Whether you're pocketing a bonus check or reveling in your newly received tax refund, landing an extra $1,000 is certainly cause for celebration. But before you go out and spend that cash all at once, here are 10 ways to put it to better use.
1. Start or pad your emergency fund
A new GoBankingRates study reveals that 69% of Americans have less than $1,000 in savings, while 34% have no savings at all. Given that the typical household should have three to six months' worth of living expenses on hand at all times, most folks clearly have some catching up to do. If you're behind on emergency savings, the most important thing to do with your newfound money is to stick it right in the bank.
IMAGE SOURCE: GETTY IMAGES.
2. Pay off high-interest debt
Whether it's a private student loan or a nagging credit card balance, the sooner you pay off high-interest debt, the less money you'll end up wasting. Imagine you owe $1,000 on a credit card charging 20% interest. If it takes you another year to knock out that debt, you'll wind up paying $1,111. Eliminate that balance right away, and you'll get to pocket that extra $111 instead.
3. Begin building your nest egg
One out of every three Americans has no retirement savings. If you already have an emergency fund and don't have high-interest loans hanging over your head, the next best place to put that $1,000 is your IRA or 401(k). Most people will eventually need 70% to 80% of their previous income to cover their living costs in retirement, and even in a best-case scenario, Social Security will only provide about half that amount. This means that if you earn $60,000 a year prior to retirement, you'll need $42,000 to $48,000 annually once you stop working, and while a good $24,000 of that might come from Social Security, the rest will need to come from you. All the more reason to get started as early as possible.
4. Open a college fund
According to the College Board, tuition and fees for the 20162017 school year cost an average of $33,480 at private colleges, $9,650 at public in-state colleges, and $24,930 at public out-of-state colleges. And those figures don't even include room and board. If you're planning to send a child to college, the sooner you start socking money away, the better. Remember, while most workers conceivably have four decades or more to plan for retirement, unless you start saving for college before your child is born, you generally have 18 years or less to build a college fund. If you get that $1,000 into a 529 plan early enough, you can start accumulating some savings to help make a dent in those eventual tuition bills.
5. Get a will
It's estimated that 58% of American adults don't have a will or living trust in place. But without a will, there's no guarantee that your final wishes will be carried out once you pass, and that extends beyond just what happens to your assets. If you have minor children and don't leave clear instructions behind regarding their care, there's no telling what might happen to them after you're gone. Spending that $1,000 on a will and other estate planning documents is therefore one of the most responsible ways you might spend that money.
6. Dabble in investing
While investing $1,000 today may not make you a millionaire, you'd be amazed at how much you stand to accumulate if you choose the right investments. Case in point: If you buy stocks that generate a yearly 8% return, which is just below the market's average, in three decades from now, you'll be sitting on over $10,000 without having to kick in a penny more. If you've yet to put money into the market, take the opportunity to do some research, buy some stocks, and track your portfolio's performance. Even if you don't make a huge profit, it'll be a great learning experience -- which will come in handy when you find yourself with additional money to invest.
7. Take a class
If a quick course or certification is standing between you and a higher salary, why not take that $1,000 and invest in your career? Even if your new skills don't result in a salary boost, having that extra knowledge in your corner could buy you more job security -- and it's hard to put a price on that.
8. Follow up on health issues
Perhaps you've been putting off a diagnostic test or appointment because of the hefty co-pay you know it'll come with. Spending some cash now to address a concern could help you get ahead of medical issues, which will not only be better for your health, but potentially save you money on healthcare down the line.
9. Buy something you need
Blowing $1,000 on a new TV when there's a perfectly good one sitting in your living room isn't exactly a smart way to spend your money. But if there's a big-ticket item you need, like a new washing machine or a replacement for your dying laptop, you're better off purchasing it while you have the cash than charging it down the line.
10. Be charitable
If you're doing fine savings-wise and don't feel compelled to spend that money on yourself, a $1,000 donation can work wonders for your favorite cause. As an added plus, you'll get a tax deduction provided you contribute to a registered charity.
It's not every day that $1,000 falls in your lap. While you may need to resist the urge to spend it on something frivolous, in the long run, you'll be much happier for having used that money sensibly.
The $16,122 Social Security bonus most retirees completely overlook If you're like most Americans, you're a few years (or more) behind on your retirement savings. But a handful of little-known "Social Security secrets" could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $16,122 more... each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after.Simply click here to discover how to learn more about these strategies.
The Motley Fool has a disclosure policy.