$1,000 is not something that you can pick up on the sidewalk nor pluck from a tree, so it’s good news if you get that amount, either as a gift, a bonus, or a mini-lottery winning.
But what will you do with that extra money? Should you buy the latest mobile phone, go on a shopping spree, or get a new set of mag wheels for your car?
Yes, our tendency when we get unexpected cash is to want to spend it on things that we believe matter at that moment.
Some of those things become obsolete after a year or two, though, so you might want to think very carefully about where your money should go.
After all, there are many good ways to make use of 1 gran that you can benefit from for a longer period of time.
Here are some of them:
Some people think that investments require a huge amount of cash, but even $1,000 can be placed in products where it has a potential to grow. Savings earn interest, time deposits earn a bit more, but other options like index funds and exchange traded funds can generate higher returns.
Three main assets that you can invest in are stocks, bonds, and CCEs:
Equities or Stocks
If you imagine yourself being part of some of the largest companies in the country – and if you are the more aggressive kind of investor – then you might consider stocks.
Stocks are shares of a particular corporation from which you can earn in two ways: one is through dividends, which is money from profits that the company pays out to their stockholders; and two is through capital gains, which is the profit you earn if you sell your stocks at a price higher than the amount you bought them.
For example, if Texas Instruments shares are selling for $70 today, then you have enough to buy 14 shares from your $1,000. Let’s say two days from now, the price of the shares goes up to $75 and you decide to sell yours, then you can get your $980 back plus $70 in capital gain.
If, on the other hand, you decide to not sell, then you can just wait for the company to distribute the dividends. For instance, if the dividend for the quarter is $0.34 per share, then you can earn $4.76 and still keep your stocks.
A few things, though: one, it can take months before you earn your dividends, depending on the company’s schedule; two; there is no guarantee that the price of your stocks will remain the same or increase – it can go down anytime; three, there are fees or charges that you need to pay when you trade; and four, shares are sold in lots (blocks or groups) – that is, depending on the price, you can buy by the thousands, hundreds, tens, or ones.
If it’s by tens, then you can only purchase 10, 20, 30, etc. shares and not 15 or 22.
In the United States, the largest and most well-known stock exchanges are: NASDAQ (National Association of Security Dealers and Automated Quotations); the New York Stock Exchange also known as Wall Street; and the American Stock Exchange
Investing in stocks posts a bit more risk than investing in bonds given the fluctuations in the market, but if you learn how it works and choose the companies in your portfolio wisely, you can earn much more than if you leave your money in your savings account. One rule of thumb about the stock market though: invest only what you can afford to lose. From there, you can try to make it grow.
Fixed Income Securities or Bonds
Bonds, in simple terms, is like an I.O.U. You lend your money to a company or the government and, after a set period, you get paid and receive interest.
The maturity date (or the date when you can get your money back) can vary from 1 day to 30 years, and the longer it is, the higher the interest is likely to be.
This is because you cannot just take your money back whenever you want, unlike with stocks wherein you have the option to sell anytime.
If you want to invest your $1,000 in a more conservative and less risky product, then you can consider bonds. There are also different kinds, such as convertible bonds, zero-coupon bonds, and callable.
Cash and Cash Equivalents or CCEs
CCEs are assets that are cash or can easily be converted into cash, such as savings and checking accounts, Treasury bills, marketable securities, and money market holdings. Government bonds that mature in three months or less are also considered as CCEs.
This is a good option if you want to keep your $1,000 liquid, that is, if you want to have your cash ready when you need it.
Similarly, you can add your $1,000 to your Individual Retirement Account or Health Savings Account. These are good platforms for your money to grow without you having to worry about it. It also provides you with additional funds when you retire and, with the HSA, you can have your medical needs covered.
Pay Off Your Debt
One thing that drains people’s money each month are debts, be it a car loan, a student loan, a mortgage, or a credit card. Not only do they have to cut a part of income to pay them, they also have to put up with the interest rates.
Therefore, if you have debts, paying them should be your first priority.
Of course, the $1,000 you have might not be enough to settle everything, but paying even part of it will surely lessen interest and you will then have savings.
For example, if you owe a total of $20,000, payable in five years with an interest rate of 9 percent per annum, then you will be charged an interest of $1,800 in year.
If you decrease the principal by a thousand now, that will bring it down to $19,000 and the interest shall also decrease by $90, down to $1,710. That’s a total savings of $450 in five years.
Bringing down the principal can either shorten the time you have to pay or lessen the amount you have pay per month.
As an advice, try giving yourself a target date to settle all your debts. If you have a yearly tax-refund or any extra money, then use them to pay what you owe.
Through this, you will surely be free from all of borrowings in no time – but is only if you stop getting new debts, like continuing to use your credit cards.
Improve Your Home
While improving your home certainly involves trying to make it nice to look at and live in, there’s a more important aspect to it.
With your $1,000, you can focus on making your house more energy efficient.
That way, your money will work for you – you may not be saving your stash directly but you are allowing yourself to save more in the long run.
For example, you can do away with your conventional bulbs and replace them with Energy Star-approved bulbs as these can lower down your power consumption.
You can also change your curtains into something made of light material, so natural light and air will flow in, lessening your need of artificial lighting and air conditioning.
You should also check your faucets and have them fixed or replaced if there’s a leak, because even 15 drops of water per minute amounts to 21,600 drops or 1.08 liters per day.
You can also have your windows sealed so that your heating during winter or cooling during summer does not leak out.
One of the best ways to spend your 1 gran is to give yourself a leg-up. In other words, invest in yourself. Here are some ways to do it:
Take Short Courses in Your Field
While a new wardrobe can help with confidence and, perhaps, command more awe in the workplace, it would be wiser to place your $1,000 in things that would boost your chances of advancing your position.
You can enroll in a non-degree program related to your field, such as a certificate course in strategic management, project management, or leadership.
This would be something to add not just to your list of skills but also to your curriculum vitae.
Learn Something New
Similarly, you can take classes for skills not directly related to your field but you can use in practical life. For example, if you are spending so much on dining out, why not take cooking classes so you can eat more at home – and impress your friends, too.
If you like desserts, take baking lessons and, perhaps, you can put up your own confectionery in a few years. Do you like clothes? Learn how to sew and make your own.
Travel can also be a good way to learn new things – there is nothing like seeing new places and cultures.
This will help you take a break, get away for a few days, and clear your head of everyday things at home and at the workplace.
This will also expose you to how things are in other places – the food, the speech, the manners.
This might be considered real expense but, depending on the outcome of your trip, it will be something to look back to for the rest of your life.
Better yet, use your $1,000 to join a volunteer program, like those listed on Volunteer Forever.
Volunteering to go to another country is a real eye-opener and will help not just the needy but it will help you, too.
It will not be just about traveling to shop and laze around, it will be for a purpose and you will be thrust not in the upbeat tourist spots and shopping districts where other tourists abound but in areas where the local people are. The experience is priceless.
Invest in Emergency Solutions
Being pessimistic is not the same as being prepared for emergencies. The former is believing that the worst will happen while the latter is finding solutions beforehand to minimize the impact of a possible not-so-pleasant situation.
Let’s face it, no one really knows what will happen later, tomorrow, or next week.
A lightning bolt could strike an electrical post or the company you work for could suddenly declare bankruptcy. What would you do if you find yourself without electricity for days or, worse, without a job for a month?
You need to be prepared for such an event, regardless of whether it happens or not, and you can start with your $1,000.
Experts say that you should have an emergency fund that can sustain your living expenses by three to six months.
This is so that should anything happen – your company suddenly closes down or there is a natural disaster that keeps you from working – you won’t be pulling your hair for worry of not having any money to buy food or to pay your rent.
Adding your $1,000 in your emergency fund (or starting one with the money you have) would give you more peace of mind because you know that you have something to use when you need it most.
You can also think about buying an insurance or adding more to what you already have.
While the price varies depending what is covered, you should at least consider getting an accident insurance, which covers medical expenses due to an accident, or a renters insurance if you’re a tenant, which covers your personal belongings against theft, vandalism, fire, and other disasters.
Emergency and Security Items
You can also use your $1,000 for investing on things that you can use during an emergency, like a generator or a solar power kit, especially if you have kids or you work at home.
You can consider getting solar-charging lamps, which you can use even when there is electricity to help lower your bill, as well an emergency preparedness kit.
Related to this, you may want to find time to take first aid training courses so you’d know what to do in cases of medical emergency.
Similarly, you may want to use your money for added security for your home or car, like alarm systems and/or security cameras.
These are only some of the ways in which you can use your $1,000 wisely.
Remember, don’t just “throw it away” – take the opportunity to make it grow through investments or put it in something that you can benefit from for a long time.