Unsure of what to do with an additional $50,000 sitting idle in a savings account? That’s a nice thing to have, in terms of problems. The abilities needed to earn and save money, however, show to be extremely unlike those needed to spend it wisely.
Of course, you could put that $50,000 in the stock market, but you’d have to be willing to take on the risk associated with stock volatility. You might also accept the reduced yield and profits by investing it in government bonds, which have lower volatility. If only there was a third choice that offered both the stability of bonds and the rewards of equities!
We’ll look at some of the finest methods to spend or invest your money in this blog article. We’ll also provide some advice on how to maximize your investment. Therefore, continue reading for tips that will help you get the most out of your money, whether you’re seeking for strategies to expand your savings or want to investigate new investment options.
1. Invest in index funds
If you don’t have any loans with high-interest rates, investing in index funds is a terrific way to grow your money. A collection of stocks and other investments known as index funds follow a particular market index, such as the S&P 500. They provide a superior mix of risk and profit and are an easy and affordable method to participate in the stock market.
Index funds are a fantastic choice for you if you have a low tolerance for risk. Additionally, they’re a wise solution if you lack the skills or time to actively manage your assets.
There are several index funds from which to pick. The Vanguard S&P 500 ETF (VOO) and the SPDR S&P 500 ETF are two prominent index funds (SPY). To invest in index funds, you can utilize a standard taxable brokerage account or a Robo adviser.
2. Clear your debt
Getting out of debt is one of the most crucial steps toward financial independence. Using your cash to settle high-interest debt, like credit card debt, may be profitable. By doing this, you’ll pay less interest overall and have more money each month to put toward other expenses.
Paying off debt is similar to receiving a guaranteed return on your investment since compound interest works to your advantage when you invest but against you when you have debt. For instance, if you owe $10,000 and the interest rate is 10%, you would effectively be paying $1000 in interest each year.
This indicates that it would take you ten years to pay off the loan, during which time you’d have to pay a total of $20,000, which is double the amount you borrowed initially! Therefore, if you have debt, paying it off should be one of your top goals in your personal financial strategy.
3. House Flipping
Even while I adore long-term rentals, there are other ways to use your $50,000 to purchase real estate. Investigate the concept of flipping a fixer-upper if you are confident working with contractors, permits, and remodeling projects. You may get paid pretty quickly while avoiding the hassles of being a landlord.
Just be careful not to conflate “fast” and “easy.” Finding excellent offers, selecting and hiring contractors, supervising the remodeling, obtaining permits, dealing with inspectors, and promptly promoting and selling the property are all time-consuming tasks involved in flipping properties.
I gained $40,000 by flipping a house in four months, and I earned every cent of it by spending practically every day on the property and taking all the risks involved.
4. Invest in business real estate
Another fantastic approach to investing $50,000 in real estate is through the commercial property. In comparison to residential property, commercial real estate offers a higher rate of return. Additionally, working with individuals or families doesn’t need you to cope with their troubles.
Through a website like EquityMultiple, you may invest in commercial real estate in the best way possible. You may make returns of more than 15% per year with EquityMultiple. This is a fantastic strategy to gradually multiply your money.
5. Open a savings account for unplanned expenses
Establishing an emergency savings account is another crucial financial step. At least three to six months’ worth of expenses should be covered by the money in this account, and ideally a full year.
An emergency fund’s purpose is to act as a safety net in case you have a financial setback, such as a job loss or unanticipated medical expenses. Having this safety net can prevent you from falling into debt or losing money when you sell investments.
Your emergency funds will slowly increase in a savings account at a very low-interest rate and will be simple to access when required. Make careful you select a savings account with a high-interest rate and no monthly fees, such as those provided by online banks.
6. Invest for the future
Another choice if you’re unsure of what to do with $50,000 is to put money aside for retirement. Even though retirement savings may seem far off, it’s never too early to begin. Additionally, the earlier you begin saving, the more time your funds have to develop.
You may make contributions to a variety of retirement plans, such as 401(k)s and IRAs. You can be eligible for matching contributions if you have a 401(k) via your workplace. You may save for retirement even more quickly with the aid of this free money from your work.
7. Remodel your house
$50,000 can be enough to cover the price of repairs or cosmetic improvements to your home, and you might be able to make a lot of changes. You may build a deck, add more space to a room, or rebuild your roof.
A fantastic approach to enhance your quality of life and maybe raise the value of your property is remodeling and improving your house. Make sure you have a reasonable estimate of the expenditures before beginning any renovation job. The time and effort needed to finish it as well as other costs like permits should also be taken into account.
By completing part of the work yourself, you may maximize the use of your money. However, only take on jobs that you are sure you can finish safely and correctly.
8. Make use of money market accounts
While not the most interesting investment, money market accounts provide a secure location for your cash. In that it is a low-risk investment, a money market account is comparable to a savings account.
The key distinction is that traditional savings accounts often provide lower interest rates than money market accounts. This implies that a money market account will enable you to increase your money more quickly. A $50k investment in a money market account is good if you won’t need the cash right soon.
9. Participate in peer-to-peer lending
In exchange for interest payments, peer-to-peer lending is a type of investment that enables you to lend money to people or companies. This may be a fantastic strategy to generate passive income and may even result in larger returns than other types of investing.
Investors and borrowers are matched in peer-to-peer lending. You might decide to lend money to individuals or companies that need a loan and meet the requirements you’ve established. You may pick the amount of money you want to invest and the interest rate you want to earn when you set up your account.
Investigate the many platforms that are accessible and contrast the interest rates, charges, and minimum investment quantities before beginning. Additionally, you should think about the danger involved and your comfort level with the concept of lending money. You can’t count on getting it back or making money off of it.
10. Make a vacation rental purchase
For some real estate investors who want to increase their financial stability, vacation rentals may be fantastic investments. Usually, these houses are situated in well-known tourist attractions.
These homes allow you to enjoy the space for yourself while you’re not renting it out, in addition to earning rental revenue. Making use of your $50,000 to invest in real estate and create monthly income flow is a terrific idea.
11. Begin a dropshipping company
Dropshipping could be a fantastic choice if you want to launch your own company. When you run an online store using dropshipping, you may sell things without keeping any inventory on hand. Buying goods from a supplier and having them ship them straight to your clients is how this works.
Dropshipping may be a fantastic method to launch a business with no initial outlay. If you’re seeking freedom, running your business solely online is another wonderful choice. Prior to beginning a dropshipping business, you must select a specialty and identify a supplier.
Additionally, you’ll need to set up a payment gateway and build a website. You may also sell your stuff on well-known online stores like Amazon or eBay. If done right, this investment may generate a sizable return in the future.
12. Invest in REITs
Any real estate investor may simply expand their money by investing in REITs, or real estate investment trusts. These trusts generally consist of a portfolio of properties, giving you access to various real estate investment opportunities. As an illustration, certain real estate investment trusts could prioritize commercial real estate while others would prioritize residential real estate.
Additionally, you may discover REITs that invest in a range of other real estate types, which can provide you with even more diversity. A wonderful option to invest in real estate without having to deal with property management is through REITs.
Additionally, REITs frequently distribute dividends, which can give you a decent source of income.
13. Invest in Real Estate Crowdfunding
One of the finest methods to invest $50,000 is in real estate crowdfunded by investors. Without the inconvenience of being a landlord, you may generate a return that exceeds that of the majority of conventional investments.
You may invest as little as $10 in real estate by using a company like Fundrise. They are furthermore offering new investors $10 absolutely free. The returns for Fundraise will depend on the state of the market, but historically they have ranged from 10% to over 20%. To begin, create an account below.
14. Invest in a franchise
Investing in a franchise is a simple method to launch a business. Franchises already have a consumer base, brand, and marketing plan in place. As opposed to forming a company from scratch, this might make it simpler to get your firm up and operating quicker and with less risk.
Franchises do have certain disadvantages, of course. They may provide you less influence over the firm than if you had found it yourself, and they can be pricey to invest in. Additionally, you must abide by the laws and regulations established by the franchisor.
Do your homework and talk to current franchisees before making an investment in a franchise. This will enable you to better comprehend the situation and determine whether it is the appropriate course of action.
15. Invest in dividend-paying stocks
If you want to make money grow, dividend stocks might be a great choice. You can invest in specific businesses that regularly distribute dividends to shareholders by purchasing dividend stocks.
A dividend, as defined by the company’s board of directors, is “the distribution of a portion of a company’s earnings to a class of its shareholders,” according to Investopedia.
This implies that if a business generates a profit, it is permitted to pay dividends to its shareholders. Most investments pay dividends on a quarterly basis, but some even do so monthly or annually. The fact that dividend stocks may offer a steady source of income is one of their many outstanding qualities.
There are many things you can accomplish with $50,000, which some investors may find daunting. There are numerous excellent methods to invest money and accomplish your financial objectives, such as purchasing real estate with Fundraise or stock market investments with M1 Finance.
But aside from investing, there are other ways to spend your money. Other ways to put your money to good use include going on a trip, giving money away, or helping out your friends and family.