An extra $50,000 can make a big difference in your life. Whether the extra cash came from saving pennies every month, a large bonus, the sale of property, life insurance proceeds, a tax refund, or an inheritance- it is incredibly important to treat that money as another investment opportunity and watch it grow.
Lets explore some of the best ways to make these investments.
First, make sure you’re in a position to invest the money
Start by asking yourself, “Am I in a position to invest all or part of this money”?
There are 3 major things to consider before moving forward with investments:
- Savings
- Consumer Debt
- Risk level
Savings
If your car breaks down, your washer drier suddenly needs repairs, or a pipe bursts that isn’t covered by insurance this can be big dollars that don’t come out of your set monthly expenses. Having a savings account can protect you from having to use credit card interest to pay off some of these unexpected costs.
We recommend setting aside a different personal bank account to cover these emergency expenses. Adding just a little cash to this account via direct deposit every month will help you dramatically with your emergency fund. That way the, “out of sight out of mind” can ring true and you’ll be well on your way to having a nice chunk of savings.
Debt
Consumer debt can be a big problem for a lot of Americans. It can be contributed to the “make more, spend more” concept we tend to feel.
Each time we get a raise or a nice bonus we tend to upgrade our lifestyle. Just make sure in the process, you aren’t taking on bigger debts than you can handle and you are saving a little each month for that emergency fund. Make sure not to spend the money before it’s there.
As far as debts are concerned, we recommend making sure that major debts (excluding primary mortgage), such as high interest student loans and credit cards are paid off first before investing your 50K somewhere else.
Risk
Consider three things first:
- Age: The younger you are the more risky you can be
- Employment Security/Status: The steadier your income the more risky you can be. If your income tends to be up and down or dependent on bonuses, it might be wise to invest in less risky options.
- Emergency Fund: Have at least 3-4 months of expenses saved before getting risky with investments
So what are the 5 safest and best options for my money?
Now that you’ve paid down your debts, have a nest egg setup, and accounted for your risk tolerance, what next? The following 5 investments are not only some of the best ways to get a nice passive income stream going, but they also have proven to stand the test of time in even the most labile markets.
- Employer- Sponsored 401(k) Match
- Roth IRA
- 529 Plans
- Index Funds
- Real Estate
Employer-Sponsored 401(k) Match
If your employer offers a 401(k) with a match, then this should be the first place to invest in. Make sure to max it out, which is $19,500 a year. Now, if that seems too much to contribute to one account, then at least be sure to invest enough to take full advantage of your employer’s match.
During the pandemic, many employers have cut the match, so it might not be possible right now- but make sure to save that money instead of spending it. For someone that makes $200,000 a year and the employer matches up to 6 percent of the salary at a 50 percent match, then contributing $12,000 a year will net $6,000 a year in employer match, which is essentially free money to you!
Roth IRA
Once you’ve reached your annual limit on your 401(k) contribution, consider maxing out a Roth. The current IRS annual contribution is $6,000. One of the biggest advantages of a Roth is that it allows you to access your money tax-free and without paying a penalty. Unlike your 401(k) if there ever is a time you withdraw the money or the reason you need it shouldn’t matter.
However, there are a few withdrawal exceptions. Read about them here.
529 Plans
The major benefit of investing $50,000 in a 529 plan is that it allows your money to grow tax-free as your children grow. These state-sponsored college investment plans are a great way to not only grow wealth but it protects you from the high expenses that come along with your children’s college and education.
Compared to 2 decades ago, college tuitions are significantly higher. College tuition costs can get crazy, read what to expect here.
Index Funds
An index fund is a mutual fund or exchange-traded fund (ETF) that is designed to track a specific index of: Stocks, bonds, or other investments like precious metals. This is a great way to take advantage of all the stocks that are part of the index without having to buy individual stocks.
Real Estate
Real estate is one of the best ways to grow your wealth quickly. But before you go out and buy a bunch of condos, fix and flippers, and have the headache that comes with being a landlord, there is an easier way.
Hard money lending allows you to invest in real estate without managing the properties yourself. This allows someone with decades of real estate experience to vet properties and borrowers without you having to understand the market.
However, don’t just invest in any hard money lending business. At Yieldi we’ve got over 50 years of family experience in real estate development focused on residential, commercial, mixed use, fix/flips, multi-family and lending. You can gain 9.5% or more on your investments without lifting a finger or dealing with a borrower yourself.
If you’re interested in learning more about hard money loans, check out Yieldi’s current offerings. Our online marketplace allows you to diversify your portfolio in one easy to use space.
See some of our current open offerings, here.
