It's not every day that $1,000 magically falls into your lap. But if you're looking at a windfall, you may be tempted to go out and indulge in the luxuries only money can buy. Don't do it, though. Chances are there are much more important uses for that lump sum that don't involve a large-screen TV or new mobile phone. Here are a few ways to really make the most of that cash.
1. Boost your emergency fund
In a recent Bankrate study, 23% of Americans owned up to having no emergency savings whatsoever. If you're one of them, then there's no better place for that $1,000 than your emergency fund, which, ideally, should have enough money to cover three to six months' worth of living expenses. Even if your savings account isn't empty, it never hurts to boost your emergency fund, especially if you're about to take on a new major expense, like a home or vehicle.
IMAGE SOURCE: GETTY IMAGES.
2. Start building a nest egg
Back in March, GOBankingRates reported that 42% of Americans have less than $10,000 in retirement savings. If you've yet to fund your IRA or 401(k), that $1,000 will help you get started. And while you will be locking that money away for a lengthy period of time, think of it this way: If you keep it invested for the next 40 years and it earns an average annual 7% return, it'll grow to $15,000 by the time you're ready to use it.
3. Pay off credit card debt
U.S. credit card debt reached an all-time high late last year, surpassing the $1 trillion mark. If you're carrying a balance, using that $1,000 to pay all or a portion of it off will not only save you money on interest, but potentially help bring up your credit score. And once you do the latter, it'll be less expensive to borrow money the next time you need to.
4. Knock out a portion of your student loans
The average Class of 2017 graduate came away with $39,400 in student debt. If you're saddled with loans, an extra $1,000 could help ease that burden ever so slightly. In fact, the average monthly loan payment among borrowers aged 20 to 30 is $351, which means that cash could conceivably cover almost three months' worth of payments.
5. Make an extra mortgage payment
Paying off your mortgage in your 30s or 40s may not seem feasible, or like much of a priority. But if you're nearing retirement and are sitting on an extra $1,000, consider putting that money into your mortgage. Doing so will only increase your chances of knocking it out entirely before bringing your career to a close, and entering retirement without housing debt will buy you much more financial flexibility when you move over to a fixed income.
6. Get a car
Owning a car is an expensive prospect. According to AAA, it costs $8,700 a year, on average. But if having that car opens the door to better job opportunities, it could be a worthwhile investment. And while you can generally expect to be able to finance a car rather than have to pay for it outright, you will need a down payment, which that $1,000 might help you cover.
7. Make a money-saving home improvement
As a homeowner, you probably have a long list of projects you're hoping to tackle once you sock away the cash. So if you suddenly have an extra $1,000 to work with, it pays to improve your home in a manner that can save you money in the long run. For example, say your fridge is old and, as such, costs you $400 a year to run. If you use that money to upgrade to a more energy-efficient model, you might cut that $400 a year in half, which means your investment will pay for itself in five years. And, you'll probably enjoy that new fridge a lot longer.
8. Buy some tools for your side hustle
Side hustles are growing increasingly popular these days, and they're a great way to drum up extra cash. So if you're missing the tools you need to succeed at your second gig, why not use your newfound $1,000 to invest in them? For example, if you're looking to do freelance Web development work but have a painfully slow laptop, buying a new one could make it easier for you to do your job -- and earn a lot more money going forward.
Getting your hands on extra cash is always something to celebrate. But rather than blow that money, put it to good use. You'll be thankful you did later on.
More From The Motley Fool
- 10 Best Stocks to Buy Today
- 3 Stocks That Are Absurdly Cheap Right Now
- 5 Warren Buffett Principles to Remember in a Volatile Stock Market
- The $16,728 Social Security Bonus You Cannot Afford to Miss
- The Must-Read Trump Quote on Social Security
- 10 Reasons Why I'm Selling All of My Apple Stock
The Motley Fool has a disclosure policy.