So you have been really good with your money for the past year and have a substantial amount stashed away in savings. If you’re wondering if you should invest 50k, here are some great ideas on how to make the most out of your money.
Accumulating 50k in cash is certainly an achievement worthy of shouting from the rooftops. Although you probably might not want to do that! You may now be wondering what to do with 50K cash?
Before you begin considering your options and getting confused with the variety of funds such as an index fund, there are some questions you should ask yourself:
- What are your financial goals and priorities?
- Are you a risk-taker?
- If you are risk-averse or more conservative, how much of your money are you willing to lose?
Answering these questions will give you a better idea of the things that you could do with your 50K in savings. Once you have figured that out, then there are plenty of ways to make your money work for you and get the best returns for your investments.
So, if you wake up one morning and think to yourself, “I have 50K to invest, what should I do?”, here are 10 ways to invest 50k.
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1. Pay Off Your Debt
So this probably isn’t the first thing you thought about when you realized that you have 50K in cash.
However, it is one of the best things that you can do for your financial health. There would be little point in investing your money if you continue to be in credit card debt.
Personal finance is a tricky topic to tackle but if there is one piece of advice everyone should implement is to clear off any high-interest debt which is one of the pressing financial issues in many households.
Ideally, you should use the 50K to settle and pay off as much debt as you can (especially those that come attached with high-interest amounts), start with a clean slate, build healthy financial relationships, and create long-term wealth.
Debts are the most common disruptors of cash flow. Some people spend their entire financial life paying off debts due to poor financial planning and you do not want to make the same mistakes.
If you have money left over from that, then begin your investments or put the balance towards something that can bring you decent returns.
The feeling of financial freedom that comes with knowing that you did not deplete your retirement savings to pay a debt, have proper management on your living expenses and don’t owe anyone or anything is priceless!
2. Build Up Your Emergency Fund
As excited as you might be in your quest to figure out how to make money with 50K, it is probably safest to set that money aside for some of the harsher practicalities of life.
The rule of thumb that any decent financial advisor will tell you is to set aside 6 months’ worth of expenses to your emergency fund.
Once you have calculated how much you spend each month, multiply that by 6 and make sure you have that amount in an account or stashed away somewhere.
You also have to make sure that you don’t touch that money unless it is an actual emergency. A savings deposit account is typically an ideal place to start with depending on your emergency fund risk level.
These emergencies can include but are not limited to:
- Sudden unemployment
- Unexpected medical bills that may not be covered by your insurance
- Car repairs
- Essential appliance repairs such as air conditioning units or refrigerators.
Remember that an impulsive road trip or the purchase of that new luxury handbag or the latest MacBook do not count as actual emergencies! A fully funded emergency fund will save you the worries and stress that come with unexpected expenses.
3. Invest In Private Retirement Schemes
A good retirement accounts main purpose is to ensure that you will have enough money to maintain or improve your lifestyle throughout your golden years.
If you want to travel and buy more things in retirement, you will need to put more money down. The amount of money you will need to save will be determined by how you want to spend your retirement.
The last thing you would want to happen is being 60 years old and having depleted retirement savings. You want to ensure you have a consistent cash flow despite not working anymore.
While there is no such thing as risk-free investments, retirement accounts are probably one of the safest places to invest your 50K if you are looking to keep your money invested for the long term.
Private Retirement Schemes (PRS) are those where you voluntarily contribute your funds to a PRS provider or PRS fund manager and they invest those funds for you.
The difference between this and other investment schemes is that you can only withdraw your returns upon your retirement as it works as a booster to any compulsory employment-related retirement fund that you may already have.
If you’re in the US, you would have already heard of some of the more well-known retirement schemes with tax advantages such as the Individual Retirement Account (IRA).
Here is a great guide from Nerd Wallet on choosing the best retirement schemes for your needs.
4. Invest In Investment-Linked Insurance Schemes
This is another good place to invest 50K, as it comes with the benefits of insurance coverage and investment returns.
What usually happens when you sign up for these schemes is that a portion of the premiums that you pay for your medical or life insurance coverage are invested for you in various funds that are managed by the insurance company.
A financial advisor is typically responsible to advise you on the performance of a mutual fund before you start investing.
As long as you are up to date with the payment of your premiums, you can carry out a partial withdrawal of the mutual funds that have accumulated from the investment activities.
Most insurance companies require you to maintain a minimum in the mutual funds so that they can continue to be invested.
Under normal circumstances, the returns on these funds are quite decent and you can expect your investment to grow at a steady pace.
If you’re thinking about using life insurance as a form of investment, this article lets you know all the things that you should consider when thinking about investment.
Investopedia also provides in-depth details of the way in which these types of life insurance plans work.
Depending on where you are in the world and the financial regulations that govern the insurance landscape in your country, they may be marketed a little differently.
So always make sure you read the fine print and understand the mechanics of the scheme before signing up!
5. Invest In Stocks And Shares
This is probably one of the other obvious things that you can do with 50K.
Keep in mind that investing in the stock exchange can most certainly be quite complicated, losing money being the main concern. It is something that takes time and patience to learn about and of course, the stock market can be volatile.
If you do decide on this option to spend your 50K in savings, you can choose to either be a hands-on investor and do it yourself or you can hire a broker to do the investing for you.
If you are a beginner investor, then Investor Junkie gives you a great detailed guide to investing in the stock market and how to invest money.
There are also plenty of video guides on YouTube that you can watch to get your foot into the door of the wild world of the stock market investment.
To get you started, here are some great share trading platforms that you can look at:
6. Invest In Exchange Traded Funds
If you do not want to go all-in in one business, as is the case with stocks but you would still like to invest 50,000, mutual funds and exchange-traded funds (ETFs) spread their money among different stocks, bonds, and other short-term assets.
You can invest 50,000 in a variety of assets at once with these funds.
Mutual funds are a type of investment option that gathers money from investors and invests it in stock exchange financial products like equities and bonds in order to build profits.
If you have longer-term objectives, such as retirement, you will find reap the most benefits from wider-range index funds. These index funds are designed to replicate a certain index, such as the S&P 500, and provide diversification and a long-term investing strategy.
Index fund returns closely resemble market returns, which have traditionally given gains despite ups and downs. They are low-maintenance and frequently have reduced rates.
Index funds are a good option for anyone with lower risk tolerance who is not in any hurry to use up the money.
7. Invest In Real Estate
Now, when considering a real estate investment when you are thinking about how to invest 50K, it cannot be denied that this particular category of investment comes with its unique risk factors.
There are a few different ways in which you can invest in properties, depending on whether your goals are short-term or if you are in it for the long run.
If you are looking for a short-term investment, you can buy a property at a low price, put some money into renovating it to increase the value, and put it up for sale at an increased amount as soon as that is done.
This is sometimes known as ‘flipping a property‘.
Financial guru, Dave Ramsey gives a detailed analysis here on how to flip a house and the pros and cons of embarking on this type of investment.
This might seem rather appealing when the property market is in your favor.
As such, timing is important. If it is not a seller’s market, then you may not be able to sell the property as quickly as you would have liked.
This could also mean that you would have just spent a ton of money doing up a property with little or no returns.
If, on the other hand, you are looking to buy property more as a long-term investment, you can rent it out to tenants and use the cash flow from the rental income to grow your wealth in other ways.
Here are a few useful guides in renting out your extra space in your house:
- How To Make $200 FAST, With Your Extra Space
- How to Start a Bed and Breakfast
- 5 Ways to Make Money With the Extra Space in Your Home
Again, timing is everything. Ideally, you would need to find a tenant who is willing to pay a rent amount that covers your mortgage repayments and gives you a little bit more profit.
If you would like to invest in real estate, choose your moment wisely as the returns can be extremely rewarding.
8. Place Your Money In Fixed Deposits
This is probably the safest way to invest your 50K in savings.
In recent years, banks are getting incredibly competitive when it comes to promoting their fixed deposit products.
Essentially fixed deposit accounts are high yield savings accounts, on the condition that you lock in that money in the account for a specific period. This is an ideal option for the newbies to invest 50k.
Previously, to be entitled to the high-interest earnings, you would have had to put your money in these types of accounts for a prolonged period, such as 5 to 10 years.
However, banks have recently become more flexible with their fixed deposit products and have begun to offer similar benefits with a low amount and monthly terms so that you can take your money out any time you need it.
However, you must keep in mind that the higher the amount and the longer your lock-in period, the higher the yield when you choose to withdraw your money.
9. Give Back
This would of course be the most selfless and gratifying way to invest 50K.
Of course, it does not have to be the entire 50K. A substantial amount, however, would go a long way to those who need it the most.
Wherever you are in the world, there is no shortage of people or institutions who could use the money.
If you are at a loss as to what to do with 50K, here are some of the types of places you could consider giving your money to:
- A charity that supports a cause that is close to your heart
- A school that is for special needs children
- Animal shelters
- Soup kitchens
Whatever option you decide on, like all things, don’t forget to do your research into the organization to ensure that the work that they are doing is genuine and that the money is going to the cause itself and not being misused.
Accountability is key here so ask all the questions you need to ask until you are comfortable with giving your money to your organization or cause of choice.
10. Start a Small Business
If you are ready to take the plunge and are equipped in all the ways you need to be, this is most certainly the best return for 50K because you are essentially investing in yourself, your passions, and your growth.
Depending on your products or services, your business can be online, home-based or you can put the money towards a small physical outlet for that personal touch to your customers.
Either way, you will need a good amount of capital or start-up money before you can embark on your own business.
That being said, starting a business is not just about having the money to do so.
There is a lot of planning in coming up with a solid business plan, budgeting, and strategizing along the way, not to mention long days and sleepless nights.
Even though this idea has multiple financial benefits, this particular option on what to do with 50K should probably not be taken lightly.
If you are ready to take on the challenge, here is Forbes’ detailed 35-step guide on how to start your own business!
Also, read this article:
1. What Are The Other Things That You Can Do With 50K?
While there are plenty of practical ways to spend your 50K, there are also other things that you can consider using that money on if you can afford it:
The experience you get from seeing different places and soaking in the culture from all around the world is invaluable.
With an amount like 50K, you can plan a long-term trip to the places you’ve always wanted to go.
You can find inspiration on where and how to adventure and travel here.
Help Out A Good Friend
Did you know that George Clooney gave some of his money to his closest friends who had helped him make it big along the way?
He even paid for their taxes!
So, if you have a friend who could use some money, then here is your chance to help them out.
Invest In Yourself
There is almost an unlimited number of courses that you can take to increase your value, regardless of whether you are an employee or an entrepreneur.
This can be in the form of degree programs, postgraduate programs, professional certificates, or quick short courses.
You definitely cannot go wrong when it comes to investing to improve yourself.
Here are some ideas on what you can do to upskill yourself:
- Learn to become a freelance writer
- Arm yourself with the intricacies of proofreading and become a proofreader
- Learn how to be a transcriber. Check out this list of the best transcription courses available
- Learn to become a social media manager on Pinterest
- If you love travelling, earn some money while you’re at it with these travel writing courses!
As you can see, there are plenty of things that you can do with 50K savings.
At the end of the day, how you use your hard-earned money is a personal choice.
Every individual has different financial goals and priorities so you need to make the decisions that are right for you and where you are in life at that time.
What is paramount, however, is to always do your research when you are figuring out what to do with 50K.
Whatever you decide, you must yourself with all the necessary information and walk in with your eyes wide open.
2. What Is The Best Thing To Do With 50000?
Invest In Real Estate Investment Trusts (REITs)
If you do not want to dive head-first into real estate investing, or if the process of buying a property is overwhelming but you still would like to be a real estate investor, try out REITs.
Getting tied up with the fluctuating property value or rental properties is not for everyone, so REITs are a great way to gain exposure to real estate without the commitments.
REITs, or real estate investment trusts, are businesses that own or finance income-producing real estate in a variety of markets.
To qualify as REITs, these real estate businesses must fulfill a variety of criteria. The majority of REITs are traded on the major stock exchanges and provide multiple incentives to investors.
As an investor, you will be participating in real estate indirectly while reaping the benefits.
Invest In A Money Market Fund
Money market accounts aim to provide investors with a decent interest rate, a secure and liquid way to start investing in cash-equivalent, debt-based assets with smaller investment quantities.
If you would like to save money and invest money with the goal of financial stability in mind, this option is an ideal way to invest 50,000 as it is classified as a low-risk, low-return investment.
For some investors, stock markets and ETFs hold too much risk and would rather have the sense of security that their money is safe albeit the lower returns.
Depending on the personal financial situation of an individual, the capacity to invest in a rental property, mutual fund, or a high-risk asset class may not be an option.
Short-term securities are the focus of money market funds. These funds try to eliminate uncertainty by adopting a short time horizon, which may assist them to manage risk.
The longer you give money to someone, a company, or the government, the more likely it is that things will go wrong and you will not be reimbursed.
U.S. Treasury securities, short-term corporate paper, and other assets with minimal risk of default are typical investments in a money market fund.
This investment option is liquid, which means you can usually pull your money out within a few business days. If your investment priority is to have the flexibility to withdraw your online savings, then money market funds give you the flexibility to do so.
Over time, money market funds may pay greater or lower rates. If you expect interest rates to climb, keeping your money in money market accounts might be a good idea.
You could expect money market funds to deliver modest long-term returns because of the logical trade-offs between risk and reward.
Maximize Your Savings Account
Most of the time, you see finance gurus preaching about the importance of investing in multiple financial institutions. However, if you are a newbie in the investment world and would like to invest 50,000, there is no harm in starting off with a high yield savings account.
Save For A Large Expense
As we all know, large expenses are inevitable. Be it for a house down payment, a vacation, a renovation, funding the education of your children, and the list goes on.
Depending on your risk tolerance, opening up new savings account for different purposes can be a great way to use up 50,000. Not everyone has the priority to invest 50k and that is perfectly okay.
Savings accounts can serve as sinking funds to any upcoming expense and you can save yourself of any worry when the time to fork on the sum comes.
3. What Is A Taxable Brokerage Account?
A taxable brokerage account has fewer limits and more freedom than tax-advantaged accounts like Roth ira.
Unlike traditional ira, you can withdraw money from a brokerage account at any time of your choice, with no tax or penalty.
However, you will have to pay a long-term capital gains rate if you keep your investments in the account for at least a year, depending on your tax status. Short-term capital gains, which correspond to your ordinary income tax band, apply to investments held for less than a year.
If you want to save for something but require access to the funds before retirement, a taxable brokerage account is great. Whether you’re saving for a down payment on a home or planning a wedding, taxable brokerage accounts provide the growth and flexibility you need.
This article covers all you need to know about capital gain taxes and all things tax-related when it comes to investing.
I hope you have an idea of what to do with 50K, now that you have reached the end of the article.
Mutual funds, index funds, emergency funds, stock market, taxable brokerage accounts, retirements accounts, and rental property may seem like a whole lot of information to digest and implement.
Take it one step at a time and start with the basics which are to clear off credit card debt and fund the emergency fund. Once you have gotten the essentials out of the way, you can begin to invest 50,000.
Put all the available options down on paper and see which option stands out to you based on your risk tolerance.
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