Do you ever get a paycheck and ask yourself, “What should I do with this money?”

Probably not.

You probably know exactly which pair of shoes or which Justin Bieber song you want to buy.  Or maybe the latest gadget from that 3 a.m. infomercial.

I’m sure you have plenty of ideas how you want to spend money.

But what about how to save it?

Or who to give it away to?

In this post, I’ll fill you in on the three things you should be doing with your money.  The only three things.  Here they are: give it away, save it, and spend it.

That’s it. Not for toilet paper. Not for gambling. Not even for starting a fire. You should do all three of these things, and only these three things.  And in this order: give away, save, spend. Let’s look at each.

3) Give It Away

Whenever you receive money, you should first give some away.  Why? There are many reasons, here are a few:

• Giving money away helps keep us humble.  When we give our things to the less-fortunate, it reminds us of how blessed our lives are.
• Those who give money away are more wealthy. Arthur C. Brooks explains the research behind this claim in his book Gross National Happiness. Call it karma or whatever you wish, but what we give away comes back to us.
• Those who give to charity are happier. This is also explained in Gross National Happiness.

Giving some of our money to the less-fortunate is just the right thing to do.  But how much should you give?

This is for you to decide.  If you are married, discuss it with your spouse. If you are religious, pray a bit and seek direction.  Historically, a tithe has been 10% of one’s income.  After determining how much to give, now figure out who to give it to.

If you attend a church, there’s a good chance that they accept voluntary donations that go to help the needy.  That’s an easy place to start.  If you are not affiliated with a church, there are many noble non-profit organizations that could use your donations for much good. (Question: does anyone know a good site/service that evaluates the honesty of non-profit organizations?)

The first thing you must do with your money is give some away.  Your soul needs that experience.

2) Save It

After donating some of your money, you need to save some.  Your soul needed you to give some away, now your future needs you to invest.  I’ve written in several other places about saving, because no one is doing enough of it!

There are many things to be saving for:

• your wedding (hopefully only one)
• a new house
• your kids’ college tuition
• vacation in Italy
• retirement

Ideally, you’ll be saving for retirement throughout your whole life. The mid-range goals of a wedding or house hopefully come sequentially and not simultaneously, so that you can focus on one at a time.

So, how much should you save for all of these expensive life events? I’ve written an extensive post on retirement saving, so I’ll focus elsewhere today. Most financial gurus say you should save at least 15% of your take-home pay. I say more.

AT LEAST 15%. That’s the bare minimum. Save more and your future will love you for it. Save less and there will be much weeping, wailing and gnashing of teeth when the kids decide that a cheapo state school is just not posh enough for them.

Spend It

After donating and saving, this is the last thing to use your money for.  Your soul needs to give. Your future needs you to save. And your present self needs to live comfortably.

There are sooo many things to spend your money on. But which are the most important? How to prioritize?

1. Utilities, rent and food: You need to spend to survive.
2. Debts: You need to spend to fulfill your borrowing obligations.
3. Stuff: You need to spend to fill other physical and emotional needs.

The awesome thing about spending in this order, is that once you get to spending on stuff, you can do it WITHOUT ANY GUILT! You have fulfilled all of the necessities: improving the world by donating, saving for tomorrow, and spending to meet your needs. Once you’re here, you are free to spend as you wish.

Earned Income vs. Found Money

I wrote an earlier post about the problem with “found money”. Since you weren’t expecting it, you blow it on Snuggies for the whole family. We’re not bad at figuring out how much of our paychecks to donate, save and spend, but everything goes out the window when we get a check from Grandma for Christmas.

I think you should work out a plan for found money. Along with spending a good portion, you should save some and give some away. Just think about it.

So, that’s all there is to it. The three things you should do with your money: donate, save and spend, in that order.

As my wife says:

Pay God first, then yourself, then others.