“What can I do with $500?”
It’s one of the internet’s most-asked personal finance questions.
Well, here at Auto Approve, we’re always saving people money. After all, refinancing your auto loan can save you anywhere from a few hundred to several thousand dollars over the life of the loan! That means we’ve had some time to think about what your next step should be.
Whether you have a few hundred or a few thousand dollars back in your pocket, here are 5 smart things to do when you have more money back in your wallet!
The Best Thing to Do When You Have Surprise Cash
Always speak to an advisor about your unique financial situation before making any big moves.
Everyone’s personal finance journey is unique, so these may not all apply to you. Hopefully you can find an idea for your money (or a combination of these suggestions!) that sounds just right.
1. Put it in savings
A simple, elegant solution for any windfall, putting your money in savings – especially a high yield savings account, if you have the option – is a great way to set up your future self for success. Savings are important for so many reasons, from lowering financial stress to ensuring you have future freedom.
Most Americans aren’t hitting savings recommended targets for emergency funds and retirement. While this bit of extra cash in your wallet might not feel like enough to get you there, any amount is a good start!
Ideally, money you save should start to grow with interest so you can keep earning a little extra pocket change on autopilot. Many high yield savings accounts have no minimum balance, so you can even start earning a few percent on just $500 – although the more you can add to the account to grow it, the better.
2. Pay down debt
Depending on your overall financial situation, you may want to use any extra cash to knock off some debt.
If you have debt with a relatively high interest rate – like credit card debt – paying off even a portion of the balance will save you from paying more interest than you need to in the long run.
Having less debt has financial and psychological benefits! It can reduce stress as well as expenses. Plus, reducing your credit utilization ratio and debt-to-income ratio can raise your credit score and make you more eligible for future loans should you want to make a big purchase down the line.
And if you have a larger chunk of debt, it might be worth consolidating your debt while you’re at it. Consolidating your debt means bringing all your debt together under one umbrella (or fewer umbrellas, at least, depending on the nature of your debt). It can help you get more favorable terms and simplify the money management and payment process.
Use the extra cash toward your first payment(s) and take time to figure out how you can build a budget and make changes in your spending to avoid future issues.
3. Put it in an index fund
Consider growing your money by putting it in an index fund.
An index fund lets your money rise (and fall) with the stock market. If you can handle a little risk and won’t need the money in the immediate future, putting it in an index fund is a good way to enter the stock market for the first time and to ensure you have money at least matching the rate of inflation.
That means your $500 today will be worth the equivalent of $500 several decades from now – or, ideally, more. After all, historically speaking, the stock market has always trended upwards in the long run, so even when things are down, the best advice is usually just to hang on and it’ll work itself out. This is especially true of index funds that don’t rely heavily on one company’s success or failure but rather act as a picture of the market overall.
Wondering where to get some extra cash to get started?
Consider refinancing! Refinancing allows you to get the best rate you’re eligible for and to change the term of the loan, meaning you can pay less per month and pay less interest overall. Most people who got their auto loan from a dealer can save money thanks to marked up dealership rates!
Get a free quote to see how much you could save.
4. Start a side hustle
If you want to grow your extra cash into more extra cash, why not use it to start a side hustle? Whether there’s something you love to do or something you’re good at that might be in demand, a little investment can go a long way to get you started. Popular side hustles include things like cottage baking, photography, design, selling things from your garden, or skills learned for work like accounting, personal assistant work, coaching, and so on.
If you want to get started with a side job, some things you might consider spending the extra money on could include:
Equipment
Software
Ingredients or materials
A website
A small stand
Marketing
Courses to build your skills
Certifications to make yourself more marketable
5. Spend it on someone or something you love
So you have a little extra money in your pocket. If you’re in good financial shape otherwise, you can use it as an excuse to treat yourself, your friends, your partner, or your family!
Experiences and fun aren’t without inherent value. A great meal might inspire you to cook differently at home. Guitar lessons might feed your soul. A vacation could expand your horizons and help you feel refreshed. And fun is important just for the sake of fun!
Even with just a few hundred dollars, you could plan a road trip or find ways to add more excitement and joy to your year.
And those are 5 great ways to make the most of $500 (or more!)
Which option is right for you and your money? Only you can say. But hopefully, these ideas have given you a jumping off point to get started making your extra cash go further.
Put more money in your pocket with Auto Approve.
Is refinancing right for you? Find out how much you could save in just a few minutes! Tell us a bit about your vehicle and current loan to see your refinancing options – no commitment or hard credit check required unless you decide to move forward with refinancing!
When you get a free quote, an Auto Approve representative will work with you to find the right option for you, then do the paperwork for you when you find a loan that’s right for you.