Rejoice and be glad, jump up and down and thank your lucky stars for however you got $100,000. Get the jubilation out of your system, and then think seriously about how much more you can make if you invest rather than spend the money. The one thing you shouldn’t do, however, is take advice from your friends on how to invest your money. A better idea is to take to the advice of people who know what they’re talking about because making money is most often a life goal.
Invest in Yourself
A word of advice when it comes to investing is to never invest more than you can afford to lose. Chances are good you’re carrying some debt, and this is a great time to pay it down. Financial author and money guru Dave Ramsey says you should pay off outstanding debt before you even think about investing. After your debt load is cleared, put $1,000 in a regular savings account for short-term emergencies like car repairs or medical bills. Next, put the equivalent of three to six months of your regular income in another account in case you lose your job.
Invest in Your Education
If your education portfolio is lacking a college degree, now might be a good time to give serious thought to going back to school. The U.S. Census Bureau said in a 2012 report that on average there’s about $1 million separating a high school and bachelor’s degree diploma, and then another $1 million separating a bachelor’s and master’s degree diploma. Another thing you might want to consider is that if the economy takes a nosedive, you’re less likely to lose your job. Even if you do, you are more likely to find another job faster than your less educated colleagues. Best of all, you won’t graduate with a mountain of student loan debt.
Invest for Retirement
Think ahead and lower your tax bill at the same time by investing as much as you can in pre-tax retirement savings. If you have a 401(k) plan where the company matches a percentage of your contributions, Dave Ramsey says you should invest at least up the match point and preferably up to the contribution limit, which for 2013 is $17,500. Next, open a pre-tax IRA for both you and your spouse if you’re married, and contribute as much as you can to each account, which in 2013 is $5,500.
If you’re currently renting and have enough left to make at least a 20 percent down payment, consider investing in real estate by buying your first home. Don’t buy a house until you have at least 20 percent to put down, or you’ll end up having to buy mortgage insurance. Put the money in a short-term certificate of deposit and keep saving until you have enough. If home ownership isn’t for you, Ramsey says that mutual fund investments are another good idea. Think about getting advice or help from an investment adviser to assist you in choosing funds that are right for you.
- Dave Ramsey: Dave’s Investment Philosophy
- National Association of College and University Business Officers: Lifetime Earnings: College Graduates Still Earn More
- The Pew Charitable Trusts: How Much Protection Does a College Degree Afford?
- Internal Revenue Service: IRS Announces 2013 Pension Plan Limitations; Taxpayers May Contribute Up to $17,500 to Their 401(k) Plans in 2013
- Internal Revenue Service: Retirement Topics -– IRA Contribution Limits
Based in Green Bay, Wisc., Jackie Lohrey has been writing professionally since 2009. In addition to writing web content and training manuals for small business clients and nonprofit organizations, including ERA Realtors and the Bay Area Humane Society, Lohrey also works as a finance data analyst for a global business outsourcing company.