Investing

How to Invest $1,000

So, you just received a nice bonus check from your employer or a tax refund from the government.  Nice!  It’s not every day that most people have an extra $1,000 at their disposal to do with as they please.  

But with so many different ways to spend that money in a flash, how do you know what the best use of that money should be?  What are some smart choices you can make with this windfall that would give you the best return and improve your well-being? Should you invest in mutual funds? Maybe you should invest for retirement? There are so many options!

In this post, we’ll explore five great ways for how you can invest $1,000 and get the maximum benefit that you’re looking for.

how to invest 1000

1-Pay Down Your High-Interest Debt

One of the first things you’re going to want to do when you’ve got extra money is to put it towards your high-interest debt.  These would be things like your credit cards, personal loans, and even student loans.

Even though a thousand dollars won’t likely erase your debt, it will bring you closer to becoming debt-free.

Why Is This An Investment? 

When you pay off your debt ahead of schedule, you save yourself from future interest payments.  Think of it as a reverse investment.  For example, if you’ve got a credit card that carries a 30 percent APR, then paying down your debt would be like the same thing as making an investment that returns 30 percent (since you won’t owe it later on).

Even if you don’t have any high-interest debt, you may want to consider using this $1,000 to put towards one of your smaller interest debts such as your mortgage or auto loan.  Again, even at a lower rate, reducing the amount of the loan balance will decrease the total interest you owe over the life of the loan. 

2- Build Up Your Emergency Fund

Build Up Your Emergency Fund

Most financial experts agree: You need to have an emergency fund!

If you haven’t already, then you really need to start one.  Your emergency fund is the cash that you can use to cover unexpected situations like car repairs, medical bills, and even unemployment.

While most experts agree that you should be saving 3 to 6 months’ worth of cash, don’t get discouraged.  Financial guru Dave Ramsey recommends that $1,000 is the perfect amount to get a “starter emergency fund” going.  

Of course, if you’ve already got an emergency fund, then this thousand bucks would make a nice addition to it.  

Why Is This An Investment? 

Even though the money in your emergency fund is generally held in cash and barely earning any interest, don’t think of it as money that’s sitting around and doing nothing.  What it’s there for is to protect you from having to take on high-interest debt or personal loans if you find yourself in an extreme situation.  It’s that kind of “out” that makes having an emergency fund every bit worth building up. 

3- Contribute To Your Retirement Plans

Contribute to Your Retirement Plans

Another great way to invest $1000 is to put it into one of your retirement funds like your 401(k) or IRA.

An IRA is a convenient choice because it doesn’t involve your employer whatsoever.  You can simply go to any reputable financial services provider or bank and open one at your leisure.  It’s about as painless as the effort it takes to set up a new checking account; 15 to 20 minutes tops.

If you’re already contributing to a 401(k) plan through your employer, then you could increase your contribution levels so that they work out to an extra thousand dollars.  

Increasing your 401(k) contributions can also be especially beneficial if your employer offers any matching contributions and you haven’t already reached their upper limit.  That would just mean more money for you!

Why Is This An Investment? 

The money you save into your retirement plans gets invested into assets that will grow and compound for years to come.  For example, if you were to invest in a simple stock market index fund, then over the long haul you could expect an average annualized return of 10 percent

On top of this, retirement plans are tax-advantaged by design.  This means that by simply contributing to them, you get to delay paying taxes on these investments for years into the future until you’re finally ready to retire and start making withdrawals.  Over time, the money you save on deferring these taxes can add up significantly!

4-Start Investing In The Stock Market

Investing is stock market

Your retirement funds aren’t the only place where you can invest your money.  A thousand dollars is just about the right amount of money to get started with buying stocks.

Scared?  That’s understandable.  Picking out stocks individually can be a tricky process.  That’s why these days you can let an app do all the work for you!

So-called “robo-advisors” like M1 Finance, Betterment, and Acorns are helping thousands of people to easily build custom-made investment portfolios with just a few clicks.  Just tell these apps what your risk / reward preferences are, and then let them do all the heavy lifting for you.

If you already happen to have a brokerage account, then you could make similar investments yourself by investing in index funds or purchasing ETFs.

Why Is This An Investment? 

Just like your retirement funds, the money you invest in stocks has the potential to grow and compound for years to come. Basically, you can make money investing in stocks.  In fact, depending on how aggressive you go, you might be surprised by how much they grow some years.

5- Improve Yourself

improve yourself

Perhaps one of the best ways to invest $1,000 would be to put it towards something you’ve probably been procrastinating on for a while now: Improving yourself!

A thousand bucks could get you started with:

  • Exercising.  Join a gym and jump into getting in shape.  Or better yet, hire a personal trainer who can work with you one-on-one to give you a tailored strength-training program.
  • Eating better.  Is your waistline not where you want it to be?  You could join a well-known diet program (such as Weight Watchers) and get specific advice on how you can start developing better eating habits.  
  • Obtaining a certification.  Is there a training program or certificate that would help you boost your career?  This money could be the thing you need to finally go out and get it. 
  • Develop new skills.  Speaking of your career, perhaps you wish you were a better presenter, more organized, had more leadership potential, etc.  You could find a class or online program that would help you to develop these talents.
  • Learning a new hobby.  Perhaps you’d like to do something for yourself like learn a new language or play an instrument.  Again, you could easily purchase lessons either online or in-person.
  • Starting a new business. Another career move you could make with $1000 is starting your own business. Maybe you want to start your own photography business? Or maybe you’d like to get into the t-shirt business? $1000 may not seem like too much, but it can definitely help you get your business up off the ground.

Why Is This An Investment? 

Though you may not make any money directly by joining a gym or taking a few classes, it can have a profound impact on your overall mental health and well-being.  Sometimes doing things that we’re passionate about can give us that sense of “feeling good” that we’re looking for.

Don’t write off that financial return on investment just yet.  For example, studies have shown that people who exercise and eat better become more confident.  As a result, they end up earning more money at their jobs.

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Kevin

Kevin is an ambitious entrepreneur that is obsessed with all things related to finance. From a young age, Kevin has always been involved with side hustles ranging from online selling to freelance work. Over the years, Kevin graduated from side hustles and started launching multiple online and offline businesses. Kevin is a serial entrepreneur who loves starting new businesses and exploring all things related to business and finance. He is constantly looking for new ways to save money, invest money, and create income streams.

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