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Priorities

  1. Pay down credit card and other high-interest debt.

  2. Create a savings account of an emergency fund with 3-6 months' expenses.

  3. How to save more money? The main answer is not earn more, but spend less. See this resource for great ideas and a supportive community. For example, car ownership is way more expensive than most people realize, and can even be comparable to housing costs across a lifetime.

  4. Invest the rest or pay down loans, depending on the rate loans are accruing. Don't expect to beat 5% in the market—you might, but don't expect it—and include inflation and fees in calculations.

  5. For investments, decide the balance of how much to put in retirement accounts for tax advantages and how much for normal investments like mutual funds, can be turned back into cash without penalty (although they incur capital gains taxes). Choose funds and companies with low fees (under about 0.5%/year).

What to invest in? The short answer is stock market index funds. Index funds are medium-volatility and high-yield in the long-run, and have good diversification. Watching their balance go up and down can be disturbing, but it's best to make investments and then not make changes for years, and just ride out the waves, both because transactions have costs and because timing the market is less important than time in the market. The sooner you want to use the money, the less volatility you can bear. If you accept greater volatility and can wait decades, others will earn lower returns because they also require low volatility.

Why index funds

Avoid managed mutual funds (e.g., Growth & Income Fund). Instead, invest in index funds (e.g., S&P500 Index Fund). In a nutshell, the index funds have lower administration fees (e.g., under 0.5% for an index fund vs. 1.0+%/year for an actively managed fund, and this difference matters over the long run), and bizarrely, holders of index funds have better overall return over time than holders of individual funds. There are a number of reasons for this; one of them is that people are strikingly bad at the timing of buying and selling. People buy when prices are high and sell when prices are low. This makes for a small yield. 

Invest mainly in index funds and do not move them around regardless of what happens. Over the long run you will likely outperform the switchers (high fees), holders in specific stocks (quite a gamble to try to beat the market; what special info do you possess?), and those deciding when to buy and sell based on their intuition and personal research (even smart people are quite bad at this). There is also research showing that investors receiving more frequent financial updates perform worse than those who look only annually, likely because of loss aversion.

Sustainability and ethical investment

Check how your bank compares at this link. Fortunately, socially responsible funds (SRI) perform as well or better than the general market. How to move your money, and where to move it to? First, ask if your company offers SRI options, and move your allocations to them (partially, if you want). My company didn't, so I moved all of my funds out. The individual retirement accounts (IRAs) could be rolled over penalty-free. Here’s a detailed guide to sustainable investment funds.

Ideally, your funds would still be diversified in terms of country, industry, and company size. Vanguard and Betterment are two good options of companies offering multiple SRI securities indexes with low fees. I went with Betterment (referral offer here) because they are more hands-off (automatic rebalancing, etc.) and because they offer a cash reserve (like a savings account) earning 1.8% (at that time). Your country may have other of these “robo investors”. It is probably wise to stay in your main currency.

More reading

The cheeky financial advice book Why Smart People Make Big Money Mistakes incorporates psychology and behavioral economics to understand financial decisions, and presents the results in a direct, accessible, and applied tone. I highly recommend it. It discusses common irrational aspects of human decision-making, such as risk aversion, the sunk cost fallacy, etc., and then how it applies to money management in real life and how to avoid making common mistakes. I also really like this advice about how to live a good life and spend less money.