5 things money experts recommend you do with $1,000

If you’ve got some extra cash, whether it’s a recent bonus, gift, or increased income, you might be wondering where to put it.

The good news is that there are many ways to invest $1,000. Here are five great ways to use your money to stretch your budget.

1. Pay off credit card debt

Credit card debt has skyrocketed over the past few years, partly due to inflation, which has driven up the prices of just about everything. Americans currently owe a record $1.1 trillion in credit card debt, with the average American owing about $6,501.

Let’s say you have $1,000 in credit card debt and the average annual percentage rate (APR) is 24.6%. If you pay at least $50 a month, it will take you two years to pay off the balance in full, and you’ll pay about $290 in interest.

Related: credit card interest calculator

But putting that $1,000 toward your credit card balance can help you pay off your debt faster and save you hundreds of dollars.

2. Invest in the stock market

Using $1,000 to buy stocks may not seem like enough money to invest, but given enough time, it could end up being more than you expect.

Let’s say you put $1,000 in a brokerage account and buy a low-cost index fund that earns a historical average annual return of 10%. After 15 years, that $1,000 could be worth about $4,177. That’s not a life-changing amount, but still. more than four times Original amount!

3. Start an emergency fund

About 44% of American households don’t have enough money to cover an unexpected $1,000 expense. If you’re in the same boat, it’s a smart move to deposit $1,000 into a high-yield savings account.

An emergency fund can help cover the cost of home or car repairs and doesn’t require you to get a credit card. And with some savings accounts currently paying 5% annual interest, $1,000 could turn into $1,051.16 in 12 months.

4. Include it in your retirement planning

If your employer offers a 401(k) plan, adding an extra $1,000 could go a long way toward retirement. And if your company has a matching plan, that money will be even bigger.

Let’s say your employer matches 50% of your contributions, up to 5% of your salary. If you haven’t yet reached your contribution limit, your employer will match your contribution of $1,000 with your 401(k) contribution of $500, giving you $1,500.

If you already have $10,000 in your retirement plan and you added $1,500 in contributions to earn a historical annual return of 10%, after 20 years you would have $77,366. In contrast, if you Did not do it Add $1,500 and you get $67,275. — That’s less than $10,000!

5. Open the CD

Another option for your money is to put it in certificates of deposit (CDs). Current CD interest rates are favorable with some people paying 5% or more.

CDs have a guaranteed rate of return unless you withdraw your money early and are FDIC insured. This makes it a great place for investors looking for a low-risk way to make money. Investing $1,000 in a 12-month CD at 5% interest will earn you about $50 in interest, helping your cash beat the effects of inflation.

Knowing where to put that extra $1,000 can do wonders for your finances. The good news is that there’s no wrong way to use your extra cash, whether it’s paying off debt, investing money, or building an emergency fund.

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