Smart Cents: When To Save, When To Spend, & When To Invest

Money. We all need it, we all have it, we all spend it. But what is the difference between those who build fortunes and those who live paycheck-to-paycheck? I wrote a post a couple months ago about basic budgeting, which is where we all should start with our money. You can read that post here.

Once you are living on a budget, it is time to make a plan for spending, saving, and investing. These three actually have a very symbiotic relationship, yet it is very important to recognize the differences between these three. 

Spending is necessary for living. Spending is also necessary for buying things that could be termed as investments in their own rights- cars, houses, stocks. Saving is necessary to build up the money for these things. Investing is necessary for creating an income beyond what we can make and save on our own. Investment involves risk. 

Here is a broken-down, quick overview of spending, saving, and investing, and how to know when it is time to do each one:


    Once you are living within a budget, it is time to begin saving.  Saving comes first, before spending or investing, and is an important part of making sure you are set up in the most financially secure position you can be. Many well-known financial advisors, including Dave Ramsey (known for Financial Peace University) and Suze Orman (of The Money Book), advise that you build up an emergency cache of savings, from as little as $1000 to as large as one month’s worth of living expenses. Once you have this emergency fund, it is advised to save between 6-12 months of living expenses to have as a buffer between your month-to-month budget and that emergency savings account. Note that if you are regularly delving into your savings account, your budget should probably be reworked. The best way to save is to budget an amount to purposely put aside to save on a monthly basis, although those who live on an irregular income (such as those of us in sales) may find it more realistic to save a portion of bonuses to put aside. 

    Once you have saved up your regular savings account, it is time to start saving towards your big purchases. Is it time to buy a new car? What about a home? Begin putting aside money monthly to go towards these purchases. If you have been paying off debt, you can apply the amount you were spending on debt every month towards these saving funds, once you finish paying off the debt.


    Spending…it’s fun to spend with wisdom. It’s time to spend when you saved the amount you have planned on having for a car or home or vacation. Spending is a time of enjoying the fruits of your labor, and when you spend after you have saved, it is both guiltless spending and very rewarding. The key to happy spending is to only spend what you have set aside to spend. Do your best to spend without touching your regular savings account or using credit, and you will find that spending becomes much less stressful. 


    With staggering statistics like 76% of Americans living paycheck-to-paycheck, it is no wonder that so few people know anything about investing. Investing separates the boys from the men. While everyone tried to save and spend, investing can actually change the way you live. Investing in stocks and beginning to get dividends can have a huge impact on one’s life, and differentiating the kinds of businesses invested in can create more security in those investments. Investing should always use money you don’t need right now, as it is a downpayment for a future payout, if all goes well. Successful investing takes time. It is rarely simple, but it is worth it. I recommend finding someone to help you invest, especially if you have never done it before. Finding a financial planner, companies that make it their business to help people invest, or even books on investing are all great places to start on the road to investing. Darren Hardy has a great book about the principles of investment, both with time and money, called The Compound Effect

We live in a society that rarely thinks about the future and doesn’t plan well, financially, in general. Changing the way you live will take work, but the principles are really very simple. 

If you are looking to change the course of where you are headed financially, and you need more help than the very simple tips in today’s post and in my budgeting post, I highly recommend Dave Ramsey’s Complete Guide to Money. Dave Ramsey is a world-renown financial advisor and his books are very easy to understand and follow. 

Wanting to know more about the emergency fund? Read our post about why, what, and how here.

Please note that some of the links in this post are Amazon Affiliate links. If you order through these links, your cost will remain unchanged, but our blog will receive a small referral bonus. Thank you for helping support this blog and helping us to continue bringing you fresh content!


Ashley Bassoppo-Moyo

Christian. Wife. Entrepreneur. Missions Worker. Young Living Essential Oils Aficionado. Student. Planner & Organizer. Budget Nerd. World Traveler. Lover of Cozy Blankets & Good Books. Writer. Home Cook. Teacher. Cheese Fanatic. Health Enthusiast.

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