If you have a spare £250 this month, you might be wondering what you could do with this money. It might not seem like a tremendous amount of cash, but even this small sum could help you get your finances back under control, no matter what your financial situation.
Today I’m going to highlight three moves you can make with £250 right now.
Reduce debt
My first tip is to use this money to pay down any outstanding debt. Paying off debt is by far the most sensible financial decision most people can make.
In fact, reducing debt is even more critical than saving because the interest rates on borrowing are generally higher than savings rates. So you should only consider putting money away in a savings account if you have a clean slate with lenders.
In theory, you should always pay off the debt that has the highest interest rate first. Another strategy is to pay off any small outstanding debts first, without worrying about interest rates. This strategy allows you to clear up your finances faster, and get a better understanding of where your money is going and to whom.
Paying off one small creditor is also psychologically more attractive because it shows you that you are making progress in reducing your outstanding liabilities.
Education
My second piece of advice could offer the best return on investment. If you’re serious about getting to grips with your finances then the best move you can make is an investment in yourself.
You don’t even need to fork out a lot of money or time to do so. There are thousands of books out there that can help you improve your finances and understanding of money, many of which cost less than £5. Even if you end up spending £50 on books, the return you will see on this investment over the long term will more than compensate you for the initial expenditure.
You can make this investment in your future and still have money left over to put in a savings account, reduced debt or invest in the stock market.
Invest for the future
And the best advice? Investing is the way to grow your money over the long term and, if you have no outstanding debt, then I highly recommend opening an investment account.
Today, there’s a whole range of platforms and providers that allow you to get started investing with just a few hundred pounds. Further, on most of these platforms, you can set up regular investment plans to invest as little as £25 a month. I believe the best way to invest this money to start with is with a low-cost fund that tracks a global stock index such as the FTSE 100.
An investment of £250 would kick-start your savings substantially. Indeed, according to my calculations, an investment of just £250 — with subsequent monthly deposits of £25 — invested in the FTSE 100 growing at an average rate of 8% per year could be worth £15,500 within two decades.
