What would you do if you suddenly had $10,000 in cash at your disposal? Would you splurge for a trip to some far-flung corner of the world? Trade up for a nicer vehicle? Buy new furniture and a hot tub for your backyard deck?
Those ideas might be the first that come to mind, but they may not be ones you will feel proud of ten or twenty years from now. Unless you have high interest debt you could pay off, your best bet with any “found money” is always going to be investing it for the long haul.
Why? Because when you invest cash instead of spending on depreciating assets, you set yourself up to have more financial freedom and better outcomes later on.
Smart Ways to Invest 10K
But, how should you invest $10,000? While there are plenty of smart ways to invest your money, the right option for you depends on your appetite for risk, your investing strategy, and your long-term goals. Of course, your best option might also depend on your unique needs and what you require to move to the next stages of your business or your personal development.
If you have found money this year, here are five ways to invest that could truly pay off down the line:
Online Real Estate Investing
Investing in real estate is all the rage these days, but that doesn’t mean everyone wants to be a landlord. The mere thought of dealing with tenants or painting interiors is enough to send some running for the hills, let alone the concept of having to deal with late night calls or costly repairs.
That’s why investing in Fundrise is such a smart idea. Fundrise.com is an investing platform that lets you invest in private real estate assets without dealing with the minutiae that comes with owning traditional rental real estate.
You only need a $500 minimum to get started with Fundrise, which makes it an ideal option if you have $10,000 to play with. Once you open an account, you can invest in major metro markets like Los Angeles, Washington D.C., and Jacksonville, Florida. Not only do they offer plans that support supplemental income, but they offer plans good for balanced investing and long-term growth.
While Fundrise has only been around since 2010, the company has performed well with returns ranging from 8.76% to 12.42% over the last four years, net of fees. These returns really speak for themselves, which is why Fundrise continues to grow in popularity among investors.
Another option within the online real estate investing is RealtyShares. Realty Shares has been featured in the Wall Street Journal, Bloomberg, and Forbes, and is already being used by 120,000 investors nationwide.
HOW TO PAY OFF $10,000 OF DEBT IN ONE YEAR
back on what we have and haven’t accomplished and decide what to tackle in the second half of the year. For many, wealth building and debt reduction will be among the top goals for the year.
If eliminating some of your debt while simultaneously improving other parts of your financial life are among your goals, this post is for you. It’s time to take back control and kick your debt to the curb.
It can sound like paying off large amounts of debt in a short period of time is impossible – but it’s not! You can even pay off $10,000 in debt in just one year. Whether you have student loan debt or credit card debt, there are options.
Here’s how you can pay off $10,000 in debt in one year.
The first step in any good debt pay-off plan is knowing how much money you need to come up with in order to meet your goal. Saying that you’re going to pay off $10,000 in debt in one year isn’t good enough. You need to breakdown that number so that you can hit smaller milestones.
The simplest way to make this calculation is to divide $10,000 by 12. This would mean you need to pay $833 per month to have contributed your goal amount to your debt pay-off plan. This number, though, doesn’t factor in the interest on your debt.
If you want to see the impact of interest and how much you can save by accelerating your debt pay off plan you can use a debt calculator like the one provided by BankRate.
In the example below we’re assuming a $10,000 credit card balance at a 16% interest rate. In order to pay the balance off in one year payments of $907 per would be needed which would save over $4,000 in interest – a huge savings!
You can use this calculator to tally up all of your current debts and see what you could save with an accelerated debt pay-off plan.
Decide On Your Strategy
If you only have one debt you don’t need to worry about coming up with a strategy. (Other than how much your monthly payments will be, of course.) You can simply choose to automate your payments and consider yourself done. However, if you’re working with multiple debts you’ll have to determine in what order you’d like to pay those off. There are two popular strategies for doing this: the debt snowball and the debt avalanche.
Debt Snowball Method – With this method you’ll list your debts from smallest balance to largest balance and work on paying off the smallest balance while making minimum payments on everything else. Once the smallest balance is paid off you move on to the next smallest while still meeting all other minimum payments.
Debt Avalanche – With this method you list all of your debts from highest interest rate to lowest interest rate. You then focus on putting all of your extra money toward your highest interest rate while making minimum payments on the rest.
There’s a lot of debate over which method you should use and there is NO right answer. The debt snowball method is a great option if you like quick wins and want to eliminate smaller bills. The debt avalanche method is great if you’re focused on saving the most money in interest.
Once you pick your strategy you should also consider how often you’ll make extra payments and whether or not to automate your plan.
In a recent interview with Forbes, RealtyShares CEO Nav Athwal credits the company’s success to their ability to help accredited investors invest into real estate opportunities nationwide without a huge initial investment. Not only can investors browse opportunities by asset type, but they can buy in for as little as $5,000.
Plus, your investment with RealtyShares is easy to track. “Investors also have access to an investor dashboard where they can monitor their investments, returns and tax documents,” notes Athwal. “Thus, through crowdfunding, we’re making investing in real estate as easy as easy as investing in stocks in publicly traded companies.”
Real estate crowdfunding makes it possible to invest in real estate without ever stepping foot in a property and without borrowing hundreds of thousands of dollars. These reasons and others are why online firms like RealtyShares and Fundrise are so popular, and why they could continue growing in the future.
Peer-to-peer lenders like Lending Club are another smart platform to consider whether you have a few hundred dollars to invest, $10,000, or a whole lot more. Lending Club is a peer-to-peer lending platform that lets you – the investor – earn interest on loans instead of traditional banks.
As an investor in Lending Club, you can spread your investment across hundreds or even thousands of loans in increments as low as $25. Lending Club has offered a historical return of 4-6% per year after accounting for defaults, although you can score a higher rate of return if you make riskier loans.
You only need $1,000 to get started as an investor with Lending Club, and you can automate your investments based on a pre-selected strategy or manually select loans that meet your criteria.
Investing in Lending Club is easy, and you can even use the platform for a traditional or Roth IRA or a 401(k) rollover.
Prosper is another peer-to-peer lender that work similarly. With Prosper, you can invest your cash into loans taken out by individuals and earn a healthy rate of return. Prosper says their investors have earned an average return of 6.59% thus far, making them a top contender in the peer-to-peer lending space.
Health Savings Account (HSA)
A Health Savings Account (HSA) offers yet another way to carefully park $10,000 in investable cash. This type of account is available to individuals and families with high deductible health plans, offering a wide range of tax benefits for today and the future.
For starters, the money you contribute to a Health Savings Account (HSA) is deductible on your federal taxes. Your investment then sits in your account and grows tax-free until you are ready to withdraw it to cover a qualified healthcare expense. Families can contribute up to $6,900 in 2018, while individuals with a high deductible plan can save up to $3,450. Those ages 50 and older can save an additional $1,000 each year.
The best part is, the money you save in an HSA (plus interest) can be withdrawn for any reason without penalty once you hit age 65. That means you can use these funds for retirement or anything else at that point, although you may still want to save your HSA money for healthcare expenses.
The bottom line: Money saved in an HSA has a triple tax advantage! You can deduct your contributions on your taxes, your money grows tax-free, and you can withdraw the money tax-free later on. It doesn’t get any better than that.
When it comes to Roth IRAs, you should have one if you qualify and haven’t opened one already. Roth IRAs offer a great tax advantage later on, and you can contribute up to $5,500 per year (or $6,500 per year if you’re ages 50 and older).
With a Roth IRA, you invest post-tax dollars today and let that money grow tax-free until you’re ready for retirement. The best part is, since you already paid income taxes on your contributions, the money you withdraw in retirement will be completely tax-free.
Anthony Montenegro, financial advisor and founder of The Blackmont Group, says he believes the Roth IRA is one of the most efficient ways to save for the future regardless of your age. You can contribute to a Roth IRA even if you have a 401(k) or comparable retirement account at work. And, depending on where you open your Roth IRA, you will likely have access to a diverse universe of holdings from traditional stocks, bonds, and mutual funds to alternative investments, ETFs, and derivatives like option strategies as well, he says.
There are income limits for Roth IRAs, however, so make sure you can contribute before you open an account. As of 2018, phase-outs start at $189,000 for couples and $120,000 for singles. Couples and singles who earn over $199,000 and $135,000 respectively can’t invest directly into a Roth IRA.
Coaching or Mentorship
While investing in coaching or some sort of mentorship may not be as traditional as other options on this list, this type of investment can be well worth it. The money you spend to get guidance or improve your accountability in a group of like-minded individuals can pay off in spades, both financially and emotionally.
How do I know? I have invested in several different coaching and mentorship programs over the years, including a program that cost $25,000! While that’s a lot of money, there’s no way I could get a better return than I did by investing in myself and my own personal development. I learned so much from the groups I took part in, and those lessons translated into a lot more than $25,000 in returns later on.
One of my colleagues, financial advisor Matthew Jackson of Solid Wealth Advisors, told me he believes investing in personal growth is one of the best little known ways to ensure a positive return. Why? Because Jackson has seen firsthand how a professional coach or mentor can help people build skills they can use to make more money and improve their lives.
“Unlike the passing ‘new investment opportunity’ that may have little control of, investing in yourself is a way you can have total control of how you put that investment to work,” says Jackson.
The Bottom Line
If you somehow wind up with extra money this year, don’t forget all the different strategies you could use to grow that money over time. Investing $10,000 today would leave you with $32,071 if you earned 6 percent and left the money alone for twenty years. Let it sit for thirty years and you’d have $57,434.
You could have even more money if you managed a higher rate of return, but it’s not chump change either way. Once you learn to let your money work for you, and the possibilities are endless.
No matter where you are on your financial journey, you need to know that it’s possible for anyone to turn their financial life around. Sometimes all it takes is that first step in the right direction to get things moving in your favor. But, as with most things, sometimes that very first step is the hardest part.
That’s why we created this list of 100 ways to start saving money today. None of these tactics will be life-changing on their own, but they can make quite a difference over time if you’re able to implement more than one. Some of these suggestions take just a few minutes, while others require a bit of regular effort. Still, they’re all incredibly simple – anyone can do them.
Obviously, not all of these tips will apply to everyone. Just go through the list and find 10 or 15 that do apply to you and use them in your life. When you do, you may quickly find that you’re saving more money than you ever thought possible.
10 Ways to Save Money
1. Move bank accounts to take advantage of perks and earn more interest
If you’re paying a monthly fee for your checking or savings account, you would benefit from researching some of newest banking offers out there. Not only do some of the best banks offer sign-up bonuses simply for opening an account and setting up direct deposit, but some offer attractive interest rates to new customers as well.
It’s true that interest rates are not what they once were, but it’s still worth a look. Some of the best free checking accounts and best savings accounts can be found online. Here’s a guide on how to make that switch.
2. Turn off the television.
One big way to save money is to drastically cut down on the amount of television you watch. There are a lot of financial benefits to this: less exposure to spending-inducing ads, a lower electric bill (and perhaps a lower cable bill if you downgrade your subscription), more time to focus on other things in life — such as a side business — and so on.
Want to take things a step further? Consider cutting the cord to cable TV altogether.
3. Stop collecting, and start selling
There was a time when people thought their collections would bring them riches. Beanie Babies were a big fad at one time, as were Longaberger baskets. Now you can find those items on resale sites like Craigslist and at garage sales for a fraction of their initial cost, leaving many people who sunk thousands of dollars into their “investments” wondering what happened.
If you want to avoid that situation, don’t collect items of questionable value. And if you want to recoup some of the money you’ve already spent on collectible items, you can start selling them now and use those funds for any number of worthy financial goals. Read our “Guide to Selling Unwanted Items” for some simple strategies that can help you profit as much as possible.
4. Sign up for every free customer rewards program you can.
No matter where you live, you’ll find plenty of retailers who are willing to reward you for shopping at their store. Here’s the basic game plan for maximizing these programs: create a Gmail or Yahoo address just for these mailings, collect every card you can, and then check that account for extra coupons whenever you’re ready to shop.
You can add to those rewards and discounts by using rewards credit cards to earn points on purchases at a wide range of stores that can be redeemed for cash back or other benefits.
5. Make your own gifts instead of buying stuff from the store.
If you want to save money while also giving generously, creating your own homemade gifts is one way to accomplish both goals. You can make food mixes, candles, fresh-baked bread or cookies, soap, and all kinds of other things at home quite easily and inexpensively.
These make spectacular gifts for others because they involve your personal touch — something you can’t buy from a store — and quite often they’re consumable, meaning they don’t wind up filling someone’s closet with junk. Even better – include a personal handwritten note with the gift.
6. Master the 30-day rule.
Avoiding instant gratification is one of the most important rules of personal finance, and waiting 30 days to decide on a purchase is an excellent way to implement that rule.
Quite often, after a month has passed, you’ll find that the urge to buy has passed as well, and you’ll have saved yourself some money simply by waiting. If you’re on the fence about a purchase anyway, waiting a while can give you a better perspective on whether it’s truly worth the money.
7. Write a list before you go shopping – and stick to it.
One of the easiest ways to save money is to only shop when you have a list. Because when you’re without one, you typically end up making impulse buys and unplanned purchases – all things that cost money.
Creating a list before you go to the grocery store is especially important. Not only can it help you buy items that fit with your meal plan, but it can also help you avoid buying food you might waste. Always create a list and, more importantly, stick to it.
You can also take advantage of a cash back rewards card that gives bonus cash at grocery stores – just be sure to pay off the balance each month.
8. Invite friends over instead of going out.
Going out to eat or “out on the town” has a way of completely destroying both your food budget and your entertainment budget in one fell swoop. And no matter what, it is always cheaper to stay in with friends and come up with your own entertainment.
Instead of hitting the town, host a fun pitch-in dinner with your friends. Play cards, sit around a fire pit, or watch movies with your guests. You’ll all save money – and have a blast.
9. Repair clothing instead of tossing it.
Don’t toss out a shirt because of a broken button – sew on a new one with some closely-matched thread. Don’t toss out pants because of a hole in them – put in a patch of some sort and save them for times when you’re working around the house.
Most basic sewing jobs can be completed by anyone, and a little bit of practice goes a long way. Learning basic sewing skills is a great way to save some money – and extend the life of your clothing.
Learn basic sewing techniques and you can mend worn-out clothing instead of tossing it. Photo: Chris
10. Don’t spend big money entertaining your children.
Most children, especially young ones, can be entertained very cheaply. Buy them an end roll of newspaper from your local paper and let their creativity run wild. Play ball in the backyard. Head to the park. Plant a garden. Teach them to ride a bike without training wheels once and for all.
Realize that what your children want most of all is your time, not your stuff, and you’ll find money in your pocket and joy in your heart.