“Dolla-bills, ya’ll!” – Sorry about that gangsta-rap intro, but I’m really excited! I just received the refunded balance for my previous mortgage escrow account. Just slightly over $1,000!
As many of you know, I just completed a mortgage refinance about a month and a half ago. When you switch between the lenders, your old lender refunds any money that you had left over in their escrow account.
So in anticipation of this small windfall, I thought it might be fun to ask the question of what to do with $1000?
Ideas for What to Do With $1000:
Okay, $1,000 is not exactly enough to buy a cool car or fancy house, so we can’t get too carried away with our ideas. But for some people, this is the equivalent to an extra paycheck, and arguably a significant amount of cash.
So what to do with an $1,000?? Well, we COULD:
1. Totally blow it all! Between Home Depot, Guitar Center, Best Buy, and Banana Republic, I could destroy $1,000!
2. Start a new home improvement project. There is no end in sight to the list of things Mrs. MMD wants to do to spruce up the house. $1,000 would get us started on at least one or two of these projects.
3. Payoff some credit card debt. Fortunately, I have only one credit card with debt, and it happens to be a 0% interest card. So if I paid off this debt, it would be like getting a 0% return. But paying off debt does feel good!
4. Payoff some mortgage principal. Makes sense, right? Since the money came from my former escrow account, it seems plausible that it should go towards my new house payments. Since my new mortgage rate is 3.75%, then I’d essentially be getting a 3.75% return.
5. Payoff some auto loan principal. Similar to the mortgage, I could payoff some of the balance on my 2.25% auto loan which would essentially be like getting a 2.25% return.
6. Invest in my Roth IRA. Lucky for me, I have already setup an automated withdrawal plan to fully fund my account. But if you didn’t already have this, it would be a really good option!
7. Let someone else invest the money for me. I’ve been hearing a lot of good things about Betterment and have been considering signing up. In case you haven’t heard of this, Betterment is an investment service where you specify what your goals are and they do all the investing for you.
8. Buy another set of dividend stocks! For example, I could buy several shares of AT&T (Ticker: T) at around $30 per share and receive an annual dividend yield of 5.69% (or $57). However, this would also be really risky since you could end up losing your principal investment. On AT&T, analyst predictions see the stock going anywhere from down 16% to up 13%.
9. Take a mini-vacation. We’ve already got a family vacation planned this summer, but who says you can’t take two? $1,000 would make for a nice second get-away.
10. Take a mom & dad vacation. How about just me and wife getting away somewhere for a day or two? Is anyone available to watch the kids?
11. Go to the casino and bet it all on black. By far the dumbest option on this list, but I’ve always wanted to try it!
12. Put the money in my kids’ 529 college savings. In ten years, I’m afraid to think of how much college will cost for my kids. I keep reminding myself that the more I can put away now, the less student loans they’ll have in the future.
13. Put the money in my kids’ mutual funds. Outside of college, they will someday want a car and place to live while they are at college. $1,000 now could be $2,000 by the time they are ready for it. If you’re looking for a cheap place to start investing for your kids, let me suggest the Vanguard Star Fund. It has a minimum opening fee of just $1,000.
14. Donate the money. I was doing fine without it before, and I probably would continue to do so. There are a lot of other people who need $1,000 more than I do.
15. Buy a cute puppy! Wait, what!? How did that one get in there? – Sorry that was daughter’s suggestion.
Readers: Have you ever asked yourself what to do with $1000? Are you going to blow it, or put it toward something responsible? Anyone getting the puppy?
Photo Credit: Simon Davison, on Flickr