Did you start to make some money? Alternatively, you already have worked for a while? Well, there are moments in life when we begin to think about how to invest a portion of our money into something profitable. I am starting with this series of articles where I investigate the best, in my opinion, investing ideas for different amounts of the initial investment. The first article is about how to spend your first thousand dollars.
Pay Off Your Debt
We all don't like to pay our debts. It is this feeling that we are giving our money and in return, we don't get anything back. There is no instant gratification effect in this. However, we need to think about our future, and with debts, it is not very bright. Debts are dragging us down, we cannot make any substantial saving, nor we can afford to buy anything we want. So how should we approach this problem?
Many financial advisors would tell you to pay out the debt with the most interest rate on it, and it is good advice, but it will not get you any gratification in the short run. If you want to feel better about paying off your debts, then try to repay those debts with the lowest amount on them first. This way, you will get this fuzzy feeling of accomplishment sooner, and it will be your reward. It is much easier to pay off debts when you feel the emotional compensation you are getting from it.
I don't encourage you to close only the low debts, I encourage you to start with them. It is always a good thing to be debt free, I don't think anybody will argue with that. Therefore if you have a spare $1000 to invest then, by all means, invest first in your debt repayment.
Invest in Index Funds (S&P 500)
When people think about investment, they think of buying some companies share and make money on growth or dividends. But for the inexperienced investor, the best way to go this route is to purchase index funds. Index Funds are basically an investment in hundreds of different companies at the same time, you are not betting on one company you are betting on hundreds so, pretty much the whole market. This helps you to diversify your investment, thus reducing your risk.
The best index found to follow is the S&P 500, the average return on the S&P 500 over 90 years is about 10 per cent, which is very good. So if you are looking for a not very risky investment with a good history, then the S&P 500 would be the appropriate choice.
Invest in Your Education
This is one of the best investments ideas for your $1000. If you want to invest in something that will last for the eternity of your life, then invest in your education. The staff that you will learn will stay with you and can, potentially, improve your career or your business.
"An investment in knowledge always pays the best interest."
― Benjamin Franklin
You can learn how to run your business, and this knowledge can help you to make a side hustle that will lead to a financially independent life. So any knowledge can be valuable, you just need to find a way to use it.
$1000 might not pay out your college, but there are a lot of online courses that cost just a small portion of this money. You can start learning to code in under 30 dollars a month, and trust me coding skills is a very valuable investment.
Invest in You Retirement Account
Every country has different retirement accounts, sometimes the company pays for your retirement. Sometimes you do it yourself, but in any case, you need to start to think about your retirement early. The earlier you start the best outcome you will get. If you've never heard of compound interest, then you are missing out, this magical thing will make you rich, and you don't even need that much money to start with, it is just better to start when you are young. Moreover, in most cases, you don't pay taxes on your retirement investment account, so this reason alone makes it a good idea to consider.
When we are old, we don't have any income source, and we can't work, so the best source of income is our retirement accounts. It will help you to survive, or if you start to think about it earlier, even live a comfortable life.So don't postpone investment into your retirement. You are missing out on this sweet compound interests. Start earlier, and you will thank me later, well... you probably will forget about me by then 😄
As you can see, you don't need much to start investing and investing is a very broad term. It doesn't mean you should invest in some silicone valley startups or in stocks. You can start investing by improving your education or paying out your debts. These investment ideas will definitely pay out a good interest on your money. Knowledge is the most valuable thing. So at this stage, it is probably is my favourite choice out of all.
When you grow your starting capital, you can consider more investing options, which I will cover in my next article in the series of How To Invest Money. Subscribe to the newsletter to be the first one to read it.
My name is Evgeny, and I am a personal finance enthusiast, I am writing weekly articles about how to handle your money the right way. I've made it my mission to make all things money easier to understand, and I am here for you to reach any of your financial goals. Subscribe to be the first to read all my latest articles.
Thank you for reading!