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What to do with $5,000

Here are 6 ways you can spend and invest your cash, writes The Motley Fool.

Got $5,000 burning a hole in your pocket? We’ve compiled a few ways you might spend your cash — and truly benefit in the process.

Earn an instant 25% return

If you’re saddled with credit card debt, pay it off before you think about anything else. While you might hope to earn 10% per year on your stock market investments, you could be forking over up to 20% per year in interest on your credit card.

If your interest rate is 25% — somewhat high, but certainly not unheard of — paying off $5,000 of debt could save you $1,250 in interest this year.

And with credit card issuers like National Australia Bank (ASX: NAB) and Australia & New Zealand Banking Group (ASX: ANZ) taking steps to make sure they limit their credit exposure as the economy starts to flat-line, getting your debt under control is more important than ever.

Travel

With the strong Aussie dollar (AUD), that $5,000 can give you, your spouse, and kids a nice holiday to remember. If it’s just you, perhaps with a significant other, your money will go even further — and so can you.

Take your pick from a luxury cruise, a trip to the States, a European vacation or even skiing in the Swiss Alps. Such adventures don’t come cheap, but if it’s a treat you’re after, it could be just the ticket for you.

Give it away

We’re serious. You can do considerable good by strategically donating that $5,000. Even giving away $1,000 of your stash will make a big positive difference.

If you make a gift of listed shares valued at $5,000 or less that you acquired at least 12 months earlier, you could be eligible to claim a deduction. What a perfect reason to dump those under-performing Telstra (ASX: TLS) shares?

Renovate your home

Spending money on your house can give you better living now, and more money when you sell. Most renovating projects will let you recoup much what you spent by fetching a higher price come sale time.

With around $5,000, you may be able to buy more energy-efficient windows, invest in some solar panels, landscape the garden, get your house painted, or update your kitchen.

Improve yourself

If you’d rather not remodel your home, why not remodel yourself? You could learn a new skill or a new profession by going back to school.

Organisations like Open Universities Australia have revolutionised higher education, letting you take courses or earn a degree or professional certificate. These days you can take a course preparing you for anything from a human resources management certification to becoming a forensic nurse.

Invest it

If you’re one of the many millions of people whose retirement savings are woefully behind schedule, investing your windfall could be a truly smart move.

If that $5,000 gets invested in a broad-market index-tracking fund, and earns the market’s historical average (never guaranteed, of course) of around 10% per year, in 30 years it will grow to more than $87,000 (although inflation will reduce the spending power of this amount).

If you withdraw 4% of that each year in retirement, you’ll be getting about $3,500 each year — all from a one-time $5,000 investment.

And Finally…

$5,000 isn’t just a bundle of cash. But, it could be your ticket to a better home, a better nest egg, or even a better life. Enjoy!

More Reading

How to Invest $500, $1,000 and More

Of the companies mentioned above, Bruce Jackson has an interest in National Australia Bank, ANZ and Telstra. The Motley Fool has a disclosure policy.

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