Wondering what to do with a bundle of cash, whether it amounts to $1,000, $5,000 or even $10,000? You aren’t alone, even in these tough times, although you might consider yourself to be fortunate enough to be in possession of some discretionary cash flow.
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Many people would simply stick that money in a high-yield savings account, but even at elevated rates, depreciation eats away at the dollar’s value faster than the interest. Here are some smart investing decisions for your money no matter how high a stack you’re holding, although the first moves towards financial security aren’t necessarily investment at all.
Have $1,000 burning a hole in your pocket? The first thing to do, according to financial guru Dave Ramsey: Create a starter emergency fund, if you don’t have one already. In fact, that’s “Baby Step No. 1” on Ramsey Solutions‘ list of seven moves to strengthen your financial position.
If you’ve already tackled that, perhaps a bit of debt control is in order. After all, with the average credit card annual percentage rate coming in at over 20%, paying high interest is just burning money for no good reason and no benefit to yourself. It’s simple math: if debt interest is higher than investment yield, debt reduction is the first use for discretionary cash holdings. You have to plug that hole, according to Mark Cuban.
“The best investment you can make is paying off your credit cards, paying off whatever debt you have,” the business mogul told MarketWatch. “If you have a student loan with a 7% interest rate, if you pay off that loan, you’re making 7%, that’s your immediate return, which is a lot safer than picking a stock, or trying to pick real estate or whatever it may be.”
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Once the emergency savings fund has been established –and bolstered perhaps a bit higher, to a few thousand dollars or more, if possible, per finance guru Ramit Sethi — and all high-interest debt abolished, what’s next?
According to “Shark Tank” star and famed investor Kevin O’Leary, you really can’t beat the relatively liquidity and safe returns offered up by Treasury bills.
“The U.S. Treasury Bill still holds the crown as the safest place to park your money — even when the market’s throwing a tantrum. You want to bet on a stable economy? You go with the one the world runs to in a crisis,” O’Leary wrote on LinkedIn earlier this year.