15 Smartest Ways to Spend Your Money

Now, Alexir, the dumbest thing we can do with money is to spend it impulsively, right? And to spend it beyond our means. But there are four smart factors to spending money, and if your expenses fit into these factors, well, you're spending smartly.

Firstly, you have to spend money to make money. Second, you need to spend money to save time. Third, you need to spend money to invest in your mental and physical health. And last, you spend money to make memories with your friends and family.

So, here are 15 smart ways to spend your money to make sure the benefits you get outweigh what you're spending.

Welcome to AX.

Number one: Dinner with someone who inspires and motivates you. When you're on a savings spree, going out for a simple dinner can make you feel anxious and stressed. But meeting with people who inspire and motivate you on your journey is essential for keeping your spirits up. It doesn't have to be anything fancy, but the boost of perspective and an outside view from someone who knows you and who is doing well for themselves can help you get more ideas about your direction and future plans. You walk away from that dinner feeling more motivated to pursue your goals and with a new and different ideas of how you can get there.

Number two: Educating yourself about your financial, mental, and physical health. A little bit of a shameless plug here, but hear us out. Okay, when we first started Ali as a blog about a decade ago, we started it because we couldn't easily find accessible and digestible financial advice. At the time, we were a two-person show, and naturally, we made mistakes. When you don't have much to start with, mistakes are costly. We had to learn from our mistakes very quickly because we literally couldn't afford to make them. But as we grew, we were lucky enough to get to move into the circles where people were sharing their lessons, and so our mistakes became less frequent and less costly. Paying to educate yourself about your financial, mental, and physical health seems like spending money on something that you don't need. But trust us, you do. Other people's experiences and mistakes are your safety net. What you spend now to educate yourself is going to change your life.

Number three: A hobby that keeps you out of trouble. Hobbies keep you occupied and out of trouble, and if you're occupied and out of trouble, then you're not spending frivolously. But don't choose an expensive hobby because that kind of defeats the purpose, right? Choose something that doesn't have major upfront costs. Maybe something really physical like bouldering in climbing gyms. They're all the rage right now, and they've already got all the equipment you need. You just pay a monthly membership fee. Go play around and spend your time doing something fun and healthy. Most hobbies do come with at least a minimal upfront cost, so choose something you can afford and won't break the bank, but still will get you excited and feeling challenged.

Number four: Blood tests. Now, this might seem like a pointless cost at the moment, but blood tests can save you a wealth of trouble and money in the future. It'll tell you about your nutrition deficiencies, metabolic disorders, your liver and kidney function, cholesterol levels, and it can detect inflammation and infections. These are all things that can be extremely costly in the future in more than just monetary terms. Being aware of your current health condition can help you to make changes that you need to do now to prevent major problems in the future.

Number five: Healthy food. Yes, healthy food is often more expensive than junk food, but not by much. You don't have to eat all organic if you can't afford it, but spending a little bit extra on fresh produce, fiber, complex carbs, and quality protein is going to save you from a lot of physical issues in the long run. Obesity and diabetes cost the U.S. nearly $172 billion and $237 billion per year respectively. While other health conditions do play into this, the majority of today's diseases could be prevented and managed with good nutrition. If there's anything you should be spending your money on, it is this: hexer, put the McDonald's down, close that food delivery app, reward yourself with good health and good nutrition.

Number six: The gym. If we're going on a health journey, let's go full force. If you're not at the gym lifting weights, stretching your body, dancing, walking, and just doing anything to move, then what's your plan? Our sedentary lifestyles are already negatively affecting us, and the longer your lifestyle stays this way, the more you'll pay for it in the future. You'll save money on medical costs, therapy, and it even occupies you when you're bored, which is one of the major culprits of impulsive spending. Find a class you enjoy, work out on your own with your earphones on, just get there. Find the joy and benefits of moving your body.

Number seven: Quality clothing and shoes. We get that this can be a trickier expense to justify because fashion changes so quickly. A great look this year becomes dated next year. But what's important to find is your own signature style. That way, you can still buy a few trendy pieces for the year, but still keep your good quality clothing that is true to your personality, unique, and looking great. Those are the pieces you should splurge on, and you're not going to find them in your usual fast-fashion mall stores. Search for a few local places that make clothes you like, find out where their clothes are made, and who makes them. Because, look, okay, some places do buy on Shein and just change the label, and then slowly start buying quality, timeless pieces of clothing from them. Some wardrobe staples: your closet and style will be unique, the quality will be great, and people can see that you look different from everyone else. We can all spot good quality clothing a mile away. We might not immediately know that that's what we like about someone's style, but it looks far more put together and tailored. That's the message you want the world to know about you.

Number eight: Family date days. Don't be afraid to spend money on making memories when you're saving for something big—a house, a new car, your kids' expensive school fees. The idea of spending money on a day out or a weekend away from them just doesn't seem feasible. But we guarantee you this: 10 years from now, you and your family will remember the family date day far more than the times taught by good teachers. You'll strengthen your relationship with the people in your family and connect on a deeper level. You'll free yourself from the distractions and stress of daily life, and you'll create this awesome supportive environment where all of you can express your feelings, communicate with each other, and create a sense of belonging and purpose. If you don't have kids, you can do this with your partner, your parents, your partner's parents. Create that family circle.

Number nine: A course that opens up other job opportunities. Upskilling yourself is great, right? Enhancing your knowledge is awesome. And while you can do it for fun, it's also great when it comes with a future goal of opening up other job opportunities. It doesn't have to be in the industry you're in right now; it could be something you might want to do in the future. You want to spend this time now building up your knowledge and experience. Becoming a scuba diving instructor, or a ski instructor, or a video editor. You could be working in retail right now or in a call center. But that doesn't mean the courses you take on have to mirror your current job. It could be completely different and open up opportunities for a pivot in life later down the line. It's a fantastic investment, and it might not seem like you'll immediately use it, but you will eventually. It's an investment in yourself, your future, and your current happiness.

Number ten: A good bed and pillow. We spend about a third of our lives sleeping. Okay, sleep affects our mental and physical health, our mood, metabolism, productivity, memory, and focus. Anything you need to function well is elevated by good sleep. You can have the best eye mask and good earplugs, but if your bed and pillow are subpar, your body is going to hate you. And just because a bed is expensive doesn't mean it'll be good for you. Your ideal mattress depends on your usual sleep position, so you're not just investing in a good mattress. No, you're investing in figuring out what works for you. Side sleepers might prefer a softer mattress to cushion their shoulders and hips; back and stomach sleepers benefit from firmer support. Then there's the material, your body weight and type, your ideal pillow for neck support—it's a whole journey, okay? A little bit costly, but so, so worth it.

Number eleven: Pay off your credit card. This one is obvious, right? But you'd be surprised how many people don't realize how important it is to keep your credit card payment at a steady level—not too much, not too little. Keep at the same pace every month, unless your debt is crippling. If you've got crippling credit card debt, you need to pull all of your resources into paying it off because the interest rates on credit card payments will haunt you forever. Forget everything else on this list and focus on paying that off first. If you're in high debt, when you're all done, come back here and divide what you were paying between everything else on our list. It's going to take sacrifice, but it'll be so, so worth it.

Number twelve: An emergency fund. We're saving some of the best for last here. If you've never saved before, it can be hard to know where to start. Retirement, investments, a house—what's the first thing you should be saving for? Well, you start at the beginning, which is saving for your emergency fund. The first few months of creating and supplementing your emergency fund is going to take some sacrifice. Experts advise saving at least three months of your monthly salary for your emergency fund. For the first few months, put as much as possible in there until you've reached your goal, and then every month put a small percentage of your salary into that emergency fund. Keep doing that for as long as you can and ignore your emergency savings unless it's an actual emergency.

Number thirteen: Investments. Investing with a long-term goal always is a good idea. It gives you something to drive for, so you don't always feel like you're investing aimlessly. You can still invest for a home, retirement, your child's educational fund, or even to have a good savings cushion. If you're already an investor, then you know what direction to go in. But if you're new to it and trying to decide what to do, you can consider three types of investments. There are index funds, which allow you to buy bits and pieces of companies. An index fund like the S&P 500 includes 500 of the biggest companies in the U.S., like Apple, Google, Microsoft. And when you buy shares in an index fund, you're essentially buying a small piece of each of those 500 companies. This spreads your risk, so if one company doesn't do well, they're removed, replaced with a better company, and you still have all the others doing better.

There's mutual funds too, which are like index funds but professionally managed by financial experts. These experts decide which stocks, bonds, and other assets to include in the fund based on the fund's specific goals. Mutual funds are a bit more expensive because the experts manage the buying and selling of assets within the fund. But because it's diversified, there's less risk compared to you picking individual stocks yourself. Then there's exchanged traded funds, or ETFs. They're similar to index funds but trade on an exchange like a stock. So you can buy and sell ETF shares throughout the day at different prices. They're flexible, cost-effective, and an easy way for investors to diversify their portfolio.

So, choose one of these three types of investments first, find a financial institution that offers you the best deal, and then set a financial goal for the next 10 to 15 years. From your goal, work back to see how much you would need to invest to reach it and how much you could potentially make from that deal. A common rule of thumb is to aim for at least 10 to 15% of your income, but even small amounts will help you out in the future.

Number fourteen: Retirement. A long-term investment is different from saving for retirement, and it's important to recognize this. You need both, and they should be kept in separate funds. Research and use retirement accounts that offer tax advantages in your country. Financial advisers recommend saving between 10% and 15% of your income, starting in your 20s. If you start later, this will probably increase slightly, but it's never too late. In most countries, you can start withdrawing from your retirement accounts without penalties around 65 years old. Withdrawing before then is often impossible, or it comes with hefty penalties, so just keep that in mind. It might be your money, but you won't have access to it for a long time.

And number fifteen: Insurance. This is another expense that can seem so frustratingly pointless and costly until you need it. Home insurance, car insurance, health insurance, and life insurance are going to be those expenses you pay for and maybe never use, and that's kind of a good thing. If you have to use it, then it means something bad has happened. In the midst of a crisis, the last thing you want to do is to try and figure out how you're going to pay for damages or upcoming costs. Insurance takes a weight off your shoulders during the most challenging times. It doesn't have to be much; pay what you can afford, try to get a decent plan out of it, and use it when you need it.

And since you stuck around with us until the very end, my friend, we've got a bonus. And that bonus is travel, hexer! Travel far and wide, get out of your comfort zone, experience a new culture and language, taste different types of food, and see the world from a different perspective. It's enriching and fun and creates a sense of purpose and meaning in your life, especially when you spend most of your time working and following a strict routine. Shake things up a bit and get yourself excited. Don't be afraid to spend on traveling because you'll get so much from it and you'll remember your experiences for years to come. Getting out and seeing this world will give you new ideas and motivation for your own life. It's an injection of happiness, and my friend, you deserve it.

Spending money wisely isn't just about saving or growing your financial assets; it's also about doing things that will enrich your life and make your days more exciting. So invest in your mental and physical health, make your budget plans, and stick to them, and find a way to make your money give you a more well-rounded, fulfilling life. That's what it's all about, right? Balancing happiness, health, meaning, memories, and security.

So tell us, Alexir, what did we miss on this list? What's a smart way to spend money that you think other people should know about? Let us know in the comments! We'll see you back here next time, my friend. Take care.