You may decide to reach $10,000 as you work towards achieving your financial goals and building your net-worth.
This is a big step, especially if your financial journey is new.
When I first had $10k in savings, I had a hard time believing it. I had to refresh the screen of my bank several times. Prior to this goal, I rarely had more than $1000 saved at any given time.
After the initial excitement of reaching this milestone wears off, you might start to ask yourself a few important questions.
Does $10,000 sound like a lot? What will I be able to do with this money? What can I do with the cash?
Table of Contents
Does $10,000 sound like a lot of money?
What is the value of saving $10,000?
What Can I do with $10,000?
Final Thoughts
Does $10,000 sound like a lot of money?
Saving $10k is an admirable achievement, but it’s not a large sum of money. This amount of money may not cover the living expenses of most Americans, depending on their lifestyle and location. This seems to be a “lot of money” category that will want you to have at least $100k.
It’s difficult to give an exact figure for how much money you need, as everyone has a different money mindset, different living expenses and budgeting methods.
What is the value of saving $10,000?
Don’t be discouraged by our previous section, where we established that $10,000 was not a large sum of money. This is a great achievement, particularly when you consider the Federal Reserve’s report that 39% Americans do not have enough cash to cover an emergency of $400.
Remember to take time out when you reach this goal of saving $10k. You should feel proud and happy about your achievements. Your personal finances can take a lot of effort!
What is the value of $10,000 in savings?
A $10,000 savings goal is a good one and an impressive accomplishment. If you choose to start a family in the future, it is better that you achieve this goal as soon as possible. Save and invest a portion of your income to increase it.
What Can I do with $10,000?
Let’s look at some strategies to put $10,000 to work for your benefit. You have a number of options for how you can best utilize this money, and it depends on your situation.
You’ll discover that these are some of the most effective ways to use that $10,000 that you just saved.
- Save it for your emergency fund
If you are saving for the first time, this amount of $10,000 could be the ideal amount to put in your emergency fund.
Although it may not be the most exciting use of money, having money on hand for an unexpected event is vital.
You may lose your primary source of income or have a medical emergency. Or, you might face a large household expense. You can feel a sense of relief when you set money aside.
If you do not have an emergency fund, put this $10,000 in a savings account. Find an account with no “maintenance” fees and that pays interest. This will allow you to keep more money and earn some even while the money is sitting.
You should aim to save 3-6 months’ worth of expenses for an emergency fund. You may have saved more than $10,000, but it is still a good amount.
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- You can pay off some debt
Debt accumulated over time through credit cards, auto payments or student loans is one area that can prevent people from achieving financial success. This can slow your financial goals, and hinder any savings you may have set.
You might consider paying down some debt if you have an emergency fund but also want to reach $10,000.
You just saved that amount, and it’s not exciting to see it disappear into a student loan or credit card company.
It can also help you to reduce the stress that you may be experiencing due to your debts or interest. You may not want to put all of your $10k towards debt. Instead, figure out what makes sense for you.
- Start Investing Your Money
I am a huge fan of investing. Especially when you think about how compound interest works for you. You can see how the $10,000 that you saved over time will turn into $50,000 or $100,000.
If you’re in a position where you can invest all or part of your $10,000, and you don’t have much debt left to pay off, it could be a wise move.
Start with a Roth IRA that you may have opened with a financial firm or a retirement account with your employer. Vanguard Index Funds are my favorite, but you can also find other excellent options. Open a taxable account and search for tax-efficient mutual funds.
You can also diversify your investment by investing in different areas. You can invest in real estate through DiversyFund, fine art via Masterworks or farmland via FarmTogether.
You have a wide range of options for investing your $10,000. Just make sure you understand the risks before investing.
- Fund An HSA Account
Unfortunately, there are some health plans that are not very good in America. Unfortunately, this problem hasn’t been resolved. A Health Savings Account could be an option for you to use some or all of your $10,000.
Opening an HSA can be a wise financial move if you have a health plan with a high deductible or a few medical costs.
You can deduct your contributions from your taxes
This account allows you to grow your money tax-free
If you use the money for qualified medical expenses, there is no tax to pay on your withdrawals
If your employer does not offer an HSA account, you may want to open an account at Lively. Lively offers a good savings and investment account without monthly fees.
- Fund A 529 Account
You have a growing household and you want to make sure you can afford future education expenses. You could use your saved $10,000 to open a 529 plan.
A 529 account is great because you can get some tax benefits. As long as you keep the money in the account, there will be no income tax due on the earnings. When you withdraw money for educational expenses, the federal income tax and state taxes may not apply.
You can invest the money in an account similar to a retirement one, and then use it for books, tuition and other education-related expenses. These account types have a few extra rules and regulations, so do some research before you start one.
- Start A CD Ladder
You may see an option in your online banking or bank to open a “Certificates of Deposit” or CD. This is a great way to earn interest on the $10,000 you have saved.
According to Investopedia: “A Certificate of Deposit (CD) product is a product that banks and credit unions offer to their customers in exchange for them agreeing to keep a lump sum deposit untouched for a specified period of time.”
You can also do a CD ladder. A CD ladder is a good option if you do not expect to need a certain amount for at least five years.
NerdWallet defines the CD Ladder strategy as “…a saving strategy that spreads cash evenly across multiple certificates to take advantage higher rates, usually in long-term CDs. While releasing portions of this money at short-term intervals.
- Start A Business
Are you an entrepreneur? Have you always wanted to start a business? You can start your business with $10,000.
Starting your own business is not without risk. You could lose the $10,000 that you have just saved. But it may lead to much more.
Many online businesses don’t even require $10,000 to start. In the first year, I spent around $2,000 to start this website. It was a lot of money, but many websites can be launched for less.
The cost of each business venture is different, but if your finances are good and you want to be in business for yourself, use the $10k toward a new business.
Final Thoughts
Even though $10,000 may not seem like a lot, it’s still an important financial milestone that you can be proud of. This amount will give you peace of mind, and can impact your finances for years to come.
It also shows you that you are able to set yourself up for success and achieve great amounts of money later on. Your next financial saving goal is a great one!
