If you find yourself with $1,000 all of a sudden — or perhaps through slow consistent saving — you might be wondering: What’s next? Maybe ideas of a beach vacation are floating through your head, or maybe you’re thinking about buying yourself a big-ticket gadget like a new computer or TV. You can certainly spend your money on those things if you want, but here are 5 smart things you could do with that $1,000 right now to improve your financial well-being.

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  1. Pay off your debts

If you’re carrying any high-interest debt like a balance on your credit card, medical bills, or a personal line of credit, you should absolutely be paying it off as quickly as possible. $1,000 can go a long way toward clearing your debt, especially if you’re only making minimum monthly payments. When you pay off high-interest debt, you’re effectively getting a guaranteed return on investment for your $1,000. So, if you have $1,000 in credit card debt accruing interest at a 20% annual rate, you’ll save $200 per year in interest expenses you would have paid if you didn’t pay down that debt.

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  1. Investment and retirement plan

If you’re not maxing out your employer’s 401(k) match, you should use the $1,000 to increase your 401(k) contributions. An employer’s 401(k) match is basically free money, so don’t pass up that opportunity. You won’t be able to contribute the $1,000 directly to your 401(k). Instead, talk to your HR department and tell them you’d like to increase your withholdings so you end up contributing an extra $1,000 by the end of the year to get the full company match. (Note: Not all employers offer a 401(k) or a company match on the account). If you don’t have access to a 401(k) (or you already contribute up to the company match), you can still save for retirement using an IRA.

  1. Save for college

It’s never too early to start saving for a college education. If you have a child, or you’re planning on having one soon, consider contributing to a 529 account. You may be eligible to receive a state tax deduction on your contribution, and you’ll be able to withdraw the funds and gains tax-free for eligible expenses. The new Tax Cuts and Jobs Act expanded the eligible expenses to include private school tuition for elementary and secondary schools up to $10,000 per year. So, the sooner you get started saving in a 529 account, the more you’ll have when you want to send your kid to that expensive kindergarten.

  1. Start a business

You can start a great business these days for less than $1,000. If you really need more funding than that, use some of the $1,000 to create a stellar Kickstarter campaign to pre-sell your idea. Worst-case scenario, you’re out $1,000. But if you find success, you may be able to quit your job to pursue your passion and make way more than your $1,000 back. Com Mirza, CEO of Mirza Holdings, says he helped a friends daughter start an online consignment shop with no start-up costs whatsoever. The kid sold $19,000 worth of her friends’ clothes on Facebook within three months with minimal advertising and kept 50% of the revenue to invest back into the business. Whatever your passion there are usually plenty of ways to start a business around it with minimal costs.

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  1. Ask an expert

It’s not easy finding answers to all your financial questions by yourself. Sometimes it pays to pay an expert to answer them for you. A fee-only financial planner will give you the straight facts without trying to lead you toward products and mutual funds that pay the highest commissions. If you have some big questions about how to plan your finances around your life goals, taking the time and spending the money on a fee-only planner could be a great investment.

There’s a lot you can do with $1,000. Maybe you deserve that vacation. But it’s important to weigh the value of spending that money on yourself now, versus investing that money in your future. Whether that’s something simple like wiping out debt or prepaying big bills, or something more complicated like starting a business or making sure everything’s in order for your loved ones, it pays to think long-term.

Courtesy: www.fool.com

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