There are several ways to spend $1,000. Some people might spend this money on a fabulous vacation, whereas others plan a shopping spree. Whether $1,000 comes from a gift, a tax refund or a work bonus, you're free to spend the money however you please. But rather than spend this money and have nothing to show for it, here are seven incredibly smart ways to spend $1,000.
1. Open an Individual Retirement Account
Opening a retirement account is one of the smartest ways to spend $1,000. This is especially important if you haven't begun saving for your retirement. And even if you have a 401(k) plan through your employer, getting a secondary retirement fund ensures that there’s enough cash during your retirement years.
2. Pay off a Credit Card – or Two
It's more fun to spend $1,000 on clothes, electronics or experiences. But if credit card debt has been hanging over your head for years, using this free money to pay off an account can provide peace of mind and increase your credit score. This way, you can get creditors off your back, and you won't get hit with expensive interest charges.
3. Bulk up Your Emergency Fund
How much do you have in savings? If your emergency savings account is pitiful or nonexistent, deposit this cash into your bank account. You can start preparing for emergencies, such as a car repair, a home repair or an unexpected medical bill.
4. Open a CD or Other High-yield Savings
When you open your savings account, there's the option of getting regular savings. But if you want to maximize your return and earn a higher interest rate, discuss other savings options with a banker. These include a certificate of deposit, a money market account or an online high-yield savings account. Regular savings accounts typically earn less than 0.06% APY.
5. Look into Mutual Funds
Make an appointment with a financial advisor to discuss mutual funds. This is a great option if you're looking for investment strategies outside a savings account. Investing in a mutual fund is a practical way to grow your network, and your financial advisor can help you determine the best places to invest your money.
6. Take an Educational Course
Whether you're tired of your job, or you're fed up with not getting paid your worth, you might snag a better salary if you take the $1,000 and invest in your future. You can’t get a degree with only $1,000, but you might be able to take two or three courses or workshops that can provide the skills you need to advance your career. Or if you're an entrepreneur, you might use this cash to jump start your own side business, which might eventually provide your full-time income.
7. Make an Extra Mortgage Payment
If you don't want to get stuck with a 30-year mortgage, take the $1,000 and make an extra principal payment. Did you know that making one extra mortgage payment a year reduces how much you pay in interest? Additionally, this can reduce your mortgage term by seven or eight years.
There are several things you can do with an extra thousand dollars in your pocket. However you decide to spend the money, make sure it counts. What are other smart things to do with $1,000?