OK, so you've got $5,000 burning a hole in your pocket, and you're itching to do something with it. Here are some ideas for you.
That $5,000 can give you, your spouse, and kids a nice vacation to remember. If it's just you, perhaps with a significant other, your money will go even further -- and so can you. If you find a bargain, you can get even a short but exotic trip to somewhere like Antarctica for around $4,000 or $5,000, for a berth in a two-person room. (There will be extra costs involved in getting to the boat, though, among other things.) And you might need a zoom lens for your camera to capture penguin faces better.
Think seriously about investing that money, especially if you're one of the many millions of Americans whose retirement savings are woefully behind schedule. If that $5,000 is invested in a broad-market index fund and earns the market's historical average (never guaranteed, of course) of around 10% per year, in 30 years it will grow to more than $87,000. That may not seem like much, but if you withdraw 4% of that each year in retirement, you'll be getting about $3,500 each year -- all from a one-time $5,000 investment.
You can do even better than the market's average, though. For instance, the CGM Focus Fund (CGMFX) has put together a 10-year track record with average annual returns of nearly 20%. Although you shouldn't count on such stellar returns in the future, the fund's current holdings, which include Ford Motor
Individual stocks could also give you better returns. Opening a discount brokerage account with that $5,000 could get you started on the right track toward turning that seed money into a serious stash.
Give it away
I'm serious. You can do a heck of a lot of good in the world if you strategically donate that $5,000. You can even do a lot by just giving $1,000 and spending the remaining $4,000 in other ways. We've supported a number of charities over the years in our Foolanthropy campaigns, and even small donations from readers like you have made a huge difference.
Earn an instant 25% return
If you're saddled with credit card debt, you really should pay it off before investing. That's because while you can hope to earn 10% or more per year on your investments, you may well be forking over 20% per year in interest. If your interest rate is 25% -- which is somewhat high but certainly not unheard of -- by paying off $5,000 of debt at that rate, you're saving yourself from having to pay $1,250 in interest this year. And with credit card issuers like Bank of America
Remodel your home
Spending money on your house will not only often give you pleasure, but it can also give you money -- when you sell. With most remodeling projects, you'll recoup a hefty fraction of what you spent by getting a higher price come sale time. With around $5,000, you may be able to buy a bunch of new windows, or replace the siding on your home, or get your house painted, or get a new roof.
Another option is remodeling yourself. You could go back to school, for example, learning a new skill or even a new profession. Companies like Apollo Group
So the next time you find yourself with $5,000, think carefully about how to spend it!
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This article was originally published Oct. 6, 2006. It has been updated by Dan Caplinger, who doesn't own shares of the companies mentioned. Amazon.com is a Motley Fool Stock Advisor selection. Apollo Group and Discover Financial are Motley Fool Inside Value selections. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool is Fools writing for Fools.
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