Imagine this, you just received an inheritance of $50,000. Maybe you checked your savings account and you've realized you have $50k.
What do you do with it?
If you're not careful, you could lose money. However, if you invest wisely, you can double your money and change your financial future.
In this post, I'll explore what to do with $50k, the best ways to grow your money, and other finance tips to manage your money the right way. Let's get started!
What to Do with $50k
Below are some things you should do with $50,000 to improve your financial situation.
If you're struggling to understand what to do with $50k, paying down (or off) debt is one of your best options.
If you have high interest debt like credit card debt or some student loans, these can be costly. For example, if you're paying 20% interest on $10,000 of credit card debt, that's $2,000 a year in interest alone!
Paying off debt can be a great way to improve your financial situation and it can save you money in the long run. Not to mention, it can be a huge weight off your shoulders.
If you're not sure where to start, I would recommend paying off the debt with the highest interest rate first. This is known as the debt avalanche method.
Once you've paid off your debt, you can focus on other things like investing or saving for retirement.
Invest in Index Funds
Assuming you have no high interest debts, investing in index funds is a great option to turn your money into more money.
Index funds are a group of stocks and equities that track a specific market index, like the S&P 500. They're a simple and low-cost way to invest in the stock market and offer a superior balance of risk and reward.
If you have a low risk tolerance, index funds are a great option for you. They're also a good choice if you don't have the time or knowledge to actively manage your investments.
There are many different index funds to choose from. Some popular index funds include the Vanguard S&P 500 ETF (VOO) and the SPDR S&P 500 ETF (SPY).
You can use a normal taxable brokerage account or robo advisor to invest in index funds.
My favorite platform is M1 Finance. Here's why:
- M1 Finance has no fees (that's right, completely free!)
- It has a low initial investment
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- You can claim up to $250 for new users
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Invest in Crowdfunded Real Estate
Crowdfunded real estate is one of the best ways to invest $50,000. You can earn a higher return than most traditional investments, without the hassle of being a landlord.
As a bonus, they’re giving new investors $10 completely free.
Returns for Fundrise will depend on current market conditions, but they historically average anywhere from 10% to over 20%. Create your account below to get started!
Invest in Commercial Real Estate
Commercial real estate is another great way to invest $50,000 in real estate.
With commercial real estate, you can earn a higher return than with residential property. And, you don't have to mess with the hassles of dealing with individuals or families.
The best way to invest in commercial real estate is through a platform like EquityMultiple.
Invest in Small Businesses
Small businesses can be tremendous investment opportunities for those with an inflated risk tolerance.
While not every small business will be successful, the ones that are can generate extraordinary returns.
The best way to invest in small businesses is through a platform like Mainvest.
With Mainvest you can start investing with as little as $100. And, you can generate returns of 15% or more.
Investing in small businesses is an excellent way to diversify your portfolio and invest $50k.
Peer to Peer Lending
Peer to peer lending is another method to invest $50,000 if you want to diversify your investment portfolio.
Peer to peer lending is simple to understand. You're essentially lending money to borrowers and earning interest on your loan.
The amount of money you can make will depend on the qualifications of the borrower. For example, a borrower with poor credit will likely have a higher interest rate and therefore generate a higher return for you.
But, even with relatively low-risk borrowers, you can still generate returns of 5% or more.
There are plenty of peer to peer lending platforms but some of my favorites include Prosper or LendingClub.
Both platforms have a minimum investment of $25. And, you can expect to earn annual returns between 5% and 10% depending on the quality of the borrower.
Invest in Real Estate Debt
Real estate debt is another great option to invest $50k while earning a decent interest rate.
With real estate debt, you're lending money to real estate investors. The nice thing about this is that it's a relatively low-risk investment.
After all, the real estate is the collateral for the loan. So, even if the borrower defaults, you should still get your money back.
It works by loaning money to an investor who needs to complete a project but they may not have the cash on hand. For example, if they're flipping a house and need an additional $5,000 for new carpet, you can loan them the money at a set interest rate.
Another great thing about real estate debt is that it can generate high returns.
By using a platform like Groundfloor, you can earn annualized returns of 10% or more.
Groundfloor is one of the only platforms that allows you to start investing with as little as $10.
This is an excellent way to invest $50k and earn a great return on your money.
Save for Retirement
If you're wondering what to do with $50k and you're not quite sure, another option is to save for retirement.
Saving for retirement might seem like a long ways off, but it's never too early to start saving. And, the sooner you start saving, the more time your money has to grow.
There are many different retirement accounts you can contribute to, including 401(k)s and IRAs.
If you have a 401(k) through your employer, you may be able to get matching contributions. This is free money from your employer that can help you save for retirement even faster.
For example, let's say your employer offers a 50% match on 401(k) contributions up to 5% of your salary. If you make $50,000 per year, that means you can get up to $1,250 per year in matching contributions from your employer.
This is a great way to boost your retirement savings and it's something you should take advantage of if your employer offers it.
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Establish an Emergency Fund
Having an emergency fund is critical for financial stability. This is money that you set aside for unexpected expenses, like a car repair or a medical bill.
Ideally, your emergency fund should have 3-6 months of living expenses. But, if you're just starting out, $1,000 is a good goal to start with.
Once you have your emergency fund established, you can focus on other things like investing or paying off debt.
Invest in Mutual Funds
Mutual funds are similar to index funds and ETFs but with one key difference.
With mutual funds, your money is managed by a team of professional investors.
This can be helpful if you don't have the time or knowledge to manage your own portfolio.
Of course, you'll have to pay fees for this service but these can be offset by increased performance of the fund.
Invest in Dividend Stocks
Dividend stocks can be an excellent option if you want to generate cash flow from your money.
With dividend stocks, you'll invest in individual companies that pay routine dividends to shareholders.
What is a dividend?
According to Investopedia, a dividend is “the distribution of some of a company's earnings to a class of its shareholders, as determined by the company's board of directors.”
This means that whenever a company makes a profit, it can distribute a portion of those profits to shareholders in the form of dividends.
Dividends are typically paid out on a quarterly basis but some investments pay monthly or even yearly.
One of the great things about dividend stocks is that they can provide a consistent stream of income.
This can be helpful if you're retired or looking for a way to generate passive income.
Invest in Cryptocurrency
Cryptocurrency is one of the most volatile investments if you want to invest $50k. But if you have the risk tolerance to deal with the ups and downs of crypto, it can be one of the most rewarding investments in your portfolio.
Invest in Digital Real Estate
Digital real estate is a booming asset class that many investors misunderstand.
There are many different examples of digital real estate but some of the most common are domains, websites, social media accounts, and land in the metaverse.
With digital real estate, you're investing in an online property that can appreciate in value over time – just like physical real estate.
Each sector of digital real estate has it's own benefits and drawbacks.
For example, with websites, you can earn an enormous amount of money and generate consistent cash flows. However, if there is a Google algorithm update, your income could be hampered overnight.
Invest in Rental Properties
Rental properties are a great way to invest $50k and generate monthly cash flow from your assets.
If you want to build long term wealth, using a rental property can be a tremendous opportunity.
Rental properties can make money through several methods.
While most people only see the rental income, your property can also make money through appreciation and mortgage paydown.
For example, if you purchase a rental property for $200,000 and 5 years later it is worth $250,000 – you would have appreciation of $50,000. As your property value increases over time, you can charge higher rents to make even more money.
Additionally, mortgage paydown is another aspect of your rental property. Each month that you pay your mortgage, a portion of that will go towards equity in your home. That means that your tenants will eventually pay off your mortgage for you.
Invest in ETFs
ETFs, or exchange traded funds are a perfect way to easily diversify your portfolio and invest in the stock market with low fees.
ETFs are a type of investment that owns a basket of securities – similar to a mutual fund.
The difference is that ETFs trade on an exchange like a stock. This means that you can buy and sell ETFs throughout the day just like you would with a stock whereas with a mutual fund, you can only trade at the end of the day.
ETFs are popular because they offer a simple way to diversify your portfolio. This is a much easier way to invest than buying each stock individually.
For example, the SPDR S&P 500 ETF (SPY) owns the 500 largest companies in the United States.
By owning this one ETF, you are effectively invested in nearly every major industry in the US economy.
Investing in ETFs is one of the best ways to invest $50k because it offers a high degree of diversification with very low fees.
Use Money Market Accounts
Money market accounts aren't the most exciting investment but they offer a safe place to park your cash.
A money market account is similar to a savings account in that it is a low-risk investment.
The main difference is that money market accounts typically offer higher interest rates than traditional savings accounts. This means that you can grow your money faster with a money market account.
Assuming you don't need the money right away, a money market account is a great place to invest $50k.
Invest in Yourself
Investing in yourself is a great way to grow your future income for many people.
What does it mean to invest in yourself? There are plenty of different ways including:
- Attending college or graduate school
- Taking online courses
- Taking care of your physical and mental health
For example, if you attend college and earn a degree, you will likely earn more money over your lifetime than if you don't have a degree.
Additionally, online courses can help you learn new skills that can make you more valuable to your employer or side hustle.
Investing in yourself is a great way to grow your future earnings potential and should be considered if you have $50k to invest.
Save for a House Down Payment
Not sure what to do with $50k?
If you don't have a house, saving for a down payment is a great option.
A house is a long term investment that will likely appreciate in value over time. Additionally, it can provide you with a place to live and may even generate rental income if you choose to rent out rooms while you live there.
While this might not be for everyone, it's a good option for many people.
Invest in Land
Have you ever heard of investing in land? Probably not!
But it can be a good way to grow your money outside of the stock market and other traditional investments.
By using a platform like AcreTrader you can invest in farmland and generate passive income across the country.
Invest in Wine
Similar to investing in land, investing in fine wines can be a lucrative investment option to invest $50,000.
Fine wine has the potential to generate returns of 10-12% per year, which is higher than most investments.
To get started investing in wine, I recommend using a platform like Vint. They make it easy to get started and you don't need to be an expert to start investing.
Start a Business
If you have some time and energy – starting a business can be one of the most profitable and rewarding investments you can make.
Depending on your financial goals, starting your own business can be a great way to invest your $50k.
There are plenty of profitable business ideas you can start to avoid losing money.
It's vital to have a solid business plan and path towards profitability no matter what business you start.
For example, starting a candle making business can be a great low cost business to start but you'll still want to take the time to craft a business plan and understand how your venture will make money.
Finding a business model that works is essential to making this investment successful.
Depending on how much risk you're willing to take, starting a business can be an awesome method investment to build wealth.
If you have enough money already and you still aren't sure what to do with $50k, donating some of your extra money can be a rewarding experience.
There are many different charities you can choose to donate your money to.
Do some research and find a cause that you're passionate about and make a donation.
Not only will this help out a good cause, but it can also provide you with some tax advantages as well.
Help Out Friends and Family
If you have friends and family that could use some help financially, giving them some money can be a great way to spend your money.
Maybe they need help with a down payment on a house, or maybe they're struggling to make ends meet.
Whatever the case may be, if you have the means to help out then it can be a great way to invest your money.
Open a High Yield Savings Account
Opening a high yield savings account is a safe way to grow your money and build wealth.
These savings accounts offer stronger interest rates than traditional savings accounts, which means you'll earn more money on your deposits.
Traveling is another option to consider if you're not sure what to do with $50k.
Whether you take a trip around the world or go on a smaller vacation, spending your money on travel can be a great way to enjoy your life and explore new cultures.
If you do decide to travel, be sure to save money by using credit card points and miles.
You can use rewards points to book your flights, hotels, and more. This can help you stretch your travel budget further.
Purchase a Vacation Rental
Vacation rentals can be tremendous investments for some real estate investors looking to grow their money.
These properties will typically be located in areas that are popular tourist destinations.
Not only can you generate rental income from these properties, but you can also enjoy the property yourself when you're not renting it out.
Real estate investing with vacation rentals can be a great way to invest your $50k and generate monthly cash flow.
Flip a House
Another option if you want to invest in real estate is by flipping a property.
With this method, you'll purchase a property, make some repairs and upgrades, and then sell it for a profit.
This can be a great way to make a lot of money if you do it correctly but it does require some work and effort.
Flipping can also be risky. If you purchase a property and do significant amount of work and list it for sale, there's no guarantee it will sell quickly or for the price you're hoping for.
You'll need to have a solid plan and be comfortable with taking on some risk if you want to try flipping a house. It can be helpful to have a mentor or someone with experience with flipping homes before getting started.
Invest in REITs
REITs, or real estate investment trusts, are a great way for any real estate investor to grow their money easily.
These trusts are typically made up of a portfolio of properties, which can provide you with exposure to different types of real estate investments.
For example, some real estate investment trusts might focus more on commercial properties while others might focus on residential properties.
You can also find REITs that invest in a variety of different types of real estate, which can provide you with even more diversification.
REITs are a great way to invest in real estate without having to deal with managing a property yourself.
Additionally, REITs often pay out regular dividends, which can provide you with a nice stream of income.
REITs can be purchased on the stock market, which makes them very accessible for investors.
What are the Best Ways to Invest $50k?
Final Thoughts on What to Do with $50k
There are plenty of things you can do with $50k – which can be overwhelming for some investors.
But there are other ways to use your money other than investing. Traveling, donating money, or helping out friends and family are some other methods to use your money for the better.