Saving your first $1,000 is no easy feat. But deciding how to spend it wisely can be even more difficult.
You might want to invest it in assets such as stocks and shares to grow your wealth. Or you might want to focus on yourself first and make immediate improvements to your life.
We’ve put together a list of 15 smart choices you can make with your money. Whether it’s your home, personal life, or future you want to invest in, these choices will guide you to make the right decision. Here’s a look at the benefits of each investment option.
Pay down your debts
Any kind of debt prevents you from saving up toward your future goals. Debt takes away your spending power. And in very serious cases, debt can trap you in an endless cycle. Some types of debt such as credit card debt or payday loans can weigh you down with interest payments that you can’t afford to pay, so you resort to borrowing more to pay the interests each month.
Using your $1,000 to pay off your debt is a very effective way of getting out of this cycle. It can help reduce the amount of interest you owe the bank. It can also help you improve your credit card score for future loans.
Invest in your retirement (401k, IRA)
You could put the $1,000 you’ve saved up in a traditional 401(k) or Roth IRA to build up a tax-free retirement fund. These funds give you financial security in your older years to enjoy life, go on vacation, and meet your daily needs.
A 401(k) is an employer-based retirement savings plan that deducts a portion of your income every month for your retirement. The money can usually be invested in U.S. stock funds and bond funds which grow with compound interest over time.
A Roth IRA, on the other hand, allows you to deposit your own money into a retirement fund at any time. You don’t have to pay income taxes on the money. You also won’t be given any penalties for an early withdrawal, which makes the Roth IRA a more flexible option than a traditional IRA.
Repair your home
We can be so busy sometimes that we neglect our homes. A dirty and rundown home can have serious consequences on our health as well as our pockets.
That’s because a minor issue can turn into an expensive disaster if you don’t act fast enough. A roof leak, for example, can flood the basement or destroy your walls. A termite problem may weaken all of your floorboards before you know it.
Making swift repairs can prevent all of these problems. Most minor home repairs cost just a few hundred dollars and can save you the time and headache of major disasters.
Pay an overdue bill
Paying your overdue bills can help you get your financial life back in order. Some utility companies charge interest and extra fees on overdue amounts. Others turn off your gas or electric supply until you pay a large reconnect charge.
With the money you’ve saved up, you could pay off the overdue amounts and make a habit of paying your bills regularly. Not only will this save you money, but it’ll also boost your credit score and make you eligible for lower-interest credit in the future.
Set up an emergency fund
Life, as we’ve all come to know, throws up surprises from time to time. Economic crises, pandemics, natural disasters, job loss, and illness are just some of the major events that can throw our lives into disarray.
The best way to weather these eventualities is to build an emergency fund. $1,000 is a good place to start as it can help cover food, essentials, and rent for about one to two months. You can save that money in a high-yield savings account that will give you about 1.00% APY, which will accrue slowly over time.
Pay down your mortgage or student loan
If you have any student loans or mortgage debt, it’s usually a smart idea to pay it down as quickly as possible. $1,000 may not bring down the debt completely but it can help you get started on a journey to become debt-free.
Invest in your professional career
With $1,000, you can reinvest in the most important thing that will help you earn more money: your career.
You could invest in a public speaking course, an Excel spreadsheet boot camp, or a language course that will help you boost your employability. Employers are constantly on the lookout for candidates that commit to lifelong learning.
Consistent professional development also helps you stay abreast of industry trends. You’ll be better equipped with the skills to remain competitive in a future workforce.
While it’s important to sharpen your intellect, it’s equally important to keep your body fit and healthy.
A good level of fitness helps you prevent workplace injuries, which is especially true if you sit to work on a computer for several hours a day. Investments in wellness programs such as yoga classes or rock climbing lessons can help you build strong core muscles for work.
Over time, exercise can make you more resilient in the face of adversity. It can also help you handle stress better.
Stock your pantry
You might also want to consider stocking up your pantry for the year with $1,000. Having a few cupboards full of staple items such as pasta, soup, canned fish, beans, and sauces can help you save time and limit opportunities for impulse grocery buying.
A well-stocked pantry may also motivate you to cook more meals at home. Money experts agree that home-cooked meals can save you up to two-thirds of your regular food budget.
Get your own health insurance
If you’re currently unemployed, self-employed or your employer doesn’t offer health insurance as part of their benefits program, it may be a good idea to purchase private health insurance.
Buy fractional shares of your favorite companies
You could also use the $1,000 to buy fractional shares as a low-risk way to get started with investing. They’re essentially fractions of shares of large, popular companies such as Tesla, Google, Apple, and more. You can buy fractional shares with as little as $1.
Fractional share investing allows you to own a diversified portfolio of stocks from many different companies without having to purchase full shares. Micro investing apps like Robinhood can help you get started with fractional shares.
Invest in a real estate investment trust
Real estate investment trusts (REITs) are another way for you to multiply your $1,000. They allow you to own stocks in different real estate properties, from shopping malls to the Empire State Building.
REITs are believed to hold their value better than traditional stocks during economic downturns. They can also provide you with a steady, predictable income. Through real estate investment platforms such as Fundrise, you can get started in low-risk real estate investing with just a few hundred dollars.
Invest in your kids’ college fund
You can deposit however much you want into the 529 plan and withdraw up to $10,000 per year, per student for tuition costs. 529 plans do not have any income limits so you can still contribute even as your income goes up.
Start a small business
Investing your $1,000 in a business idea could help you start a new side hustle or even a new career. If you have the passion and time to make it happen, this could be a smart way to put your money to good use.
You could build a series of online courses to sell, put together a blog on your favorite topics, or start an online shop to showcase your art. With effort and dedication, a small business could even become an outlet for you to share your creativity with the world.
Go on vacation
Everyone needs a break from the daily grind and a vacation may just be the best way to do so.
Spending your $1,000 on a well-deserved vacation can help you rest after long months of work and reduce your risk of death by 20 percent. It can also be a good opportunity to spend time with your family and strengthen your relationship with them.
However you spend $1000, do it ethically
Aspiration is an online finance platform that can help you spend your $1,000 ethically. We don’t invest any money in fossil fuels as the large banks do. We take careful steps to ensure that the money you deposit with us is handled according to the strictest federal guidelines set by the Federal Deposit Insurance Corporation (FDIC).
With our Spend & Save account, you can earn up to 1.00% APY on your savings deposits, making it a great option if you’re saving up for an emergency fund or any future investments. We don’t charge any hidden bank fees to make sure you can grow your wealth with full transparency.
Try Aspiration today to start saving your money responsibly.