How you spend your money can determine your future financial health. While some purchases might seem necessary or desirable in the short term, they may not contribute to your long-term monetary goals.

On the flipside, other investments can have a positive impact on your financial wellbeing. With this in mind, here are three areas you are highly encouraged to spend on, and two you should avoid.

Go for these

1. Education

Investing in education is one of the best ways to improve your future financial standing. Education equips you with valuable knowledge, skills and credentials that can increase employability, income and career prospects.

A solid education will also nurture critical thinking, creativity and problem-solving abilities that will help you adapt to the changing demand of the labour market. Some examples of educational investments that can pay off in the long run are:

• pursuing a degree, diploma or certificate in a high-demand field such as engineering, health or technology;
• taking online courses, workshops or seminars to learn new skills or update existing ones;
• reading books, articles or blogs that offer useful information or insights on various topics;
• joining professional networks, associations or clubs that can provide mentoring, guidance or opportunities.

2. Tech for skills enhancement

Another way to fast-track your finances is to purchase technology that can enhance your skills and employability. Technology helps you access information, communicate, collaborate, and create more efficiently and effectively.

It can also help us showcase our work, build our portfolio and reach a wider audience, while enabling us to work remotely and independently. This in turn increases satisfaction, productivity and income.

Examples of skills investment include:

• buying a laptop, tablet or smartphone to support work or learning needs;
• purchasing software, apps or tools that can help perform tasks, manage projects or organise data;
• subscribing to online platforms, services or resources that can offer training, coaching or support;
• investing in equipment, devices or accessories such as headphones and cameras that can improve one’s work or learning environment.

3. Health and wellness

Health and wellness investments are those that help prevent or treat illnesses, injuries or disabilities that affect our quality of life and ability to work. Such investments also help us maintain or improve our physical, mental and emotional wellbeing, which can boost energy, motivation and performance.

These investments can also save us money in the long term by reducing medical expenses, insurance premiums, or losses owing to absenteeism. Examples include:

• buying healthy food, supplements, or products that can nourish the body and mind;
• purchasing fitness equipment, gadgets, or memberships that can help you exercise and stay fit;
• spending money on hobbies, activities or experiences that help you relax, recharge, or have fun;
• seeking professional help, advice or therapy to help cope with stress, anxiety or depression.

Avoid these

1. Impulsive luxury items

This refers to paying for expensive or unnecessary items or services that do not add value to your life and goals. Impulsive luxury spending can harm financial health by reducing savings, increasing debt, and/or creating a habit of overspending.

Such spending can also lower levels of happiness and satisfaction, as one might experience regret, envy or guilt after making such purchases as:

• designer clothes, shoes or accessories that you do not need or wear often;
• latest gadgets, devices or models that you might not use that much;
• lavish parties, vacations or entertainment that you actually cannot afford;
• gifts, favours or donations that you do not genuinely want to give or receive.

2. High-interest debt

Credit cards and loans are examples of high-interest debt that can have a negative impact on financial health as it can eat up income, limit cash flow, and/or damage credit score.

Such debt leads to stress, anxiety or depression, as one may struggle to repay one’s obligations, face penalties, or lose assets. Some examples that can have long-term consequences are:

• using credit cards to pay for everyday expenses such as groceries, utilities or transportation;
• taking payday loans to cover unexpected emergencies, such as medical bills, car repairs, or home maintenance;
• applying for personal loans to finance discretionary spending such as home improvement, education, or travel;
• borrowing money from friends, family, or lenders to fund risky investments such as gambling, speculation, or scams.

This article was first published on MyPF. To simplify and grow your personal finances, follow MyPF on Facebook and Instagram.