I'm 23. I have $3000. How can I best use it to make more money?
Hello fellow HN readers,
The title gives the gist. I'm in college. I'm $6000 in credit card debt, and at 12% APY I'm paying $60/month in interest. If I pay off half of it, then my interest drops to $30/month. In other words, it's an investment that makes me $30/month. I've read into CDs and IRAs, and I find them meaningless, since their returns are insignificant, and any accrued money will be offset by inflation.
I want to know, from any multimillionaires here, what is the best course of action? Speak authoritatively. How would YOU use this money--if it was all you had--to snowball it into more? I'm open-minded.
Thanks
35 comments
[ 3.0 ms ] story [ 28.5 ms ] threadYou are much better off paying down your credit card debt. Sorry I wish I didn't have to sound like Suze Orman.
$3000 is not much for starting a business etc.
On his budget, I could see him investing a few hundred into Facebook with the intention to stay and hold, but anything beyond that is silly gambling.
The stock is being sold at nearly 25 times sales...Amazon is selling for about 2 times sales. Seriously? This is just a get-rich scheme for current Facebook shareholders.
Not saying anything is wrong with it. But you should definitely wait to invest until after the pop and the prices slide back to something reasonable.
Also, the OP has no business investing in stock right now. Unless you have 10k to throw around as disposable income, investing should be off the table.
3k is almost starving and homeless territory. Pay off your debt and get a part-time job.
Could work...I would say $6,000 in the hole - $500 will not really change your predicament?
I've easily spend $10k in books (and $20k+ in training) over the past ten years, and can't think of any other investment that has an ROI that's remotely close. Example: after reading Value-Based Fees by Alan Weiss, I tripled my profitability pretty much overnight. The book cost $40.
Buying every book on my recommended list would set you back about $1,500. (Less if you hit the library, and buy only the books you want to keep for easy reference.) The rest can be spent buying tools, specialized training, and inexpensive test marketing.
As long as your first idea isn't very capital intensive, $3,000 can take you far if you use it to invest in your own knowledge and skills.
Most of my early book / course purchases were financed with credit card debt. I paid off my cards in full with a small portion of my first product launch. I'd do the same thing in a heartbeat.
But, three years later, I shipped my first real product, having done all the learning and coding on that very same machine, and made enough money to recover all that several times over. The knowledge I gained during those years led to a programming career that continues to the present.
Early in life, I think it makes sense to not pay down debt, or take on even more debt, in order to buy something is going to be a force-multiplier for you.
Obviously, without additional effort, there is not much you can do with $3000 that is likely to have a higher return than paying off the card.
But, depending on your own interests and motivation, there are a lot of things that--when combined with your own efforts--will allow you to upgrade your own value. So figure out what those things are, and whether any of them can be had for $3000.
If you own a laptop and can use your schools internet - start learning.
And stop spending your money. Go freeze your credit card in a block of ice or something.
I spent that much because I was learning and doing much more than programming, and even then, some of my spending was inefficient due to lack of good guides and less useful online material at the time. I bought a ton of things that weren't that useful in the end. Even with the "waste," it's still the best investment I've ever made.
I think it's entirely possible to be too frugal when it comes to learning. If you can take a course that costs $1-2k, and it directly teaches you things that help you make 5-10x more money on a recurring basis, that's a bargain.
I don't subscribe to the theory that says you should always use your available cash to pay off debt. Having no ready cash can leave you in a world of hurt if the unexpected happens. While $60/month is no fun, it is manageable and not a financial risk.
Oh yeah, one more thing, stop using your credit card.
He has a credit card with at least a $6k limit...
If $3000 was all that I had, the one thing I would do would be to a) get a job or b) get a second job (work hard while you can). I would then immediately pay down my credit card with the $3000. Then, with the money from my paychecks, I would save $1000 into a regular savings account (for emergencies). More work more money. Then I completely pay off my debt. I sure as hell hate debt! After my card is paid off, I start adding that old credit card payment to my savings plus anything extra that I possibly can.
It is more advantageous for you to stay out of debt now (and forever). I think you will feel better.
It's hard to give a good answer without knowing what kind of income you have and how regular a source it is. The more regular your income, the more aggressive you can be paying down your credit card debt. But if you expect to go a while without a significant source of income, you will need to keep more cash on hand.
You could ask family or close friends for a no-interest loan to help you get your credit card debt down to $3000 or lower. Depending on how much they are willing to loan you, you might be able to use some of your cash to pay it off completely.
The bottom line is that, realistically speaking, you are not going to be able to "snowball" $3000 into anything when you owe $6000. Your snowball needs to be pushed uphill right now (pardon the mixed metaphor). When you get over that hill you can start thinking about rolling it down the other side.
In the meantime, you can do as Mr. Kaufman suggested and spend a small amount on educational books that will prepare you for the day when you are in the black.
But with $3000 I recommend using most of it to pay off your debt, and take a night to analyze where all your cash is going and how you ended up with so much debt! It would be best if you could provide additional information such as your monthly salary and expenses, and maybe others can give you advice on how to cut back and live happier!
Here are some examples: http://www.topappcharts.com/search.php?string=debt&show=...
They probably make $100 or more daily.
If you find some project that you're passionate about, then don't be afraid to burn through a little bit of your savings in order to learn and explore.
Looking at a comparison website and moving your money to an account with good interest is probably worth it, though.
Pay off your debt.
Don't worry about them now because you have no money (and need to pay off that debt), but once you get a steady income and have your debt under control - start investing money into your retirement.
A little money put into an IRA now will make a huge difference 40 years from now.
Focus on the skills you have that help you earn money. I don't know whether you have a job or a business, but you'll get much more by investing there. For example, if you work as a programmer, you can probably get a $10k salary bump by learning how to negotiate.