Some of us will be getting a government-issued stimulus check very soon. I’ve seen a lot of people on social media spending it before it’s even in their accounts! Maybe you’re not one of the lucky ones getting money handed to you in the next couple of weeks, but you have a little cash just burning a hole in your pocket and are considering how to spend it. Before you pre-order your Nintendo Switch, take a minute and consider your goals longer-term.
Here are 5 Awesome (and smart!) Ways to Invest with as Little as $500!
1. PAY DOWN YOUR CREDIT CARDS: Did you know that credit scores are partially determined by how much available credit you use? In other words, if Discover gives you a credit card with a limit of $1,000 and you almost always max it out, this hurts your credit. Badly! Your goal should be to use no more than 30% of your available credit combined. So if you have three credit cards, totaling $8,000 available credit, you want to be using no more than $2,400. Credit companies want to see that if they give you credit you won’t rush out and use it all up, making it that much more likely you’ll run into problems paying it and they’ll get stuck with the fallout of your mess.
2. START A 529 PLAN: These plans are to save money for college and, as long as you use the money for educational purposes, you don’t have to pay taxes on it! It’s a win no matter how you look at it. Even minimal investments of $25 here and there will really make you glad you did it when it comes time to pay off your loans in a few years.
3. INVEST IN STOCKS: Although stocks are risky, they also offer crazy-high returns. To minimize your risk, choose a company that’s been around for a long time rather than a newer company that could go belly-up as technology and consumer demand evolve. The key is to buy low and sell high! Check out Robinhood to get started on your mobile device.
4. START A ROTH IRA: A Roth IRA is a retirement account. While I know that’s probably the last thing you’re thinking about right now; it shouldn’t be so low on your list of priorities! Did you know that 42% of people age 18-29 have no retirement fund in place? If you started one now, you could be ahead of nearly half of your peers after making just ONE investment? That’s pretty crazy, right? If you start at age 23, for instance, you only have to save about $14 a day to be a millionaire by age 67. If you’re younger than 23, just think how easy it could be to retire a millionaire with a daily investment of the equivalent of a take-out cheese pizza??
5. START A BUSINESS: OK, I know that sounds like a really daunting task! Guess what? It is! I’m not going to pretend otherwise. But listen up: If you start a little side business on a shoestring budget right now in your teens or early 20s, even if it fails miserably, you’re still better off than most of the people who play it safe. Imagine two 20-year old guys, Safe-bet Sam, and Why-not Walter. Safe-bet Sam puts his $500 into a bank savings account earning 1% interest…or worse yet, stuffs it under his mattress for a future emergency. Well, in 5 years, Sam has either $510 or…$500 if he hid it under his mattress, but either way he’s not really any better off than he was 2 years ago. And that’s if he didn’t have a house fire or someone steal his wad of money. On top of that, it’s boring! Remember, Sam’s young! If not now, when will he live a little and take a chance at greatness? Now, what about Why-not Walter? Well, he decided that since he’s good with graphic design, he’d start a little side hustle with his $500 and go online designing business logos for people. He didn’t make much at first, but after 2 years he’s making $1500 a month to basically have fun with art, which is his passion anyway. He sits around in sweats and designs logos and has invested 15% of his profits into stocks which have grown exponentially over the past couple years. His $500 has now become a nice form of extra income, along with an investment that’s grown to a few thousand dollars in just 2 years. Wait a minute. You might say, “Yeah, but what if Walter’s business fails?” And here’s your answer: He’s still likely to have learned a TON from his mistakes, and from business in general. 9 times out of 10, the Walters out there would go on to try again, and again, and again until something clicks. He’ll see what he did wrong, have checked out the competition, talked to other entrepreneurs, and be walking away with so much valuable knowledge that he’s bound to succeed eventually. And if he doesn’t? Well, at least he took a chance and dared to dream big. Not only that, he did it in his early twenties and has (likely) 60+ years to figure out a plan B!
The bottom line is, if you make some smart (and sometimes risky) choices now while you’re young, it could yield BIG returns! If you fall on your face, which is unlikely, you’ll have a lifetime to recover and learn from your mistakes! There might not be another chance anytime soon to have a chunk of money handed to you, so proceed with caution. Think longer-term and figure out what you really want out of life before you part with the cash.