OK, so you've got $5,000 burning a hole in your pocket,
and you're itching to do something with it. Here are some
ideas for you.
Travel
That $5,000 can give you, your spouse, and
kids a nice vacation to remember. If it's just you, perhaps
with a significant other, your money will go even further --
and so can you. If you find a bargain, you can get even a
short but exotic trip to somewhere like Antarctica for around
$4,000 or $5,000, for a berth in a two-person room. (There
will be extra costs involved in getting to the boat, though,
among other things.) And you might need a zoom lens for your
camera to capture penguin faces better.
Invest it
Think seriously about investing that money,
especially if you're one of the many millions of Americans
whose retirement savings are
woefully behind schedule. If that $5,000 is invested in a
broad-market index fund and earns the market's historical
average (never guaranteed, of course) of around 10% per year,
in 30 years it will grow to more than $87,000. That may not
seem like much, but if you withdraw 4% of that each year in
retirement, you'll be getting about $3,500 each year -- all
from a one-time $5,000 investment.
You can do even better than the market's average, though.
For instance, the
CGM Focus Fund (CGMFX) has put together a
10-year track record with average annual returns of nearly
20%. Although you shouldn't count on such stellar returns in
the future, the fund's current holdings, which include
Ford Motor (NYSE: F),
Goldman Sachs (NYSE: GS), and
Amazon.com (Nasdaq: AMZN), have certainly
made nice contributions to the fund's performance
recently.
Individual stocks could also give you better returns.
Opening a discount brokerage accountwith that $5,000
could get you started on the right track toward turning that
seed money into a serious stash.
Give it away
I'm serious. You can do a heck of a lot of
good in the world if you strategically donate that $5,000.
You can even do a lot by just giving $1,000 and spending the
remaining $4,000 in other ways. We've supported a number of
charities over the years in our
Foolanthropycampaigns, and even small donations from
readers like you have made a huge difference.
Earn an instant 25% return
If you're saddled with credit card debt, you
really should pay it off before investing. That's because
while you can hope to earn 10% or more per year on your
investments, you may well be forking over 20% per year in
interest. If your interest rate is 25% -- which is somewhat
high but certainly not unheard of -- by paying off $5,000 of
debt at that rate, you're saving yourself from having to pay
$1,250 in interest this year. And with credit card issuers
like
Bank of America (NYSE: BAC),
Discover Financial (NYSE: DFS), and
Capital One (NYSE: COF) taking steps to
rein in defaultsand reduce their credit exposure during
this crisis, getting your debt under control is more
important than ever.
Remodel your home
Spending money on your house will not only
often give you pleasure, but it can also give you money --
when you sell. With most remodeling projects, you'll recoup a
hefty fraction of what you spent by getting a higher price
come sale time. With around $5,000, you may be able to buy a
bunch of new windows, or replace the siding on your home, or
get your house painted, or get a new roof. Continued... |