So you find yourself with an unexpected, unbudgeted $1,000 sitting in your checking account. You dont have to think about how that nice sum got there, but you do need to figure out what to do with it. It might be tempting to use the money on a series of small luxuries, but it wouldnt be smart. And beyond fleeting glimpses of instant gratification, it wouldnt be very satisfying.
Make the most of your windfall by planning for it immediately. Assess your current financial and material needs, your goals for the immediate and far future, and decide where your $1,000 could best be spent or saved.
Not sure where to start? Here are some smart ways to spend an extra $1,000:
Begin or Bulk Up an Emergency Savings Fund
While most experts recommend you keep around six months worth of living expenses in an easily-accessible savings account for emergencies, surveys show 69 percent of Americans have less than $1,000 in savings. Whether you add your entire windfall to your emergency fund or just a portion of it, the peace of mind youll have just knowing its there is priceless.
Pay Off High-Interest Debt
Even if youve stopped using your consumer credit cards, their high interest rates can bury you in debt. $1,000 is enough to make a sizeable dent in repayment efforts. If you dont have any high-interest debt, congratulations! Putting your money toward any low-interest debt (like a mortgage, car note or student loan) is also a smart move, even though you wont feel the impact as immediately.
Spend It on a Necessity Youve Been Avoiding
You know the type – that pricy routine maintenance that keeps your life running smoothly. Putting $1,000 toward vehicle maintenance (like new tires or brake replacement), dental work or home maintenance (maybe a new hot water heater or tree trimming) instead of waiting until youre in an emergency can save you money and hassle in the long run.
Where best to invest $1,000 depends heavily on your life stage, savings goals and current financial situation. Do some research and decide whether a tax-sheltered account for your retirement like a Roth IRA, a 529 savings plan for your children, mutual funds, bonds or diversification in passion stocks is the right choice for you.
Studies show its better to spend your money on experiences rather than things. Book a trip, make expensive dinner reservations, plan a party for your friends or snag tickets to see your favorite band. The memories remaining after your money has been spent will bring you more long-term happiness and satisfaction than any material purchase would.
Upgrade a Possession That Matters
Buying higher-quality versions of certain material things – those that impact our daily health, happiness and passion – can make a difference in your quality of life. If you live in a cold climate, a warm parka can make your commute more comfortable. If you work from a computer every day, upgrading to a laptop with more memory and a faster processing speed can make you more efficient. If photography brings you joy, a nice DSLR camera will enhance your passion far more than any smartphone camera. And if youre like most people who spend six to eight hours in bed every night, a new mattress, sheets and pillow can help you feel better-rested.
Invest in Your Health
There are many free and low-cost ways to prioritize self-care, but if youre serious about getting healthy, a monetary investment can enhance your efforts. Joining a gym or yoga studio, buying a bike or treadmill, finding a therapist or getting laser eye surgery can turn $1,000 into the starting block on your road to improved health.
Protect Your Family
Craft a will, designate power of attorney, or increase your life insurance coverage to ensure your smart financial decisions are long-lasting. You can visit www.naepc.org to find an estate planner. And SelectQuote has experts available to help you learn more about your life insurance options.