emergency fund every so often and spend it on things that you probably shouldn't be. So if you ever find yourself with, you know, a little bit of a gap in what you should be having, go ahead and top that up. It's more important than pretty much anything else in your financial life that you always have that emergency fund at the number it needs to be.

Lauren: So the fourth great way to spend that extra $100 at the end of the month would be for upgrades, repairs, and maintenance on your home. So upgrades really make sense when you own your home and repairs and maintenance apply in both cases whether you're renting or you're buying.

Chelsea: Now obviously there are going to be certain things when you're renting in terms of maintenance and repairs that fall under the domain of your landlord, but there are also lots of things you can do while renting that will improve your quality of life and also possibly save you some money. For example if you take the time to go through and replace your light bulbs with more energy efficient ones, you can kind of rearrange your furniture to make the most use of natural light as well as air flow and you can even make small upgrades to increase how much heat you can retain and how cool you can keep it in the summer so that you're just not wasting money that you could otherwise be saving while renting.

Now a fifth thing that you could do with that extra $100 a month is to reinvest that in your career. Now that means you can take that money and invest in things like workshops or tutoring or even going back to school for a class or even an entire degree. There's pretty much a whole spectrum of things that you can do to really increase your current skill set and gain new skills. For example the TFD team from time to time will invest in things like, you know, online courses about grammar or workshops or software just to kind of brush up on our skills. 

Lauren: Yeah I just recently actually bought a food photography course for bloggers on SkillShare, so that's a great investment for the work I do at TFD.

Chelsea: And I actually have a friend who recently signed up for a local course at her community college to kind of give herself a crash in Spanish because she knows that at her particular job people who speak both English and Spanish tend to have way better salaries and get promoted much much quicker. Now the sixth thing that you can do with a little extra money every month is give it away! But in a smart way. That includes everything from things like Patreon or Kickstarter to ideas and projects and work that you might like, or micro loans which you could find throughout the world or even just pure charities. And we at TFD do a mix of all 3 and each are really beneficial and bring a lot to us for their own reasons. 

Lauren: So some examples of charities that are relevant for us would be, you know, The Bowery Mission in New York City, Planned Parenthood, local charities for education in the area, anything like that is just really worth your dollars and they can put them to work in a way that's smart and really does good for the community. 

Chelsea: And if it comes to any online project or content that you really enjoy, it's worth it to check out if the creators have a way that you can sponsor them so you can give a little back for the thing that you enjoy everyday. We say giving money away, but that's really a joke. I mean you're donating it, but you're getting something back that's huge in return and that's a huge boost in quality of life and plus the feeling that you're really having a tangible impact, which is something you don't always get to feel everyday. So no matter how you choose to use that extra $100 at the end of the month just make sure that it's something smart, intentional, and thoughtful and not hemorrhaging it on Q-tips and nail polish! Which is what we often do, although you need Q-tips that's a bad example...

Lauren: You do need Q-tips to clean your ears. Like soap... come on! Body wash!

Chelsea: Are you still spending money on shampoo it's 2016!

Lauren: So as always thanks for watching and don't forget to hit the subscribe button and go to thefinancialdiet.com for more

Together: Bye!