Having an extra $1000 in your pocket is a nice feeling, but using it to shop for things you really don’t need won’t help you build your financial security, which is much more important. If you’ve come into an extra bonus at work, made some money working a part-time job, or received a nice financial gift, using it toward your financial security is a great way to make it work for you.
So you have an extra $1000 . . . what should you do with it?
The first thing you need for a little financial security is an emergency fund. If you don’t have one, $1000 is a great start to building one. Ideally, you should have 3-6 months of income in your emergency fund, but if you’re just getting started, $1000 will go a long way in helping with an unexpected car repair or a medical emergency not fully covered by insurance. Opening a savings account and deposit your $1000 there; you’ll want it to be easily accessible if you need it in an emergency. Just make sure it’s not linked to your debit card, you don’t want it too easily accessible or you might be tempted to spend it.
If you already have a good emergency fund built, use your $1000 to pay down a high-interest credit card. The interest alone is costing you a small fortune. You’ll be able to lower your monthly expenses by making a large payment to your high-interest loan and paying down the balance. Just make sure you don’t use this payment as a way to open up a large line of credit so you can go out and spend again.
OK, you have an emergency fund and your high-interest loans are paid off, now what can you use your $1000 for? That $1000 can go far in starting your investment fund. Use that money to build your investment account and buy some stocks or bonds to secure your future. If you haven’t started investing yet, that’s okay. $1000 is plenty to open your first account. Visit Vanguard to check out your options and get started.
So you have an emergency fund, you’ve paid down your credit cards and loans, and you’ve opened an investment account. What should you do with the extra money now? If you’ve been thinking about starting your own business or starting a side business, $1000 will go a long way to getting it off the ground. Use it to build your website, order some business cards, and do some online advertising. Having a side-hustle is a great way to increase your income when you can’t get a raise at work. Depending on what you decide to do, you can make anywhere from a couple hundred extra a month to completely replacing your full-time income.
If you already feel like you have all of the above items under control, there are two more options for your extra $1000. The first is to increase your savings or investment account or pay down more debt. The second is to use the money for some kind of adventure like a trip or experience that you can share with friends and family. The money will be much better spent on making memories than buying “things”.
Extra money comes with choices, but with these choices, you’ll make a great one every time.