Ready to put your money to work for you? $500 is a great amount to start with! Yes, $500 is not a ton of money but it’s definitely enough to get something started and when it comes to investing, you don’t need to be a millionaire to get your foot in the door.
"When it comes to investing, you don’t need to be a millionaire to get your foot in the door."
Below I'm sharing a few ideas on how you can invest $500.
1. Start contributing to a 401k or an IRA
If you have access to contribute to your employer-sponsored retirement plan, like a 401k or 403b, $500 is a great amount to get you closer to your annual contribution maximums and you can make a one time $500 deposit to your 401k by talking to HR or payroll to get it scheduled. If your retirement plan comes with a match and your goal should be to at least meet the requirements needed to qualify for the full match which is essential free money.
Another great idea to save even more money for retirement is to set up and contribute to a traditional IRA or a Roth IRA through a brokerage and automate your transfers.
2. Buy a certificate of deposit
Need a safe place to keep your emergency fund or saving for a short-term goal? Then you should consider a certificate of deposit, aka a CD. Certificates of deposit are one of the safest investing avenues that exist because you get a guaranteed return on your investment in terms of the interest that is paid to you based on the initial deposit agreement you enter, regardless of what's happening in the economy. Not only is your return guaranteed, your money is also FDIC insured.
It's important to keep in mind that interest rates on CDs are only slightly higher than savings accounts but when it comes to emergency funds or money you need for short-term goals, the whole idea is to keep that money easily accessible and not tied up in any investments this way when you need it, it's there. The last thing you want is for the money you might need relatively soon to be tied up in an investment or impacted by a market decline.
3. Start a side hustle
Want to earn some extra money? A side hustle is not a bad idea if there is something you are good at doing that you want to pursue as a business. $500 is a good amount to buy good or supplies to start out with or to get a website up and running.
For example, if you have an eye for it, buying popular items to flip for a profit is one of the easiest side hustles to start. You can find popular items such as furniture, appliances, gently used baby products etc on websites such as Facebook Marketplace, eBay, Poshmark or at local consignment or thrift stores etc which you can then resell for a higher price through the same avenues.
4. Set up a DRIP (Dividend Reinvestment plan)
A dividend reinvestment plan, is basically when you buy dividend paying stocks and then you reinvest whatever dividends you earn into buying more stock over time. Your money then gets to grow over time through these reinvestments. This approach combined with the power of compound interest is one way of putting your money to work for you. You can open a DRIP account with most brokerages.
5. Pay your student loans or other high interest debt
I'm a huge fan of getting aggressive with any debt you might have and $500 can make a big difference. Think credit cars, student loans, car notes etc. The return on your investment by paying down debt can save you a ton of money in interest that you won’t have to pay to your creditors if you get rid of your debt as quickly as possible.
6. Get expert help or educate yourself
There are several well vetted experts out there (like me!) that can help you improve your finances and teach you the financial concepts you need to know as well as the actions you need to take to build long term wealth. Their expertise can give you a fresh perspective, new information, motivation and accountability.
Alternatively, there are a ton of great books, courses and other resources which you can leverage to help you get your finances in order and that can help you learn about things you might struggle with or are not too familiar with when it comes to your finances.
It's all about getting started and putting your money to good use so you can reap the rewards of your investment and $500 is a great amount to get started!