Few things are better than unexpected cash. Maybe an invoice you forgot about, a larger tax refund, or a gift from someone who didn’t know what to get you. Extra cash is free money – you didn’t budget it, it’s nowhere in your financial plans, and it doesn’t matter what you’re about to spend it on, right? Wrong, and on so many levels.
The number one rule of personal finance is telling your money where to go and make your assets earn more money, not spend it without purpose. We all treat ourselves once in a while, but a lump sum is not something you should waste without thinking.
The smartest thing you can do with $500 is investing it in your home, wellbeing, and future.
If you’re having doubts about forsaking that big shopping spree, we have the answers to when, how, and why you should save that sum and put it to work.
Create An Emergency Fund
I can’t stress enough the importance of an emergency fund, and if you didn’t have one until now, those $500 need to be your first installment. Next time an unpredicted expense happens, you won’t be charging your credit card. You’ll dive into the emergency fund, cover the bill and start putting back as much as you can.
It’s not a secret most people don’t have an emergency fund. If you’re one of them, here’s what you need to do after those $500. A fully-funded emergency stash needs to cover your living expenses for 3 to 6 months.
Spending $500 on non-essential items sure is fun, but having your bills paid when you’re out of work is more important.
Consolidate Some Debt
If you’re deep into student loan debt or credit card debt, $500 might not seem as much, but it’s still a step forward to debt payoff. Consider consolidating some of your debt; maybe $500 can cover one of your credit cards in full!
At the beginning of your personal finance journey, you might feel that putting money towards debt is money lost. But remember that being debt-free is the first step towards financial freedom!
From there on, all your money can bring you more money instead of repaying hefty interests.
Prepay Your Mortgage
I know what you’re going to think – How is $500 going to help my $300,000 mortgage? But hear me out.
If you prepay just one installment on your mortgage, you’ll be one month in advance. Imagine prepaying one more installment every few months. In no time, you’ll have a year less or repayment and may think about refinancing your mortgage too!
The same goes to rent; if you have one month of rent prepaid, whatever happens with your job and finances, you know that you don’t have to act at the moment. The roof over your head is safe for at least a month more.
Invest In The Stock Market
Those $500 can be a good investment start.
But where should you put it if you have no experience in investing and the stock market?
An Exchange Traded Fund is a popular investment for both active and passive investors. ETFs provide low-cost access to a mixture of asset types, industry sectors, and global markets. S&P 500 ETF includes the 500 most profitable and reliable companies.
You can invest in them by purchasing an EFT fund. The 3 most popular ETFs that follow the S&P 500 are offered by State Street (SPDR), Vanguard (VOO), and iShares (IVV).
ETFs are ideal for people who have a small amount to invest and want to keep their costs low.
As the money you set aside to invest grows, you’ll want to check out our articles on what it’ll take to earn $1,000 a month or $3,000 a month from your investments.
Buy Cryptocurrencies
Make use of the bull market and buy some cryptocurrency. At the same time, we don’t advise ricking with your savings. If you have some extra money, like some unexpected $500, try your luck and invest in some of the best rating cryptocurrencies like Bitcoin, Ethereum, Ripple (an altcoin), or Dogecoin (a meme coin).
Even with the current downfall of bitcoin, each year, the currency’s lowest value is higher than the previous year. If you invest $500, for example, you’ll probably still have that money in a few years and some!
Do your research; the risk is high, but after all, you’re not investing a large amount out of pocket.
Fund Your Retirement
The first time you’ll think about retirement can be overwhelming. I remember the first time someone around me mentioned they’re investing in a retirement fund. I was naive, thinking it’s way too early; I’m still in my 20s!
Don’t make the same mistake; start funding your retirement savings as soon as you start your first job. And $500 can go a long way. It can cover the first quarter payment of your Roth IRA or even help you open an HSA.
Not to forget the 401k; if you haven’t set up one already, invest those $500 in it, and your employer might match it!
Kickstart Your Career
Have you ever thought of upgrading your knowledge or switching careers? It’s not only stressful, but it can cost you a lot of money. While there are tons of free courses on sites like Coursera, Udemy, and even Youtube, there are some certificates that cost up to $500 but will look great on your resume.
When entering the world of personal finance, financial freedom, and good money management, you learn that you can either spend less or earn more. I always opt for the latter.
Why not take a new path, or upgrade your knowledge in the niche you’re already working in, encouraging you to ask for a raise and even switch jobs?
Seed A College Fund
You’re out of college and struggling with student loan payoff for ages, so why not make it slightly easier for your children?
If you have or plan to have kids, seed a college fund with those $500. Even if you manage to save for just a year of tuition, it’s better than having them start from zero.
Higher education is expensive and puts a burden on you for a long time after you graduate. Imagine if you had just a year of your studies paid; how much less interest you would have paid off today.
Look into the 529 Plan or a similar one offered in your state.
Buy Life Insurance
Thinking about life insurance in your 20s and 30s can sound depressing to some, but it’s the ultimately responsible move. Forming a family and having kids puts a great responsibility on you for providing emotional and financial support.
If anything ever happens to you, you wouldn’t want to leave them without anything.
At a relatively low cost, you can have your loved ones covered for at least some time, maintain their standard of living, and continue with their everyday life. Put $500 towards the wellbeing of your family in the case the unthinkable happens.
Get A Health Screening
No amount of money can buy you good health, but a regular screening can help you tackle any signs of sickness at the beginning.
Regular screenings often get overlooked; you feel fine, so you’ll skip it this year; why make an unnecessary expense. This is irresponsible and can lead to higher costs in the future.
If you didn’t budget for a health screening this year or had one more than 6 months ago, take the $500 and invest them in your heath.
Fix Your Car
New cars are expensive, and so is repairing your old one once it breaks down. Regular checkups are essential for keeping your old vehicle working perfectly and avoiding a more significant expense.
Basic services start at $100, but new tires and changing some essential parts can get over $500.Regular car maintenance keeps your vehicle running smoothly, and you’ll avoid the cost of a new car!
Make Home Improvements
You can’t change your windows and doors for $500, but you can make minor home improvements. Cleaning your heating system and fixing some drafty doors can save you a lot of money down the road.
Fixing leaking faucets drops a couple of dollars off your water bill, and buying a gas stove to replace the electric one will reduce the energy bill. Just $500 can lead to saving over $1,000 a year in utility bills!
Frequently Asked Questions
How can I start investing with little to no money?
With only $25 a month, you can invest in low-initial-investment mutual funds, use a micro-savings app, high-yield savings account, or a Robo-advisor.
It’s sensible to do even when you have more money but don’t have in-depth knowledge of the investment world.
How can I make 500 dollars fast in less than a week?
A week is a short time but it’s possible to make $500. Declutter and sell your unused stuff on E-bay, Depop, Etsy or have a yard sale.
Take overtime at your job, download a cashback app, get a freelance gig, write a short e-book, take surveys, rent out space in your house on Airbnb or rent your car.
Can you do an overdraft for 500 dollars if your account has been open for 30 days?
You can make an overdraft of $500 if your account has been open for 30 days and regular deposits of at least $100 have been made in that period.
The bank will allow a $500 overdraft limit with at least a $500 monthly deposit.
How can I turn $500 into $1000?
To double your $500, you have to learn the stock market and diversify your portfolio with real estate investments.
Taking an extra course for around $500 can lead you to a job with a $1,000 higher salary. If you’re specifically good at something, you can make an online course or start an online business.
How much do I need to invest to make $500 a month?
You could make $500 a month in dividends if you invested around $200,000, specifically anywhere between $171,429 and $240,000.
It’s highly dependable on the diversity of your portfolio and the dividend yield of the stocks you own. As your goals & needs increase, we have another post on how much to invest to make $3,000 a month.