What Can You Do With $10,000?

a stack of money that adds up to $10,000

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You’ve gained $10,000 through smart saving, investing, or simply through a windfall that happened recently. You ask yourself, “What can I do with that $10,000?” There are many good financial decisions you can make instead of keeping that money stagnant.

From making your money work for you to reducing the debt in your life, $10,000 can be a game-changer. Here are some of the things that you can do with that money so you can improve your financial future.

Boost Your Emergency Fund

If you’re unsure of what to do with $10,000, one of the first things you could consider is building a hefty emergency fund. That way, you won’t have to worry as much about unexpected events. An emergency fund can be in a place where your money is easy to access, such as in an online savings account. At the same time, your money can grow, albeit slowly, over time.

A typical high-yield online savings account pays around 0.5% interest. While this isn’t much compared to if you invested your money, earning some interest while keeping money set aside for life’s curveballs is still handy. We recommend CIT Bank for online savings account as this bank pays a competitive interest rate, is easy to use for deposits and withdrawals and has excellent customer support.

Contribute to an IRA

An IRA is a great move for your future retirement. You can choose either a traditional IRA, which you contribute pre-tax dollars and pay taxes once you withdraw, or a Roth IRA, where you contribute after-tax dollars but don’t pay any taxes on your gains later in life. Both have their distinct advantages, but it all depends on your current tax situation.

In general, the type of IRA you choose will depend on your specific financial situation. For example, if you are in a consistently improving situation, you may want to go for a Roth IRA. Since you’re paying taxes on contributions while being in a lower tax bracket now, you’ll avoid higher taxes once you advance into a new tax bracket later. On the other hand, if you expect your financial situation to be the same or worse, then you may want to go for a traditional IRA instead for the opposite reason.

In either case, speaking to a financial advisor or an investment bank representative can help you make this decision. Charles Schwab Bank has an excellent investment team to help their customers make decisions like this, so if you haven’t opened an IRA yet and are planning to, we recommend Schwab. Alternatives include TD Ameritrade, Vanguard, and Fidelity, which all have great reputations as well.

Save for a Down Payment on a House

Using $10,000 as all or as part of a down payment on your future house may make sense as it takes substantial cash to initiate a home purchase in most cases. The more money, and higher the percentage, you put towards your down payment, the less your monthly mortgage payment will be. 

If you’re planning to buy a house in the near future, consider using your $10,000 as money towards this goal.

Pay Down Your Mortgage

Likewise, if you already have a house, using $10,000 as a lump sum prepayment will lower your total future interest payments over the remaining life of your mortgage, provided you can make prepayments without any penalties.

Paying down your mortgage sooner than later frees up more money each month and gives you full ownership of your house sooner. It also promotes working towards a debt-free life and financial independence.

Pay Down Credit Card Debt

Credit card debt hurts your financial situation as it accumulates. This is because interest adds up, and as your credit card balance rises, your monthly interest charges rise as well, which makes it more difficult to pay down the principal balance. 

Using $10,000 to wipe out as much, if not all, of your credit card debt, can dramatically improve your financial situation. If you have substantial credit card debt, you may consider this option as the best option to use some or all of the $10,000 you have available.

Pay Down Your Auto Loan

Similar to the other debts that can be paid off with $10,000, monthly auto payments can eat up most of your spending power. However, with the average new car payment being over $500 per month, paying off an auto loan can certainly increase cash flow. 

While car loans have a generally lower interest rate compared to others, it’s still debt you have to pay. Paying off your auto loan earlier means paying less total interest over the term of the loan.

Pay Down Your Student Loans

Like a mortgage, student loans are the type of debt that some people pay for a decade or longer. Paying off your student loans sooner than later means less overall paid interest over the loans and lowering your total debt in general.

Then, you can think about your other financial goals. For example, you can invest more for retirement or even think about buying your first home. Additionally, the money no longer spent on student loan payments can go towards things like travel, nice things for your family, or simply to upgrade your lifestyle a little.

Start a Business

A business can be a lucrative and life-changing endeavor. Small business ideas can help a person gain wealth and change their life forever. In almost any business, the most crucial thing to have is capital. You cannot start earning money without spending money when it comes to business.

$10,000 can come a long way towards helping you jump-start your passion project. Additionally, using your own money to start a business frees you from looking into loan options. Make sure to thoroughly research the market you want to enter and see if there’s demand for your business idea.

Here are some profitable business ideas:

Invest in the Stock Market

If you’re looking to invest your money, the stock market can be one way to grow your money over the long term. The reason why many people look to the stock market is because of its consistent returns. On average, portfolios that invest in index funds grow at a rate of around 8-10% a year. When considering the stock market as to what to do with your $10,000, you can enlist an advisor’s services to help you manage your investments, use a Robo advisor, or do ample research yourself and invest your money on your own.

Invest in Real Estate

Real estate will always be an asset that’s in demand around the world as people always need a place to live. While the markets have their ups and downs, most areas experience higher prices over time. 

One way to invest in real estate is to buy a property, improve it, and resell it for profit. Another way is to buy a property and rent it, collecting rent as passive income for as long as you choose. You can either be a landlord yourself or hire a property management company to do the work for you.

However, investing in real estate generally requires a lot of money to get started, and $10,000 may or may not be enough. 

To solve for this, you can invest in crowdfunded real estate on Fundrise. Fundrise gives you access to millions of dollars worth of properties where you own partial shares of many homes, apartment complexes, and commercial real estate. Your money grows via appreciation and quarterly income paid to you.

Invest in Peer-to-Peer Lending

Another investment avenue that’s been gaining traction in the last few years is P2P lending. With P2P lending, you lend your money through an intermediary company to those who need it via personal loans. Each month, you’re paid principal and interest, where the interest is your profits. 

Prosper is a popular P2P lending platform where you can invest as little as $25 per loan, called a note, and receive monthly payments for the note’s terms, which is three or five years. 

One strategy is to invest $25 to as many notes as you have money to do, which allows you to diversify. This way, if a borrower defaults, you mitigate the loss by collecting interest across all of your other notes.

Further Your Education with Online Courses

One of the best investments you can make is through improving your knowledge and skills. According to Indeed, the fastest growing industry right now is IT, so a computer science or cybersecurity certification are a few good examples of ways to increase your education which can pay off with a higher-paying job.

Improving your education makes you more valuable to companies, meaning that you’re more likely to land a better position, get a promotion, or have the leverage to ask for more money.

Some of the best places to take online courses at an affordable price are Skillshare and Udemy.

Start a 529 for Your Children

Education is a significant expense that your children will incur if they go to college. Investing in their education early can help them avoid or mitigate student loan debt. A 529 is an investment plan catering to the education sector. It’s designed to help pay for your child’s future tuition, all while offering tax advantages so you can more easily maximize your money in that account. 

Fund an HSA

health savings account (HSA)is one way to use your $10,000, but it has limitations as a tradeoff. Once you put money in an HSA, you can only use that money for health expenses. 

The HSA is an option to consider if you expect that you’ll have a lot of health care expenses in the future. Having money ready for medical care and emergencies can be enticing to many. In addition, you also have the freedom over how much money you want to put into the account. 

Create a CD Ladder

A CD is one of the safest forms of investment, reserved for those with low risk tolerance. However, while most people think about CDs for the long term, you can stagger your investments, creating a way to keep earning money.

For example, you can invest in a 3-month, 6-month, 9-month, and 12-month certificate of deposits, and every three months, as your next CD matures, invest in a 12-month CD. This way, every three months, a CD will mature, and you’ll open a new CD, creating a safe passive income stream.

Because CD rates are often quite low, the amount of money you’ll make with your $10,000 through this avenue will not be very much, but if you’re looking for a safe investment, CDs are about as safe as they come.

Wrapping It Up

One of the worst things you can do with $10,000 is to leave it in a pile without doing anything. Your money can begin working for you, setting you up for a brighter and more financially secure future.

If you haven't yet saved $10,000, check out this article for how you can save $10,000 in a year.

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