Personal Finance Question?

Use 1/3 of it for the phone and spending and put the other amount in a savings account that has high interest...

A windfall this big is a lucky thing. I would take some of it and give it to a charity (Karma is a good thing). Then I would blow a little bit on something fun (less than $300).

Then, with the rest, I would think about upcoming big purchases (like college, a car, a first apartment) and if any of those are in your future in the next 18 - 24 months, then keep the remaining money in a savings account. All of those big purchases are something your windfall can really help with. If you can avoid a loan on college or a car you will be way ahead financially speaking compared to other people your age.

If you choose to get an iPhone, then pay for it month to month with money you earn from a job. It is a nice thing to have, but it is never a good idea to pay something that is discretionary in a way that you "don't think about it". If you are aware that your bills you pay are an exchange of money you earned by working, and you will be careful only to buy what is worth the effort to earn. Let's say your monthly bill for the iPhone and related services is $200 for the phone and $100 a month for the services. If you work in a job where you make $10 an hour, is it worth 10 hours of your labor to have the phone for a month? If the answer is no, that's too much work, then don't get the phone.

If you use the windfall bank account to pay for a phone you don't think about, then in just over two years, your bank account will be almost empty, and all you will have to show for it is memories of phone calls.

Automating your bill payments is a great way to build good credit and avoid late fees. Just always be aware that your bills are something you have to pay by your earnings, so you will be able to compare the amount of effort you have to work in order to pay for things.

Basically, you just need a checking account, and authorize the phone company to take their payment from the account each month. Automatic, nothing for you to do. Same as you writing them a check each month, except you don't have to go through the hassle, or remembering it.

Me, I think it's a NASTY idea. Start giving people access to your checking account, and you have NO control over what else they're doing. Oh, sure, they SAY they won't do it. And, if they go too far, you can even SUE to get some of your money back. But that's costly, takes a lot of time, and you lose a lot of edge by giving them permission in the first place. Even when you tell them, IN WRITING, to no longer automatically charge your checking account, they can and do still do it. Your only option is to close your account and open a new one that they don't have access to.

But... for a lot of people, it's a convenience, and companies are not going to outright STEAL from you.

Oh, and reading some other comments, automated bill payments do absolutely NOTHING for your credit rating. The ONLY way to build credit is to be granted credit, through loans, which are then tracked for repayment. Monthly bills are not credit, just an agreement for service, and if you don't pay, they stop doing business with you. The unfair part is that it can hurt your credit record, without ever helping it. But that's the way it is.

A windfall should not be blown. What you are about to do is part with this money very quickly. For a few short pleasures you will always remember the money like this you blew. My suggestion is you buy about $4000 of Series I Savings Bonds at www.TreasuryDirect.gov and use the remaining $1000 very frugally. Make sure you really need something before spending. Spend some time thinking about want versus need. You will be really happy in the future if you can understand and act more responsibly. Try to think about your future happiness farther into your future, not just tomorrow or next week. Good luck!