What Can You Do If You Have Extra Cash Lying Around?
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When it comes to our finances, most of us are taught from a young age about the importance of saving. We’re told to put away money for a rainy day, for retirement, and for any other number of reasons. But what should you do if you have extra cash lying around and don’t know what to do with it? Here are eight of the best ideas you might want to consider.
1. Consider Certificates of Deposits
A certificate of deposit, or CD, is essentially a savings account with a fixed interest rate and term. This means that you’ll earn interest on your deposited funds while they remain untouched in the account. CDs are one of the safest investments you can make since they’re backed by the FDIC (Federal Deposit Insurance Corporation) for up to $250,000 per depositor. And, if you need access to your money before the CD matures, you can typically do so but may be subject to an early withdrawal penalty. You can additionally research the best current CD rates to make sure that you’re getting the most bang for your buck. For example, as of October 2020, the average annual percentage yield (APY) for a one-year CD was just 0.15%, while the APY for a five-year CD was around 0.70%.
2. Pay Off Debt
If you have any high-interest debt, such as credit card debt, it may make sense to use your extra cash to pay it off as quickly as possible. Not only will this save you money in interest charges, but it can also help to improve your credit score. If you’re not sure where to start, you can use a debt snowball calculator to create a plan for paying off your debts. Additionally, if you have student loans, you may want to consider refinancing them to a lower interest rate. This could potentially save you thousands of dollars in interest charges over the life of your loan.
3. Invest in Real Estate
Investing in real estate can be a great way to grow your money. While there are some risks involved, if you do your research and invest wisely, you can potentially make a lot of money in the long run. There are a few different ways to get started in real estate investing, such as buying a rental property or becoming a landlord. You can also invest in REITs (real estate investment trusts) or invest in crowdfunding platforms that focus on real estate projects.
4. Start or Expand a Business
If you have a business idea that you’re passionate about, now may be the time to start pursuing it. Or, if you already have a business, you could use your extra cash to help expand it. Of course, starting or growing a business is not without risk, but it can be a great way to earn a significant return on your investment if things go well.
5. Invest in the Stock Market
Investing in the stock market is another option for growing your money. While there are some risks involved, over the long run, the stock market has historically been one of the best places to invest your money. If you’re new to investing in the stock market, you may want to consider opening up a brokerage account and investing in a few stocks or mutual funds. You can also consider using a robo-advisor, which can help you to invest in a diversified portfolio of stocks and other securities with minimal effort on your part.
6. Invest in Gold or Silver
Investing in precious metals, such as gold or silver, is another option to consider. While the price of these metals can be volatile, they can potentially offer a hedge against inflation and economic downturns. You have a few different options for investing in gold or silver, such as buying physical metals, ETFs (exchange-traded funds), or mining stocks. For example, as of October 2020, the price of gold was around $1,900 per ounce, while the price of silver was around $24 per ounce.
7. Save for Retirement
If you’re not already doing so, now may be the time to start saving for retirement. Even if you have a 401(k) through your employer, you may want to consider opening up an IRA (Individual Retirement Account) as well. This can help you to get started on the right foot in terms of saving for retirement and potentially give you a tax break in the process. For example, as of 2020, you can contribute up to $6,000 per year to an IRA (or $7,000 if you’re 50 or older). It’s also a good idea to have an emergency fund that you can tap into if you ever find yourself in a bind. This can help you to cover unexpected expenses, such as a car repair or medical bill, without having to put the charge on a credit card or take out a loan. Ideally, you should aim to have at least three to six months’ worth of living expenses saved in your emergency fund.
8. Invest in Yourself
Finally, don’t forget to invest in yourself. This could include taking courses or getting certifications that can help you to advance in your career. It could also involve investing in your health, such as by joining a gym or starting a healthy eating plan. Or, you may want to use your extra money to travel and experience new things. For example, you could use your extra cash to visit a new country or take a trip that you’ve always wanted to go on. Whatever you choose to do, investing in yourself can be a great way to improve your life and make the most of your money.
While there are many different ways to invest your money, these are just a few of the most popular options. Ultimately, it’s up to you to decide what makes the most sense for your unique circumstances. However, if you have extra cash lying around, these are all worth considering as potential options. So, make sure to do your research and carefully weigh your options before making any decisions.