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.
Travel
That $5,000 can give you, your spouse, and your 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 to $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 to better capture those cute penguin faces.)
Invest it
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 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, such as with some high-quality managed mutual funds. I've been investing more and more in them myself. One of my holdings, for example, is the T. Rowe Price Media & Telecom (PRMTX) fund, which has averaged a nearly 27% gain over the past three years and 26% over the past five years. Its top holdings recently included Juniper Networks (NASDAQ:JNPR), International Game Technology (NYSE:IGT), Google (NASDAQ:GOOG), and XM Satellite Radio (NASDAQ:XMSR). It has a below-average expense ratio of 0.87% and no load, and it's not alone in being a way-above-average mutual fund. Another strong performer is the Julius Baer International Equity A (BJBIX) fund, which has averaged 28% annual gains over the past three years and 21% over the past five years, with an expense ratio of about 1.19%. Its top holdings recently included Novartis (NYSE:NVS) and Siemens (NYSE:SI).
The latter fund is closed to new investors right now, but it might reopen one day. There are plenty of others around, though. For help in finding others, I invite you to take advantage of a free trial of our Motley Fool Champion Funds newsletter. In it, our analyst Shannon Zimmerman regularly highlights top-notch funds with low fees, strong management, and promising futures. With a free trial (no obligation), 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 38% vs. 23% 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.
If you're looking for some impressive organizations, the Motley Fool Global Gains team is currently participating in PlayPumps International's campaign to raise funds for 100 pumps in 100 days. We've already raised almost enough for three pumps that will provide clean, safe water to people in Africa who would otherwise have to walk an average of five miles a day to haul water that may or may not be clean. Learn more about it.
I also invite you to spend a little time learning about our annual Foolanthropy charity drive. Every year for the past decade, we've raised funds for some exceedingly worthy organizations that really impressed us. Foolanthropy 2006 raised more than $300,000, and though our drive is over for the year, the organizations would still love for you to get to know them and perhaps chip in.
You might also give to loved ones. Perhaps an aunt or uncle or parent is missing out on the online revolution. If so, you can buy a solid computer system for that person for less than $1,000. Imagine how you might transform someone's world.
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, the average default interest rate for credit card debt at JPMorgan Chase (per CardWeb.com) has hovered around 30% in past years.
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.
Remodel yourself
Another option is remodeling yourself. You could go back to school to learn a new skill or even a new profession. At Apollo Group's online 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 Kaplan University, you may be able to become a forensic nurse if you have $3,400 to spend and 12 months to study. If so, you can earn up to $55 or more per hour.
If you're interested in learning without collecting credits or certificates, here's a wonderful opportunity that Fool Community member Windowseat wrote to me about: "It's possible to download almost all of the MIT courses and take them at home... Free knowledge. Free information... What an incredible gift to the world." You can go a long way on $5,000 with this route.
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 as little as $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 sneakers, start a walking or running routine, and invest the rest! Perhaps even in Nike stock -- investors in our CAPS community are generally bullish on it.
So the next time you find yourself with $5,000, think carefully about how to spend it!
This commentary was originally published on Oct. 6, 2006. It has been updated.
Longtime contributor Selena Maranjian owns shares of no company mentioned in this article. For more about Selena, view her bio and her profile. JPMorgan Chase is a Motley Fool Income Investor pick. The Motley Fool is Fools writing for Fools.
