Suddenly have some extra money in the bank? Before heading to your nearest department store for some retail therapy, it may be a good idea to consider how a mini-windfall of unexpected income can be used to benefit you long term.
6 Money-Smart Ways to Spend $1,000
Take Care of the Necessities
This may be obvious, but doing the responsible thing with a small windfall isn’t nearly as exciting as splurging on something fun, which is exactly why a lot of us opt for a shiny new toy instead of catching up on bills. If you find yourself with some extra money, this is a great opportunity to catch up on housing or utility payments. After all, that new gaming system will be a lot less fun if your power is shut off.
Pay Off High-Interest Debt
While mortgages, student loans and car payments generally have relatively modest interest rates. However, if you have credit card debt, you’re likely paying a lot of money in interest, especially if you’ve only been able to make minimum payments. Putting a large chunk of money towards that debt is a gift to yourself that keeps on giving: not only do you get the satisfaction of seeing your balance decrease substantially (or even disappear) but you may also save hundreds of dollars on interest over the life of the debt.
Put Money Aside for a Specific Goal
Whether it’s a home renovation that you’ve been dreaming about, a fun vacation or a large purchase, having the opportunity to put a lump sum toward your goal puts it that much closer to becoming a reality. Most savings accounts require a minimum balance, so if you’re one of the nearly 45% of Americans who don’t have a savings account, opening one with a mini-windfall is a sacrifice-free way of getting the ball rolling.
Give Your Savings Account a Boost
And speaking of savings accounts, about 70% of Americans have less than $1,000 set aside for emergencies. In other words, most people would have to borrow money if suddenly faced with an unexpected home or auto repair. Most experts agree that having at least a $1,000 emergency fund is the first step towards long-term financial security. While this isn’t always feasible when monthly expenses eat up your entire income, if you suddenly have unexpected income, your best course of action may be to do nothing but simply set it aside for a rainy day.
Perhaps you’re current on monthly expenses and have a decent sum of money set aside for emergencies, and you’re considering dabbling in the world of investing. Micro-investing is gaining a ton of traction because it allows you to invest as little as $5 initially and get into a steady habit of investing that can add up. There are numerous highly rated apps, taking the guesswork out of getting started. If you want to take a nontraditional route and invest in something that is of special interest to you or you simply want to diversify, check out the world of cryptocurrency. A few popular places to get started are Coinbase and Cash App. Use either of these two links and get free Bitcoin!
Sometimes the money just burns a hole in your pocket and some retail therapy is exactly what you need. Supporting local businesses, especially those that have been forced to scale back operations, is a great way spend unexpected money.
Spending money wisely doesn’t come naturally to many of us, but having a plan for a mini-windfall can help you make it work to your maximum benefit.
*If you sign up for an investment app please note that we are not financial advisors. These are simply suggestions and things that we have done.