You've Got $40. Now What?

Imagine you have $40.

Maybe you received it for your birthday. Maybe you earned some of it. Maybe you saved it little by little.

Now the money is in front of you. What are you going to do with it?

You could buy something. Save for something bigger. Give some of it. Maybe there are several things you want at the same time.

And suddenly that $40 can start to feel a lot smaller.

YOUR MONEY CAN DO A LOT. IT CAN'T DO EVERYTHING.

When you have a limited amount of money, you have to make choices.

This lesson is not about finding one perfect way to use $40. It is about learning how to make a plan before the money is gone.

Start With What You Already Know

Money can have different jobs.

SPEND

Use money for something now.

SAVE

Keep money for later.

GIVE

Use money to help someone or support something important to you and your family.

But now we are adding something new. What happens when you want your money to do more things than you have money for?

That is when making a plan becomes important.

Josiah's $13 Problem

Josiah had been looking forward to his 10th birthday all week.

After the cake was gone and the presents were opened, he sat down with the birthday cards he had received. Inside the cards was something else he was excited about:

$40

At first, $40 felt like a lot of money. Josiah immediately started thinking about everything he could do with it.

There was a game he wanted that cost $25.

His cousin had asked him to go for ice cream that weekend, and Josiah figured he would need about $8.

He was also saving for a $60 building set. He already had some money saved and wanted to put another $15 toward it.

Then he remembered that his family was collecting money for a local food pantry. Josiah wanted to put $5 toward that too.

For a minute, Josiah was feeling pretty good. Forty dollars. Four plans.

Then he wrote everything down:

He added it:

$25 + $8 + $15 + $5 = $53

Josiah looked at the number again. Then he looked at his $40.

JOSIAH HAD $40 WORTH OF MONEY AND $53 WORTH OF IDEAS.

That left him with a $13 problem. He was $13 short.

Nothing had gone wrong. Nobody had taken his money. Josiah had simply discovered something that happens to adults too:

SOMETIMES YOUR MONEY CAN'T DO EVERYTHING YOU WANT IT TO DO.

Now Josiah had a decision to make.

What Matters Most Right Now?

Josiah looks at his list again.

He really wants the game. He also wants to go for ice cream with his cousin. The building set is something he has been saving toward for a while. And giving is important to him and his family.

He cannot say yes to everything. So now he has to think.

He could buy the game and change the rest of his plan. He could skip the game. He could spend less somewhere else. He could save less this time. He could decide something needs to wait.

There is more than one possible answer.

MONEY DECISIONS DO NOT ALWAYS HAVE ONE PERFECT ANSWER.

Different people can make different choices because they may have different goals.

Every Yes Can Create a Not Yet

Suppose Josiah says yes to the $25 game.

He started with $40. After spending $25, he would have:

$15 LEFT

That means only $15 is available for everything else he wanted to do. He cannot spend the same $25 again.

Maybe ice cream has to wait. Maybe he saves less. Maybe another part of the plan changes.

Choosing one thing can affect another choice. There is a word for that:

TRADEOFF

A tradeoff happens when choosing one thing means having less money available for something else.

Here is a simple example. You have $20.

You can spend the $20 today. Or you can keep the $20 for something later. But you cannot spend the full $20 and still have that same $20 saved.

MONEY CHOICES COME WITH TRADEOFFS.

A tradeoff does not automatically mean you made a bad choice. It means you understood that saying yes to one thing may mean saying not yet to something else.

What Does Josiah Choose?

Josiah thinks about what matters most to him. He decides the game can wait.

$8 -> SPEND

Ice cream with his cousin.

$27 -> SAVE

Toward the building set.

$5 -> GIVE

With his family.

Now he checks the total:

$8 + $27 + $5 = $40

His plan fits the money he actually has.

Does that make Josiah's plan the correct plan for every kid?

NO.

Someone else may have bought the game. Another person may have saved all $40. Another family may make a different choice about giving.

The most important part of Josiah's story is not exactly how he divided the $40.

HE MADE THE DECISION BEFORE HE SPENT THE MONEY.

He knew what he had. He looked at his choices. He added them up. He realized everything would not fit. Then he decided what mattered most to him right now.

That is the skill we are learning.

Four Steps for Making a Money Plan

When you have money and several ideas for it, try four steps:

1. KNOW

2. LIST

3. ADD

4. CHOOSE

What If Some of the Money Already Has a Job?

Here is another important lesson. Sometimes money is given to you for a specific reason.

Imagine a parent gives you $10 for lunch on a school field trip. Is that the same as receiving $10 for your birthday and being told you can decide what to do with it?

No. The lunch money already has a job. It is for lunch. If you spend it on something else before lunchtime, you may have a problem.

As you get older, you may become responsible for more things. That means some money may already have somewhere it needs to go.

DON'T MAKE A NEW PLAN WITH MONEY THAT ALREADY HAS A JOB.

First, set aside what is needed for the responsibility. Then look at what is truly available for your other choices.

You Have Enough to Buy It. But Does It Fit Your Plan?

Imagine you have $40. You see something you want that costs $35.

Do you have enough money to pay the price? Yes.

But there is another question:

WHAT HAPPENS TO THE REST OF MY PLAN IF I BUY IT?

After spending $35, you would have only $5 left.

Maybe that is completely fine. Maybe the $35 item matters more to you than your other choices. But maybe you were saving for something you care about even more.

Having enough money to pay the price does not mean you have to buy something.

JUST BECAUSE YOU CAN BUY IT DOESN'T MEAN THE DECISION HAS ALREADY BEEN MADE.

You still get to think.

Need, Want or Goal?

Here is another way to look at the choices on your list.

NEED

Something important that you or your family has decided you are responsible for.

WANT

Something you would enjoy having but can usually be okay without.

GOAL

Something you are working toward over time.

Suppose you want a $60 building set but only have $20 saved. The building set may be a want and also a goal because you are working toward it over time.

These words do not make the decision for you. They help you understand what kind of choice you are making.

What If You Change Your Mind?

You can. A money plan can change.

Suppose you planned to spend $12 on something. Before you buy it, you decide: "I don't really want that anymore."

Great. You can change the plan. Maybe the $12 goes into savings instead.

But after you spend it, things are different. Once the money is gone, you have to make your next decision using what is left.

BEFORE YOU SPEND, YOU CAN CHANGE THE PLAN.

AFTER YOU SPEND, YOU WORK WITH WHAT REMAINS.

That is one reason planning before spending can help.

Your Turn: You Have $40

Now imagine this $40 belongs to you. You are thinking about four things:

Add them:

$15 + $20 + $12 + $5 = $52

But you only have $40. Your ideas are $12 over.

What are you going to change? There is more than one answer.

Maybe you decide the $12 item can wait. Your plan becomes:

That works. But you do not have to choose that answer.

Maybe you decide to spend less today and save more. Maybe you make another plan entirely. The challenge is making all of your choices fit inside the $40.

Now Build Your Own $40 Plan

Forget our example. Imagine the $40 is really yours.

Write down up to four things you might want your money to do.

Compare your total with $40.

Is your total more than $40?

Ask: What stays? What changes? What waits?

Is your total less than $40?

Then you have money left. You do not have to find something else to buy. You could keep the rest saved until you know what you want it to do.

Does your total equal $40?

Then every dollar in this example has a place in your plan.

Don't Copy Someone Else's Plan

Imagine your friend gets $40 too. They spend most of it. You save most of yours.

Does that automatically mean one of you made a better decision? No.

Maybe your friend was saving for something and finally reached the goal. Maybe you are still working toward yours. Maybe your families have different expectations. Maybe you simply care about different things.

A money plan should make sense for what the money needs to do and what you are trying to accomplish.

YOUR FRIEND'S PLAN DOESN'T HAVE TO BE YOUR PLAN.

That is part of learning to make your own money decisions.

Before the Money Moves, Make the Plan

When you receive money, it can be tempting to start thinking only about what you can buy.

Try something different.

KNOW

How much do I actually have?

LIST

What do I want or need the money to do?

ADD

Can my money cover all of it?

CHOOSE

What stays, what changes and what waits?

You do not need a complicated spreadsheet. You can do this with a piece of paper and a pencil.

The important thing is thinking before the money starts disappearing.

Money Starts Early

You do not need hundreds or thousands of dollars to practice managing money.

You can learn with $40. Or $20. Or $10. The amount is not the most important part.

The important part is understanding that:

• Money is limited.
• Choices compete with each other.
• Some money may already have a job.
• Choosing one thing may mean waiting on another.
• A plan can help you decide before you spend.

And sometimes you will make a choice and later wish you had chosen differently. That happens.

The goal is not to make every decision perfectly. The goal is to learn from your choices and get better at making them.

YOUR MONEY CAN DO A LOT. IT CAN'T DO EVERYTHING.

So when money comes into your hands, do not only ask: "What can I buy?"

WHAT DO I WANT THIS MONEY TO DO?

Then:

KNOW -> LIST -> ADD -> CHOOSE

And before the money moves:

MAKE THE PLAN.

MONEY STARTS EARLY

Education First. Always.