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Make the Most of $5,000

I'm back with more money ideas designed to unlock the fortune hidden inside your paycheck. This time, we're going to examine what to do with that spare $5,000 you've got lying around.

$5,000 buys you ...
What will five grand buy you? A quick Google search says:

  • Unlimited green fees at the Cinnabar Hills Golf Club in San Jose, Calif. Hobnob with Silicon Valley's elite as you drive golf balls through the brown -- I mean, amber -- hills of sunny San Jose!
  • A digital canvas for your video artwork. Dude, you are soooooo avant-garde.
  • A cold steak, runny potatoes, and a handshake. Welcome to the world of political fundraisers, Fool. You've just been punk'd.

Spend it Foolishly
Of course, there are better ways to make the most of your $5,000. Try giving it away. I'm serious! How many people could you help by contributing to a charity through our annual Foolanthropy campaign? A lot, according to David Gardner and Carrie Crockett, who recently kicked off this year's effort in concert with Hilton Hotels.

But there's more than altruism and personal satisfaction at work here. Most charitable giving is deductible. If you're single and in the 25% tax bracket, your $5,000 gift to a recognized charity such as the Grameen Foundation or Doctors Without Borders -- two organizations the Fool has supported in earlier Foolanthropy efforts -- would result in a $1,250 tax deduction, and that's money in the bank.

What's more, if you make your contribution using a cash-back credit card such as this one, you'd earn 1%, or $50, on your giving. Put that in the bank, too. Just be sure to pay off your balance each month or the interest charges will eat away at your earnings.

Or invest it Foolishly
But you may prefer to invest what you have. That's fine -- Warren Buffett did just that for decades and now, after accumulating billions, he's secured a legacy as one of the world's most generous capitalists. The BerkshireHathaway stock he'll give away, valued at roughly $37 billion at the time of the pledge, truly has a chance to change the world.

You can, too, if you invest well. And that means using tax-sheltered accounts whenever possible. Consider an IRA. If you're 50 or older, you may be able to contribute the full $5,000. If you're under 50, you could contribute $4,000 this year and pay down credit card debt with the other $1,000.

Either way, you'll save at least a grand if you're in the 25% tax bracket. That's more cold, hard cash in your hands. You'd do even better if you invested the proceeds in a stock fund such as T. Rowe Price New Horizons (FUND: PRNHX  ) , which gives you ownership of some of the world's finest small-cap stocks:


% of Assets

NII Holdings (Nasdaq: NIHD  )


Henry Schein (Nasdaq: HSIC  )


O'Reilly Automotive (Nasdaq: ORLY  )


Apollo Group (Nasdaq: APOL  )


Toll Brothers (NYSE: TOL  )


Oshkosh Truck (NYSE: OSK  )


Source: Morningstar

Follow the money
With a pair of simple tips, we managed to transform your $5,000 into at least $7,300. That's how it works with Motley Fool GreenLight. Each month, co-advisors Dayana Yochim and Shannon Zimmerman offer a slew of suggestions that will make or save you money. Sound interesting? Click here to find out more.

Fool contributor Tim Beyers will once again be contributing to good causes through Foolanthropy. He suggests you do the same. Tim owns shares of Berkshire Hathaway, which is a Motley Fool Inside Value selection. Get a peek at everything he's invested in by checking Tim's Fool profile. T. Rowe Price New Horizons is a Motley Fool Champion Funds pick. The Motley Fool's disclosure policy is a bargain at any price.

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5/27/2016 12:24 PM
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