The Five Best Uses for $1,000
Posted on December 23, 2016
While $1,000 may seem like a genuine chunk of change, in reality it’s not hard to save up that much with a little discipline. But the real question is, what’s the best use for that money?
If your first thought is “shopping spree” or “ski vacation,” we offer the following alternatives:
- Pad your emergency fund or retirement account. The first tip is also the most obvious — if you don’t have a savings account with at least six months of expenses (enough to cover stuff you wouldn’t want want to go without, like your mortgage or rent, utilities, health insurance premiums, and groceries), you probably know you should. Otherwise in the case of job loss, you’ll have to dip into your 401(k), which you know enough not to do. But having even $1,000 in the bank will go a long way toward paying those unanticipated bills, like emergency vet care or car trouble.
- Open a high-yield savings account. Let’s go back to that idea of a ski vacation for a minute. By opening a money market account with an online bank, you’ll likely find better interest rates than if you were to sock that money away in a brick-and-mortar bank due to decreased overhead. That means you’ll reach your short-term goals faster, like taking that trip or buying a new car. You can find the best rates by browsing banks at Bankrate.com.
- Pay down your credit cards. OK, we admit that this is the most boring option. But since you’re unlikely to find a no-risk savings account that offers a higher interest rate than what you’re paying on your balances, putting it toward any consumer debt is like an instant return on your money.
- Invest in an index fund. If you’ve got the emergency fund and the consumer debt under control, then maybe now is the time to get into investing. Take a baby step toward making real money in the stock market by putting that money in a low-cost index fund. It tracks the overall state of the stock market, which makes it an ideal long-term investment.
- Treat yourself. Do you have check marks next to all of the above? Congratulations — you’ve put yourself in great financial shape. Make sure you remember what you’re saving all this money for anyway and indulge a little.