5 Places Your Money Should Be Going

Basic budgeting tips for beginners

Image from Imperative Concierge

When I was a kid, I used to hide my extra cash under my pillow or in my piggy banks because those were the only ways I knew how to store money. Growing up, my family dealt with a lot of financial stress, but nobody ever talked to me about money management. As a result, I had no concept of budgeting or investing for a long time. Now that I am out of school and am learning more about personal finance, I no longer resort to stashing all my cash in my house. Rather than mindlessly spending every paycheck, I now spread my money across different investing and saving vehicles.

Below are five things you can incorporate into your budget to jumpstart your path towards a healthy financial life.

1. 401(k)


A 401(k) is an employer-sponsored retirement/investing plan where employees can automatically budget a percentage of their pre-tax income towards the plan up to an annual contribution limit. By contributing to a 401(k), you can significantly cut down on your upfront taxable income for the year while saving and growing your money for retirement. One of the best perks of a 401(k) is the employer match. Most companies will match a portion of their employees’ contributions, which is basically free money. The general rule of thumb is to contribute enough to at least max out your company’s matching contribution, but deciding how much to put into your 401(k) is up to your discretion and how the plan fits into your monthly budget.


Not all companies will offer a 401(k) for their employees. While you are not paying taxes up front, you will eventually have to pay taxes when you start withdrawing money from your account. Additionally, you will get penalized if you withdraw money from your 401(k) before age 59 1/2. However, taking out money from a retirement plan should be an absolute last resort. By withdrawing money early, you are potentially limiting your financial options when you retire.

2. Roth IRA


A Roth IRA is an individual retirement account funded by your post-tax income with a maximum contribution of $6,000 per year (if you are under age 50). By contributing to a Roth IRA, you are avoiding double taxation. In a regular investment account, your profits from trading are considered capital gains and will be taxed. In a Roth IRA, your gains are not taxed, meaning your account can grow tax-free. Unlike a 401(k), where employers typically have preset investment options, how you invest the money in your Roth IRA is up to you. Depending on your investment style and risk tolerance, you can invest as aggressively or conservatively as you would like. Some providers you can choose from include Fidelity, Vanguard, Charles Schwab, M1 Finance, etc.


If your income exceeds a certain amount, you are ineligible to contribute to a Roth IRA. For married couples who are filing jointly, the income limit is $206,000. For individuals or married couples filing separately, the income limit is $139,000. (Note: There are a few workarounds, such as a backdoor Roth IRA.) Because this is a retirement fund, you can get penalized if you withdraw money before age 59 1/2. The biggest downside is the $6,000 annual contribution limit. If you overcontribute, you could potentially face a tax penalty.

3. Emergency Fund

Life is unpredictable, so putting aside funds for unexpected emergencies, such as a hospital bill, car malfunction, or house repairs, can go a long way. Most experts generally recommend having an emergency fund of 3 to 6 months of your income to cover critical expenses. However, given how severely the pandemic has affected the economy, you might be safer setting aside 8 to 12 months of your income as insurance if you can. If this sounds difficult for you, you can slowly build up an emergency fund by setting aside a small amount of money each paycheck until you reach your desired goal. Ultimately, the purpose of having an emergency fund is to protect you from any financial problems that might come up.

4. Short-term savings

These days, it’s super easy to swipe your credit card or use services like Afterpay to pay for everything. However, this makes it more likely for people to spend money they do not have and carry unnecessary debt. If you know that you will be going on vacation soon or will need money for a big-ticket expense, saving some money ahead of time to cover those expenses could make a big difference in your financial health. By creating a budget to account for this type of spending, you will be less likely to overspend or make too many impulse purchases. You will also have a clear sense of where your money is going and know that you can afford your spending habits.

5. Investment accounts

If you have discretionary money left over after paying for all your necessities, consider investing in things like stocks, cryptocurrency, funds, investment trusts (Ex. REITs), or bonds. By allocating money towards investments, you can generate passive income and make your money work for you. With inflation slowly eroding the value of the dollar, it is important to find ways to combat inflation and ensure the value of your money holds over time. Nowadays, it is easier than ever to invest in the stock market as many brokerages no longer charge fees for using their platforms. You can even automate your investments with apps like Acorns or M1 Finance. Additionally, there are a lot of accessible resources that you can leverage to learn how to invest, such as YouTube, online communities (Ex. Discord, Reddit, Public), free investing courses, and more.


When people think about personal finance topics like budgeting, saving, or investing, all these things can seem overwhelming and may carry a negative connotation. It also does not help that most schools do not teach us about these topics while most people do not like talking about money with their family and friends. However, at its core, budgeting is all about spending purposefully. The goal of budgeting is not to prevent you from doing what you want, but to give you the freedom to spend money on what is most important to you.

Disclaimer: This article is for entertainment purposes only. I am not a financial advisor or financial expert. Everything I mentioned above is my personal opinion and should not be considered Financial or Legal Advice.



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Annie Zhou

Annie Zhou

Blogging about my life and interests — for entertainment and educational purposes only Personal finance blog 👉 financefuturists.com