Let’s imagine for second…
You’re sitting here reading this article and you get a notification on your phone from Venmo..
Or instead, of magically having the sum of cash arrive into your life, you meticulously saved up over several months and now you have $1,000.
Do you blow it on V-Bucks or do something responsible with the newfound cash?
We at aPennyLearned suggest as Jo Bennet says, “I hope you’re turning that money into more money.”
Here are the top eight things to do with $1,000
1. Spend it on your side hustle
There are many side hustles that you can start with very little to no capital. If you have an existing side hustle, the $1,000 can be invested in inventory, investment into another company, or better equipment.
Let’s say your side hustle is photography, the $1,000 can be spent on new photography equipment. If you’re into video editing you can purchase the new top of the line software or new computer to ensure your videos look the best.
These investments into your side hustle will likely bring additional money and recurring income. Spending this money on your business may set you apart from the completion and allow you to produce higher quality work. This, in turn, should result in more, higher-paying clients!
2. Spend it on you
This doesn’t mean you get to “Treat ‘yo self.” It means to spend it on you in a way that will better yourself. Namely, through continuing education. You have $1,000 extra cash, not $200,000 so you can’t go get a full four-year degree, but you can get a wealth of information from an online class.
Many online courses will teach you new and meaningful skills and trades. There is a wealth of videos for free on YouTube. These are fine and well but paid courses have higher quality content and will teach you more.
3. Save it
Like your grandmother always said (or maybe not)
Save your money for a rainy day, because sooner or later, it’s gonna rain
There are some different ways to save this $1,000 windfall.
- Savings account
This is aPennyLearned’s optimal suggestion.
Several high-yield saving accounts pay you a decent return. A couple of popular ones that are FDIC insured and provide the best rates.
- Ally Bank- Which currently yields 1.80% APY
- Betterment- Which currently yields 2.04% APY
- Fitness Bank- Can yield up to 2.75% APY
Let’s run the numbers.
If you were to place the $1,000 in one of these accounts, it would pay you about $20 a year forever! Or as long as you kept the money in the account. You could spend this extra $20 each month or you could let it grow and the account would produce more money than the previous month.
- Under the mattress
This is not an ideal option. Did you seriously think we would say it’s a good idea?
It’s literally the worst.
If you placed $1,000 under your mattress today and left it there, 20 years from now the purchasing power of that same about of cash it would only be worth $500. The same goes for a checking account due to the negligible amount of interest most checking accounts receive.
How is this possible? The answer is due to inflation.
4. Roth 401k Retirement
This is one of the most responsible options. This is considering your future, like, really distant future, when you’re old and gray. The thing about saving for a retirement account, it cannot be withdrawn until you’re of retirement age (without penalty, of course).
21% of the American population has $0 saved for retirement. If you place the $1,000 in a retirement account, or even $1, then you are doing better than 21% of the population, that will feel good!
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5. 429 Kids college fund
If you don’t have children yet, feel free to skip onto option number six.
If you do have children, who knows how much it will cost to send little Johnny to college in 18 years.
According to the US Department of Education, the average annual cost of public colleges and universities increased 6.5 percent each year over the last decade. Utilizing this same trend total cost for a four-year degree will be more than $205,000 by 2030.
Compound interest works best with more time, meaning it is better to start sooner than later. If you placed the $1,000 into a 429 and left it there for 18 years at an average return of 7% this would amount to over $2,800. It won’t put little Johnny through Harvard, but it is at least a responsible start!
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6. Put it toward a down payment on a home
Buying a home is a big step toward future wealth and prosperity. Likely, if you came into an extra 1,000 bucks you wouldn’t jump into homeownership. There are a few steps to take a few things to know first.
When you are ready to purchase a home
- You have no outstanding consumer debt, which includes student loans and credit cards
- You have enough for a big down payment
A home is possibly the largest purchase in one’s lifetime. Every little bit helps toward this goal and if you don’t know what to do with $1,000, save it towards your first house. You can’t go wrong!
7. Pay down credit card debt
Credit card debt in America hit the $1 Trillion mark for the first time in history in April 2019.
The average American adult carries $5,673 in credit card debt that may be at a rate at over 20% interest rate.
The average credit card has an interest rate of 20% and can lead to the destruction of a monthly budget.
These outrageous interest rates are likely higher than student loans and house payments, or any other debt for that matter. If you have credit card debt, you should aim to get them out of your life immediately and permanently.
8. Pay down student loans
In 2019, Forbes reported that student loans were a national crisis, tipping the scales at over $1.5 trillion. Over 45 million Americans carry the burden of student loan debt, do you?
Recent graduates will have to repay over $30,000 in student loan debt. They are non-bankruptable, they aren’t going away, sweetheart. Let’s put that $1,000 toward your student loan debt to lessen your burden.
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My wife and I paid off $54,000 in student loans in 18 months. We hurled every extra dime on this pile and are now fully free from the chains of student loan debt. If you have student loans it is highly recommended to pay them down, especially high interest or adjustable-rate loans.