You might be reading this and thinking to yourself, “When I am going to have an extra $1,000 to spend however I wish?” Tax season is approaching and many of people out there will be getting modest refunds and wondering whatto do with that extra money. I am not a financial advisor but I have some insight as what you can do if you find yourself with extra money.
In my opinion, the smartest way for you to spend your extra $1,000 is to pay down debt. Paying down debt ahead of schedule is really never a bad idea. This is especially true for credit card debt as it is probably the worst kind of debt you can have. Making the minimum payments on a credit card will cost you substantially more money in the long-run than in it would to just pay down the principal now. Let’s you have $1,500 in credit card debt. Your interest rate is 19% APR and you are paying $75 a month. It will take you 25 months…that’s over two years to pay off the credit card. It will also cost you $317 in interest over the roughly two years to pay this off. Apply your thousand dollars to this and pay the debt down to $500 and you will save yourself nearly $300 in interest over the life of the loan. Not a bad way to spend a thousand bucks, huh?
The next thing I would recommend you to do with your money after paying down debt would be to invest it. Now what you invest in is entirely up to you however unless you really know what you’re doing I would not advise you to pick individual stocks invest in. Instead, consider invest in passively managed ETF’s (exchange traded funds) or index funds. By putting your money here you achieve diversification and earn the return on the market which is usually around 10%. If you are not comfortable investing in the stock market you can always buy U.S. treasuries which are usually regarded as the safest investment in the world. While the return on treasures is pretty low they are a safe a place to park your money and save it for a rainy day.
Finally, the last thing that you can do with a $1,000 cash is to treat yourself something nice. There are a lot of things that your spend $1000 on. Perhaps a you are in need of a new computer or TV. Or why not get yourself a new Velodyne subwoofer and pair of headphones? A WI-Q 12” and a pair of vPulse is not a bad way to spend $1,000 on yourself.