7 Smart Ways To Invest $10,000
Congratulations! You have an extra $10,000 to invest today that you don't need for your daily spending. But the big question remains...How do I invest $10,000 in the smartest way possible? Read on below for 7 smart ways to invest $10,000!
#1: 401k match = Free Money!
The first place you should look to invest your extra money, is with any 401k match. If you are not picking up 100% of the free money your company is offering in the 401k program, increase your contributions now! Your take home pay will decease by the expected amount. This is free money, and is absolutely your first move!
#2: Pay down high interest debt (>10%)
If you are already picking up the largest possible match in your 401k program, the next area of your life to fund would be any high interest debt which is greater than 10% interest rate. These could be credit card debt, a very high car loan, or any personal loans you may have taken out.
#3 Health Savings Account (HSA)
Health savings accounts are triple tax free. You invest pretax money directly from your paycheck, you grow these assets tax free, and you withdraw them tax free! Triple Tax Free!! This is your next stop on your investment waterfall as you are looking to optimize and let your money do the most work it can for you! Interested in learning more in Health Savings Accounts? Check out our page on HSA's here.
#4 401k Tax Deferred
If you are reaching these levels, give yourself a pat on the back! It is rarefied air to be able to ratchet up your contributions to your 401 program. You can personally contribute $19,000 per year to your 401k program, and if you are able to max this out, fantastic job! #4 & and #5 come with asteriks. If you are in a small company, most individuals are better off fully funding their IRA's (#5) prior to their 401k max (#4) due to the incredible fees associated with 401k plan maintenance. If you are in a large company with a great 401k plan, contribute here first. Want to better understand how many fees you are paying in your 401k plan? Check out FeeX which reviews the fees in your 401k and makes recommendations on how to reduce your fees.
#5 IRA Contributions
If you have no other traditional IRA balances, you may be eligible to maximize your contributions by contributing to a traditional IRA first, and converting to a Roth IRA. If you are able to perform this back door roth IRA contribution (fully embraced by the IRS) this is your next area to focus your money on.
#6 Taxable Account
If after working your way through the above list, you still have money left over for invest and save. Your standard taxable investment account will be the home. You should choose any of the low cost providers to open this account and you can check out our guide with recommendations here.
#7 Pay down any remaining debt
Once you have secured your future by fully funding all of the above, go ahead and pay off any low interest debt. This could be a mortgage, a low rate car loan, student loans, etc. Although mathematically this is not the best way to maximize your money, sometimes it feels great to simply reduce the debt on your shoulders!
Want to learn more? Check out our About Us page!
