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 better capture adorable penguin faces.
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 help in that mission, consider some of the wonderful mutual funds recommended by analyst Amanda Kish in our Champion Funds newsletter. Her latest fund recommendation has managed a 15-year average annual return of nearly 11% -- even with the big losses stocks have suffered in the past year. That extra percentage point may not sound like much, but at 11%, $5,000 would turn into $114,000 in 30 years. (That's far from a sure thing, but I just wanted to stress how much of a difference even a single percentage point can make.) The fund invests in small-cap stocks including Church & Dwight
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 JPMorgan Chase
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. At Apollo Group's
So the next time you find yourself with $5,000, think carefully about how to spend it!
For more on mutual fund investing, read about:
This article was originally published Oct. 6, 2006. It has been updated by Dan Caplinger, who doesn't own shares of the companies mentioned. The Fool owns shares of American Express, which is a Motley Fool Inside Value selection. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool is Fools writing for Fools.