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.
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. A one- or two-week trip to Antarctica can cost 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 . If that $5,000 is invested in a broad-market index fund, and it 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 help in that mission, consider some of the wonderful mutual funds recommended by analyst Shannon Zimmerman in our newsletter. His Fund of the Month for August sports a 10-year average annual return of 14%. At that rate, $5,000 would turn into $255,000 in 30 years. (That's far from a sure thing, but I just wanted to stress how much of a difference a few percentage points can make.) His pick from the month before is a newer fund that seeks out large-cap growth companies; it nearly doubled the market's return in its first year. It's invested in the likes of Yahoo!
Try the newsletter , and you'll be able to access all past issues and see which funds Shannon has recommended -- and why. Together, his picks have gained an average of 24%, versus 16% for benchmark indices.
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. Consider microcredit, for example. If you donate $1,000 to a microcredit organization (such as ones we've supported in our annual Foolanthropy campaigns), it might turn into 10 loans of $100 each to extremely poor women around the world. The money permits each woman to launch her own little business (by buying a goat or a sewing machine or kitchen supplies, for example) and to eventually lift herself and her family out of poverty. These women will then repay the loans (around 95% or more of microcredit loans are repaid), and the money will be loaned out again -- and again and again. Not a bad return on your investment, eh?
Earn an instant 25% return
If you're saddled with credit card debt, you really should pay it off before investing. While you can hope to earn 10% to 15% or a bit more per year on your investments, you may well be forking over 20% to 30% or more per year in interest. If your interest rate is 25% (which is not all that unusual), by paying off $5,000 of debt at that rate, you're saving yourself from having to pay $1,250 in interest this year. Just as an example, late last year, the average default interest rate for credit card debt at Bank of America
Remodel your home
Spending money on your house will not only often give you pleasure, but it can also give you extra money when you eventually 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, replace the siding on your home, 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. At Apollo Group's online school University of Phoenix, for example, you can take courses or earn a degree or professional certificate. At many colleges, you can take a course preparing you for a human resources management certification for around $1,100, and at Washington Post's Kaplan University, you may be able to become a forensic nurse if you have $3,400 to spend and 12 months to study, earning up to $55 or more per hour.
You can remodel yourself physically, too. Equipping a home gym with fitness equipment from companies such as Nautilus can cost less than $5,000 (and even $1,000). And a gym membership will generally cost you considerably less than $5,000 per year as well. In fact, you might just spend $150 on two pairs of Nike
So the next time you find yourself with $5,000, think carefully about how to spend it!
This article was originally published on Oct. 6, 2006. It has been updated.
Longtime Fool contributor Selena Maranjian owns shares of Washington Post. For more about Selena, view her bio and her profile. Yahoo! and Bed Bath & Beyond are Motley Fool Stock Advisor selections. Bed Bath & Beyond is also an Inside Value pick, and Bank of America is an Income Investor recommendation. The Motley Fool isFools writing for Fools.