The best way to organize your finances in order to spend your money wisely, save money for emergencies, and invest in your future is to create a personal budget plan. Your personal budget plan should show your total monthly income; list all your necessary monthly expenses; include enough money to pay your federal, state, and local taxes at the end of each year; and set aside some money for savings each month. Because life is unpredictable, financial experts recommend that you have at least six months' worth of necessary expenses maintained in a savings account to cover emergencies, as in the event of a job loss. Whatever money remains at the end of each month is called discretionary income, which is the money that should be used for investing in your future.
The next step is to research, study, and learn more about investment risks vs. potential rewards. Some investments are riskier than others and some offer more potential returns than others. There is no one single type of investment that is best for everybody. One traditional principle of investing is to start with small transactions to learn which kinds of investments works best for you, and then increase the amount of money you put into the types that bring you maximum returns. It is always a good idea to diversify your investments into different categories such as stocks, bonds, money market accounts, long-term certificates of deposit, or real estate so that potential losses will be offset by potential gains.