A recent Federal Reserve study found that 40% of Americans cannot pay an unexpected expense of just $400. And while six months of spending as an emergency fund is the gold standard, having just $2,500 in the bank can make a huge difference to most people.
One problem with personal finance is that most people don’t know how to prioritize saving and spending. Many people try to save money as soon as they are finished spending as much as possible.
Here’s a strategy: Try instead to spend money only after a period of time where you save as much money as possible.
According to a recent study by the Organization for Economic Cooperation and Development, Americans are saving more money. The OECD says that the average family is now saving about 10% of their available disposable income.
Are you lucky enough to have saved at least $1,000? Don’t let it sit there. Here are four ways to optimize $1,000 now.
Buy life insurance
If there is one thing that the past year has taught us, it’s that life and the things that we take for granted can change in an instant.
And while discussing one’s own mortality is never a pleasant thing to do it has been an unavoidable topic in the past year. Owning a life insurance policy may be the way to go.
Do some research and you can find many 10-year to 20-year term life policies for $1,000 or less, depending on your circumstances.
Check your credit score
The average credit score is now 711. The higher your credit score, the less of a risk you will seem when you apply for credit in the future.
Also, the higher your credit score, the lower your interest rates will be when paying them off. Your ability to get a new job, loan, or house is determined by your credit score. If you’ve saved $1,000, it’s time to check your credit score.
You can check it for free at Credit Sesame. Some credit cards let you check your credit score free as well.
Open a health savings account
A health savings account (HSA) is a bank account that is exclusively used to pay for medical expenses. You can open one through a job or a bank. And as long as you only withdraw money from a HSA to pay for medical expenses it will never be taxed.
You will need to have a high-deductible health plan to use an HSA.
Start investing strategically
You can start investing with small change apps such as Acorns. Or consult with a financial advisor to find the best option. A smart investment can provide a reliable return for months and years in the future.