Before investing anything, getting out of consumer debt, saving-up a fully-funded emergency fund, and contributing 15% into retirement are the most prudent steps to take to financially thrive.  After that, there’s freedom to deploy extra money in a variety of ways depending on your preferences and goals.

Whether it’s a meager raise at work or a sizable inheritance, knowing your financial goals helps provide clarity on what to do next regardless of the amount of money you come into – be it $1,000 or $1,000,000.

Below are 10 ways to invest each dollar above your emergency fund:

1. Save For Large Upcoming Expenses

• Examples include an upcoming wedding or baby birth, a car replacement, and a house down payment.
• Don’t risk this money – place it in a high-yield savings or money market account or short-term CD.

2. Pay-Off Your House

• Having no mortgage payment is a beautiful thing.
• As Uncle Dave says, “100% of foreclosures happen to homes that have mortgages”.

3. Max-Out 401(k) Contributions

• The 2020 Roth 401(k) and traditional 401(k) limit is $19,500 with certain IRS restrictions.
• These are pre-tax dollars and your growth is taxed when you withdraw funds.

4. Max-Out Roth IRA Contributions

• The 2020 limit is $6,000 for those under 50 & $7,000 for those over 50.
• These are post-tax contributions and the growth is entirely tax-free.

5. Max-Out Health Savings Account (HSA) Contributions

• The 2020 individual limit is $3,550 & the family limit is $7,100
• These contributions are not subject to federal income tax and most states also don’t tax HSAs.
• You can invest the money in your HSA in certain mutual funds and any interest and earnings grow tax-free.
• Any unused HSA funds roll over into the next year.
• To learn more about HSAs, click here.

6. Max-Out 529 Plans

• Much like Roth IRAs, 529 Plans are funded with post-tax money.
• 529 Plans are not taxed federally when used for qualified higher education expenses.

7. Mutual Funds & Index Funds

• It’s not a good idea to pick individual stocks – diversify with mutual funds & index funds.
• Fidelity & Vanguard have great options with reasonable fees.

8. Real Estate

• Not everyone has “the landlord gene”, but a good piece of real estate has numerous advantages, including consistent cash-flow and a myriad of tax deductions.
• Some ways to get in the real estate game include buying rental property, fixing-up a room in your home, building an in-law unit, and buying a “tiny house” to place on your property to rent-out.

9. Peer-To-Peer (P2P) Lending

• Peer-to-peer lending isn’t for everyone – there are service fees and the potential to lose money if your borrower(s) default.
• There is also a likelihood that a percentage of borrowers misrepresent themselves and slip through the vetting process.
• That being said, P2P lending is a great way for the average investor to dabble in the world of angel investing.

10. Give!

• Investing in your church, your community, or a charity you’re fond of may not provide you a monetary return, but it does often result in positive outcomes to the individuals and organizations you support.
• As an added benefit, many charitable donations are tax deductible.

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