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How to Best Use $1,000

Updated on August 17, 2017

What To Do With $1,000?

The purpose of this hub is to simply name a number of things that $1,000 can be used for to help improve your finances and have an even greater impact that spending the $1,000. No matter how hard it is not make that impulse buy, hold off for just awhile and take a look at my other uses for these funds instead.

1. Pay off credit card debt. This seems boring, but paying off debt can leave you much richer very quickly depending on the interest rate that you are paying on your debt. Pay your debts first, and then you will have more cash to spend later.

2. As Dave Ramsey lays out in his Baby Step #1, $1,000 is usually the perfect amount to rebuild or create your emergency fund. An emergency fund should consist of $1000 initially that can be used for any unexpected expenses. It should then be built up to 3 - 6 months of expenses usually ($7,000 - $10,000) as soon as your consumer debts are paid off. A specific fund for emergencies allows you to stay out of debt when life throws a curve ball in your direction.

3. If you've taken care of both #1 and #2, I suggest you add the $1,000 to your retirement IRA or use this amount to start and fund a Roth IRA. I prefer the Roth over a Traditional IRA because of the flexibility it provides in being able to withdraw contributions without a tax penalty, and you are not required to withdraw funds at a certain age like all other retirement accounts require. This allows to you to transfer an entire Roth IRA account to an heir or beneficiary.

4. Invest in your children or grand children's future by purchasing stock of a company through a DRIP. A DRIP is a dividend reinvestment plan. A DRIP is a great way to get your kids excited about investing, and it provides a cheap way to purchase stock and watch your investment grow through dividends.

5. Pay additional principal towards your home mortgage. This goes back to my first point on the importance of being debt-free, and a fully owned home gives you a larger paycheck to use however you want. The quicker the home mortgage is paid off, the less interest you are paying to the bank.

6. Use it to purchase some sort of unique investment that supports one your hobbies. For instance, I enjoy collecting coins and antiques. I would consider the purchase of a nice silver coin a worthwhile investment for both my hobby and the potential for a return on my investment in years to come.

7. Pay off any remaining balance such as that on a car or student loans.

8. Use the $1,000 to make monthly budget adjustments where needed. For instance, if one expense category of your monthly budget consistently goes over, then allocate this amount to the whole year and increase that category by that amount per month.

Will you implement any of these ways to use $1,000?

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    • profile image

      ElleBee 

      6 years ago

      When I saw the title of this Hub, I expected to see a bunch of frivolous things to do with money, I'm happy to see some solid, practical ideas about how you can use your refund to help you get ahead in the longterm.

    • wowsite1234 profile image

      wowsite1234 

      6 years ago from Moncks Corner, SC

      Some good ideas on how to spend your tax refunds! I was fortunate enough not to have any debt at the beginning of the year so I went crazy with it, now I'm regretting it (lol). Great Hub!

    • Dolores Monet profile image

      Dolores Monet 

      6 years ago from East Coast, United States

      Great tips on what to do with tax refunds. Paying down debt seems a great way to go. I may purchase a new stove - mine is in real sad shape and is electric so may switch to gas, spending money to eventually save money.

    • Kulsum Mehmood profile image

      Dr Kulsum Mehmood 

      6 years ago from Nagpur, India

      Very good hub and good suggestions about spending that tax refund money.

    • bankscottage profile image

      bankscottage 

      6 years ago from Pennsylvania

      Nice Hub. Good suggestions for people to follow. I look forward to the additional suggestions.

      Taxpayers can remove the temptation to spend all of their refund when they get it. You can use Form 8888 to split your refund into up to 3 accounts. The accounts have to be registered to the taxpayer and should be set up before filing your taxes.

      You can split your refund among accounts that include, savings, checking, or mutual funds or brokerage accounts (think IRA). Form 8888 can also be used to purchase US Series I Savings Bonds. You can check out my recent hub on the use of Form 8888.

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