What to Do With $1,000 Extra in Your Bank Account
If you're experiencing the good fortune of having to figure out what to do with $1,000 extra in your bank account, it's cause for celebration. Your financial goals are waiting, and no matter your vision for the future, you can put that money to work today to help you get there. Here are four pathways you can choose from to invest $1,000 in yourself.
1 Build an emergency fund
Experts recommend that you have 3 to 6 months' worth of living expenses stashed away for a rainy day. If you haven't started an emergency fund or need to top yours off, consider using your unexpected windfall to shore up your basic savings.
Having an emergency fund can help secure your financial future by giving you quick access to cash when you need it on short notice. When you use your cash savings, you avoid incurring credit card debt. This can help you protect your credit score for life's bigger purchases down the road.
2 Start saving for bigger goals
If you have your emergency fund squared away, think about what's next among your financial goals. Whether it's a down payment for a house, a dream vacation or even putting money aside for retirement, that extra $1,000 can provide a big boost.
For life's major goals ahead, you could use your windfall to:
- Start a savings account to build toward your down payment on a home, which will protect your investment and earn you modest interest along the way.
- Save for a vacation by using certificates of deposit, or CDs. If the vacation is a few years out, consider using a CD ladder—that is, buying several CDs that mature at regular intervals. This can help you potentially reinvest your money at a higher rate if interest rates rise.
- Open an individual retirement account, or IRA, and make your first deposit toward your future. The sooner you start saving, the more time your investment has to grow.
Every little bit you save now toward a big goal helps bring your dream into clearer focus.
3 Pay down your debt
If you're itching to reduce your debt load and have more money left over each month to save toward your goals, paying down debt might be just what to do with $1,000 extra in your bank account.
You could make a lump-sum payment toward your highest interest-rate debt or make several smaller payments to different loans or credit cards. You can even stash a little bit away in savings and put the rest toward your debt. In fact, it's a good idea to save and pay down your debts at the same time.
4 Invest the rest
You don't have to have a lot of money to begin investing, so why not invest $1,000 in a portfolio of carefully selected stocks and bonds? If you've already met key financial goals like establishing an emergency fund, paying down your debt and saving for retirement for the year, you can meet with a financial professional to craft an investment plan tailored to your individual goals. From there, you'll have help selecting the best investments to match your needs.
Now you have multiple ideas for what to do with $1,000 extra in your bank account. Whichever path you choose, don't forget to set aside money each month to enjoy the life you're living while saving. A sound financial plan is all about building a life you love at every life stage.
A few financial insights for your life
This information is provided for educational purposes only and should not be relied on or interpreted as accounting, financial planning, investment, legal or tax advice. First Citizens Bank (or its affiliates) neither endorses nor guarantees this information, and encourages you to consult a professional for advice applicable to your specific situation.