Ready to Invest
As soon as you graduated college, your parents probably advised you to do a few things: Find a good-paying job, call them every once in awhile, and begin to invest your money, now. While mom and dad might have dated taste in music or fashion, they usually do know what they’re talking about when it comes to money.
Talking about money can feel weird — dirty even. It’s a topic that some people try to avoid, however, everyone — and we mean everyone — uses it. So when the discussion of saving or investing money comes up, it seems easier to brush it off or ignore it completely. Well, we’re here to break this bad habit. The sooner you invest and save your money, the better off you’ll be later in life. And even though you may not have to worry about it now, your future self will thank you if you begin to make investing and saving a habit now.
So to help, we’ve rounded up 10 easy ways you can invest $10,000 — trust us, your parents will be so proud.
Pay Off Your Student Loans
If the thought of your student loans makes you want to ugly cry, then it might be a good idea to deal with them head on. The sooner you pay off these bad boys, the less stress you may feel. The Institute for College Access & Success discovered through their Project on Student Debt that 68 percent of 2015 bachelor’s degree recipients graduated with an average debt of $30,100.
Use some of that $10,000 to pay off more than the required amount that’s due to get ahead of your loans, and try to pay off the loan that has the highest interest rate. If you’re eligible, you can refinance your loans and receive a new interest rate based off your current debt-to-income ratio and credit score. However, it may be difficult to do this with private loans, so double-check with your loan provider before you do any adjustments.
Pay Off Your Credit Card Debt
If your credit card debt is higher than you’d like, there’s a way to say buh-bye to that debt. According to Forbes, you never, ever just want to pay the minimum balance. It’ll take you years to pay off the debt. Instead, invest some of your money by paying double (or even triple) the minimum amount. However, if you have multiple cards (because, who doesn’t), they recommend to pay off the card with the smallest balance first, so you can feel accomplished and motivated to pay off your second card with the same momentum.
Pay Off Your Mortgage
If you’ve already purchased a home and plan on living there for a long time, then it may be a good idea to invest your $10,000 into your mortgage. While it’s exciting to buy a home, it can be a huge buzzkill to pay off your mortgage with any extra cash. Thankfully, there’s a way to do it without feeling depleted.
According to Real Simple, you can make a lump-sum payment with a tax refund in addition to your $10,000, switch to bi-weekly payments, or refinance to shorten your loan’s time frame. See, there are plenty of smart ways you can invest your money into your home.
With your $10,000, you may want to buy a few ETFs to invest in your future. What’s an ETF? So glad you asked. ETFs are like mutual funds in the sense that they allow investors to hold a stake in dozens or even hundreds of different companies with a single purchase. An exchange-traded fund can be bought or sold like a normal stock through a brokerage firm or stock exchange. With ETFs, you also have better control over when you pay the capital gains tax, and you can buy and sell any time of the day.
It’s usually less risky to invest in bonds, depending on the type you get. They tend to do well when stocks do poorly. However, you want to be mindful when investing in them, since they provide the most reward when they hit their maturity — which will be years later, of course. Aim to invest in treasuries and find a nice balance between investing in stock and bonds. While stocks are riskier to invest in, bonds will provide that stability you seek.
Start a Robo-Investor Account
Welcome to 2017! There’s a way for a computer to invest your money for you.
How? With a robo-advisor. Essentially, it’s a computer algorithm that claims to invest your money better than you. Plus, robo-advisors are cheaper to use.
According to Time, traditional financial advisors will charge around one to two percent of your assets while robo advisors will charge around 0.4 percent. However, each robo-advisor has their own style when it comes to investing, so make sure to do your research before you get trigger-happy with your money. Want to learn more? Check out Wealthfront.
Set up a 529 Education Plan for Your Kids
Whether you have kids or are planning to have kids, it’s never a bad idea to invest in their future. While there are a few ways to do this, investing in a 529 education plan is easy to start.
A 529 plan or “qualified tuition plans” is a college savings plan that’s sponsored by the state or state agency. Your kids can use this money to buy books, classes, or other education-related items. The great thing is, there are no income restrictions — so anyone, with any level of income can open one. Plus, if you invest for your kids’ future, you’ll receive special tax benefits. It’s a win-win all around!
Save for a Downpayment on Your First Home
If you’re thinking of buying a house in the near future, it might be a smart idea to save your $10,000 for a down payment. Having a down payment readily available when you purchase your home can secure a better interest rate and help avoid private mortgage insurance costs. Want to invest more than your $10,000, Well, you came to the right place.
According to Forbes, you can begin saving money by saving the same amount of money you spend each month, cutting back on expenses, and being realistic about your home-buying timeline.
Put Money Into a Retirement Plan
Your $10,000 will look good in your future self’s pocket.
Best way to do that? By putting it directly into a retirement plan. But which one do you choose? Well, retirement plans fall into three categories: individual retirement plans, employer-sponsored retirement plans, and self-employed or small-business-owner plans. If you’re currently employed, you probably should invest in a 401k. Employers usually match a certain percentage to what you decided to invest. However, the other two types of plans are for people who own businesses or work independently. Most retirement plans are tax deductible and some work based on how many employees you have.
Once again, make sure to do your research so you can wisely invest your money.
Begin a Rainy Day Cash Fund
Even though it’s nice to invest in your future, it’s also nice to have $10,000 in the bank just in case. Place your rainy day fund in a high-yield savings account where you can easily access it. Not sure which one to pick? Use this list from NerdWallet to help plot a path to financial freedom.