Whether your cash gifts total $1,000 or $10,000, you'll want to make the most of every dollar. And that doesn't mean blowing it all on a 50-inch plasma TV. Here's what CNBC personal finance expert Suze Orman (author of Young, Fabulous & Broke) would do with it. (For advice on your specific financial situation, go to suzeorman.com, click on YF&B, and enter the book's access code: 98635472.)
1. Take care of your immediate needs first, says Orman. For most newlyweds, this will involve some aspect of nesting, like putting down deposits on a rental apartment, buying basic home appliances, or purchasing a bigger bed. (Who said being practical can't be fun?)
2. Next, work out how to decrease your monthly expenses. That usually means addressing the D-word—debt—accrued from credit cards, car loans, or student loans. "Line up your debt payments from the highest interest rate to the lowest," advises Orman. "Pay off bills with the highest interest rate first." (That usually means credit cards.) If you both have debts, pay them off equally—after all, you're in this together.
3. Set up an eight-month emergency fund. Even two happy, healthy newlyweds need one. To determine how much to save, calculate what you spend every month on necessities like gas, rent, utilities, and food, then multiply that figure by eight. Socking away cash in an FDIC-insured account (checking, savings, money market) means you'll be able to pay your bills if one of you loses your job, without resorting to drastic measures like taking a credit card cash advance or dipping into your retirement account.
4. Start saving for a house. "The smartest goal a couple could have, bar none, is to own a home sooner rather than later," says Orman, "especially given that the price of real estate has gone down dramatically in certain areas, and interest rates are still relatively low." If you intend to make a purchase within the next five years, put your wedding money in a bank account, she suggests. Shop around to find the one that pays the highest possible interest rate. "As long as it's FDIC-insured," says Orman, "it doesn't matter whether it's an online bank or brick-and-mortar."
5. Fund your retirement. "Invest in a 401(k) or a 403(b) if and only if your company matches your contribution," says Orman. Or put your wedding money in a Roth IRA. That way, the money you accumulate over time won't be taxed when you withdraw it later on. After all, the best way to start married life is not being just young and fabulous, but solvent, too!
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