6 Smart Money Moves that You Can Make with $1,000
Watch our video above for some important tips on how you can invest the money you’ve saved.
Now that you’ve been skimping on expensive coffee purchases, limiting your nights out, and all those other little tips to help you save, you’ve probably put together about $1,000. If you’re curious what to do with that money, we can help. Below, we’ve built on our video to provide you with more resources you can use to invest your money wisely.
1. Invest in the stock market.
If you’re interested in investing in the stock market, then you’ll probably want to understand it a little better.
What exactly is the stock market?
The Balance explains it relatively simply – basically companies sell stock in their company to raise money that they can use to grow. And people invest by buying stocks, hoping that the company succeeds, which will make their stock more valuable. And the stock market is the market where all public companies are bought and sold.
How can you get started on investing?
Invest in a stock fund: You can invest in a group of stocks, managed by professionals, so your risk is lower. We love a company like Vanguard, where you can buy into an EFT fund, which bundles stocks together. These allow a good balance of freedom and safety. We recommend something like S&P 500 Index Fund, which follows the general trend of the market.
Take it a step further, and go with a brokerage account: If you want more direct control of your stocks, you can open an E*Trade Brokerage Account. This kind of account does come with some trading fees, and you’ll need to keep an eye on it. But they offer a huge number of resources to learn how and what to invest in.
Start small with an investment app: Naturally, the app age has given us plenty of options for investing from the comfort of our smartphones. Apps like Robinhood and Stash allow you to make small investments, while learning about how to invest.
If you’re totally new to investing, you should start small or start with a fund that can help you make the best decisions. But don’t let the fact that the market is complicated intimidate you – the more time you spend in it, the more you’ll learn. And that is worth every penny.
2. Start an IRA.
It’s never too early to start thinking about the future, and in our evolving economy, fewer and fewer people get retirement investments from their workplace. An IRA (aka Individual Retirement Account) is a long-term investment account that you can build over time, so you have money to retire later in life.
Some things you should know about IRAs:
- They are tax deferred – you don’t have to pay taxes on the money your account gains, as long as it’s in the IRA.
- You can only contribute a certain amount per year – right now it’s $5,500. Although, if you’re older than 50, you can contribute an extra $1,000.
- Officially, you can’t take money out of the IRA until you are 59 and a half. However, you can take money out if you need it, but you’ll pay a hefty penalty.
There are two types of IRAs, and you need to understand the differences. The differences basically come down to how the money in the IRA is taxed.
When you contribute to your IRA, you can deduct your contributions from your taxes that year. However, when you take your money out in retirement, you have to pay income taxes on it. This kind of IRA is better for those with higher incomes. If you think your tax rate now is higher than it will be in retirement, you might like this type of IRA.
Roth IRAs get taxed the opposite way. When you contribute to your Roth IRA, you don’t get to deduct it from your taxes. However, when you withdraw money in retirement, you don’t pay taxes on it. This style of IRA is better when you’re younger and don’t make as much money. However, you can only contribute to a Roth IRA up to a certain income level. Right now, the limit is $133,000.
There are tons of options of places to open an IRA – see some recommendations from Nerd Wallet here – but it can be a bit overwhelming. Don’t be afraid to take your time, talk to customer service, and do tons of research before you make your decisions.
3. Put your money in a mutual fund.
Mutual funds are very similar to stock funds, but they typically mix stocks, bonds, and other investments into an even more stable investment. However, because they are connected to the market, even mutual funds can go up and down.
Here are a few things to look at when choosing a mutual fund:
- Always choose a No-Load Fund: These funds don’t charge you anything to get started, and that’s best.
- Look for a low Expense Ratio: This is the percentage that funds charge to cover their overhead, so you want to try and find a low percentage, so it’s less money out of your pocket.
- Pick a diversified fund: If you’re investing in just one fund, choose one that has a solid balance of different investments – stocks, bonds, international funds, and more. When you look into a fund, you can usually see the balance of funds, so you can pick one that’s pretty diverse.
- Invest slowly, rather than all at once: Instead of putting your full $1,000 into the fund at once, divide it up int $100 chunks and deposit $100 per month for 10 months. This helps spread your investment over time, and insulates you a bit against changes in the market right after you invest.
4. Pay down your debts.
One of the biggest debts many of us carry is student loan debt. We can often be paying off our student loans for 5-15 years after graduating. But paying extra money to pay down your principal can reduce the amount of interest you end up paying over time, plus you can pay off your loans faster. And less debt means less financial stress for you.
5. Improve your skills.
We could all stand to learn a new skill, and thanks to the internet, it’s easier than ever. Not only can you take a college extension course, as we mentioned in the video, but there are tons of online opportunities too. Many online courses are offered from accredited universities, and some of them are even free! But for those that aren’t, here are some options of how you can spend you extra funds.
edX – This site offers courses from universities like Harvard and Columbia in a wide range of subjects. You can audit courses for free, but to get the full benefits and a certificate, courses cost about $49 – $200.
Coursera – Similar to edX, they offer a wide variety of courses and multi-course specializations from well-known universities. You can audit courses, or earn certificates for around $49 per month.
Skillshare – While it still offers a wide variety, Skillshare is less academic than the others. These are courses created by experts in their field, so you can take anything from web design to music lessons. You’ll pay monthly, as little as $8.25 per month, for access to thousands of classes.
Udemy – This is another site similar to Skillshare with a wide variety of class options. Unlike Skillshare, however, with Udemy, you purchase specific classes, which start in about the $12 range.
Of course, doing anything online, at home, on your own time can be tricky. So make sure if you sign up for a course, you make a plan to stick to it.
6. Invest in yourself.
Too often, we get stuck in a cycle where we skimp on the investment that means the most to us – ourselves. Don’t feel bad spending your money on yourself, especially because you earned it. Instead, take a moment to plan your spending, so that you feel comfortable and you lessen the chances for buyer’s remorse.
Studies show that spending money on experiences makes us happier than if we spend money on things, so take that chance. Here are some ways that your self-care spending can go even further.
- Skyscanner: This handy website compares flights from all different sites in a user-friendly interface, so you can find times to fly on the cheap.
- Pack light, and fly budget: Budget airlines that have been popular in Europe have started to cross the pond. You can fly Spirit domestically, or on WOW Air and Norwegian internationally for a very reasonable price. But the catch is, you either have to pay a fee for baggage or pack VERY light. But if you can manage with just a small bag, then go for it!
Take a Retreat
- Stay local: We’d all love to go on a tropical retreat, but staying local means you’ll save big time on travel fees.
- Bring a buddy: Most retreats are cheaper for double occupancy, so try to convince a friend to join you.
Build Your Passion
- Start online: As we mentioned above, online classes are very reasonable, so if you need to learn a new skill, start there, first.
- Sign up early for a conference: Most conferences, conventions, and other networking events offer early bird pricing, so take the leap early and save some money.
However you decide to spend your money, know that you’re making the right decision now that you’ve surveyed all the options.