So, I’m pretty sure many of us have come into some extra money (i.e. tax refunds, stimulus checks, EID Loans) over the last few months. But the question is what have you done with that money? Moreover, how will you be investing any leftover cash you might still have? Let me help you decide how to invest. If you’ve got $1k leftover, here are 5 tips for what to invest 1000 dollars in today.
What to Invest 1000 Dollars in Today: Top 5 Tips
I’m sure you could use $1k in many different ways. But don’t just think of ways you could spend it. Rather, think of how you could be investing! I want to give you some tips on how to really invest that money. Below you’ll find out how to invest today in order to reap the benefits tomorrow.
1) Emergency Fund
If you don’t already have an emergency fund, you should be sure to invest your money here first. I’m sure you’re wondering why this is so important. Well, for starters, this is your “rainy day fund”.
The fund is designed to help in case you fall on hard times (such as during a pandemic!). There were millions affected by this pandemic. But did you know the vast majority of those affected weren’t prepared for something like this to happen?! It’s devastating!
Even though the unemployment rate has decreased to 11.1% as of June 2020 (it was 14.7% back in April), people are still finding it hard to maintain financially. Knowing this, you should really be preparing yourself (and your family) in case of another shutdown.
2) Real Estate
Another way you could invest $1k is through real estate investing. Yes, I know, real estate investing can be pretty tricky. You would think it takes a higher initial down payment to really invest in real estate. And it does.
Unless you invest in other ways like:
- P2P Lending using microloans
- Real Estate crowdfunding
With peer-to-peer lending, the borrower potentially gets better financing and the investor has the potential to earn a higher return (due to you taking on a much higher risk). All while being able to invest in real estate property! Sites like Prosper and Lendingclub can help if you’re interested in offering microloans. Lendingclub provides its historical returns and averages between 4.83% to 6.37%. This offers a look into their past returns but does not guarantee future returns. But the potential is certainly there.
You can also:
- start with an initial down payment of $1000
- manage investments on the go
- track your performance
- diversify your portfolio
The best part though: when borrowers make payments each month on their principal and interest, you get paid!
Real estate crowdfunding acts more like an electronic real estate investment trust.
With Fundrise’s average annualized return of 9.11% as of 2018, there’s much potential for growth. The initial down payment to get started investing is $500 for both crowdfunding platforms. So, just think of the possibilities if you get started with $1,000!
3) Fund an HSA
Funding a Health Savings Account is another great way to invest 1000 dollars. However, this is potentially only a great idea if you don’t constantly dip into the fund. Think about it, this is an investment for your future. Even though the funds are there for you to use on qualified expenses, why would you want to keep taking away from your future self??
You can choose:
- payroll deductions (automatic and through your employer, if allowed), or
- direct contributions (use electronic transfers or mail in a check if permitted)
HSA’s are tax-deferred accounts that can carry over from year to year. The funds are typically set aside to cover healthcare expenses your insurance won’t pay for. What makes it such a great investment tool is the fact that the money can be withdrawn tax-free.
If you’re looking to invest in an HSA, you’ll first need to be enrolled in a high-deductible health plan. So if you’re not looking for high deductibles at this time, this may not be something that sparks your interest. If you’re fine with the high deductibles, great!
Just make sure you meet the following criteria:
- not enrolled in Medicare
- no other type of health insurance (like that of a spouse)
- no disqualifying medical savings accounts like a Flexible Spending Account (FSA) or Health Reimbursement Account
- can’t be a dependent
- not covered under VA benefits
If you meet all the criteria and are truly interesting in this investment tool, I say go for it!
Related: How to Get Rich With Your HSA Fund
4) Taxable Account for Retirement
When I think of what to invest 1000 dollars in, taxable accounts just seem more efficient to me. Don’t get me wrong, tax-deferred accounts are great when you’re watching their growth. However, they come with so many restrictions. Using after-tax dollars in your taxable retirement account is great for flexibility.
- no minimum required distributions
- tax-loss harvesting
- potential tax savings for heirs
- more control (when retiring)
Now, do you see why using your after-tax dollars to fund your retirement account can potentially be a better idea?! Your taxable retirement account can be used for anything that you want WITHOUT PENALTY! But if you do decide to use it before you’re ready to retire, make sure to replenish it so you can still reap those benefits in your retirement.
5) High-Yield Savings Account
This is a great way to invest $1000, but it admittedly is a low interest rate compared to the other options. BUT, if you’re looking to stash some money away that you may use in the next couple of years, it’s best to keep it handy and not tied up in a more formal investment.
On average, high-yield savings account earn between 0.80% and 1.05% interest.
Like I said, it’s not too exciting, but it’s safe and it’s better than stuffing your money under your mattress!
What to Invest 1000 Dollars In…What Will You Choose?
If it’s possible for you to invest at least $1,000 in anything, do it!
You want to be prepared for anything and preparation is key when facing the unknown. If you already have an emergency fund, great! Now, start investing your money in accounts that can help it grow. Trust me, when you have money put aside in case of disaster (whether big or small), you’ll feel a HUGE sigh of relief knowing you’re financially prepared!
Can you think of any other tips on what to invest 1000 dollars in?
AUTHOR LaTia Longuemire
My name is LaTia Longuemire. I enjoy writing, singing, and cooking in my spare time. My passion is helping others. At this stage in my lifetime, I'm primarily focused on my children. They are everything that keeps my world spinning.