Congratulations are in order. While it may not be enough to retire on, chances are — since you’re reading this article — you have some extra cash to play with. Whether it’s from a windfall or just diligent savings, that money can make a big difference in the long run.
To spice things up a little bit, I’m going to assume that you’ve paid off all of your high-interest debt and have an emergency fund in order. If not, those two should be on the top of your list. Otherwise, here are some more interesting suggestions.
Open an IRA
In the alphabet soup of investing terms, IRA is one that you should know: Individual Retirement Account. While your workplace hopefully has a retirement plan in place — either a 401(k) or 403(b) — only you can open up an IRA.
In general, you have two options: a Traditional IRA, or a Roth. In a nutshell, here’s the difference:
- Money put into a Traditional IRA is tax deductible right now, but you’ll have to pay taxes when you withdraw it in retirement, and you’ll pay a penalty if you pull it out early.
- Money put into a Roth IRA is not tax deductible. Because of that, you pay no taxes when you withdraw it in retirement. In general, you can also pull your principal out early as well with no penalties.
For 2017, the limit on IRA contributions is $5,500 per person, or $6,500 for those 50 and older. That is the total for all of your contributions to Traditional and Roths, should you chose to use both.
And when it comes time to actually invest that money, you have lots of options. The most basic — and probably the safest bet — is to simply buy a broad market ETF like S&P Depository Receipts (NYSEMKT: SPY). With the $1,000 you have, you’ll be able to get four shares, and get about $18 in dividends every year as icing on the cake.
Buy a bike
I like focusing on purchases that can improve your life in a number of different realms — not just finance. One thousand dollars can get you a top-of-the-line bike, new workout clothes, and a solid bike lock, but it’ll also give you so much more.
It’s no secret that obesity is a problem in America. The CDC estimates that a shocking 36.5% of all Americans are obese. This obviously contributes to a host of medical problems, including heart disease, stroke, type 2 diabetes, and even some types of cancer.
Professors at Stanford point out that the solution is actually quite simple (though simple doesn’t always mean easy): improve eating habits and exercise regularly. On the latter, they say that for adults, it’s important to “accumulate at least 30 minutes or more of moderate-intensity activity on most, or preferably, all days of the week.”
Here’s the real kicker: back in 2006, those who were obese spent an average of $1,429 more per year on medical expenses than persons of normal weight. That’s astounding.
Therefore, if you use your bike for 10 years — and are able to maintain a healthy body weight because of it — your $1,000 investment will yield you over $14,000 in savings over 10 years…and that’s in 2006 dollars!
That’s not to mention that the exercise, fresh air, and increased social interaction that come with biking around your neighborhood will also improve the social, emotional, and even relationship realms of your life. It seems like a no brainer.
What are you waiting for?
Recent studies have shown that millennials are more likely to keep their excess capital in cash than anything else. Only one in three has any money in the stock market. Obviously, paying down high-interest debt and setting up an emergency fund are must-do activities.
After that, putting money away in a retirement account is incredibly important. But even if you’re gun shy about that, putting your money toward a bike could be a great way to stay healthy and drastically reduce your future healthcare costs — while immediately improving your quality of life today.
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