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If somebody asked me that question 2 years back, I'd probably say I don't know, which is true for two reasons. First, I knew zilch about handling money (I'll probably just ask Job about it). Second, even if I was a kuripot spender, because I don't track my money, somehow it always manages to get "lost," so I rarely had P5,000 to spare.
But what if you are unlike me 2 years back and want to be financially wise? What if you're tired of spending your money on senseless things? Your spare cash could be more than P5,000, or less, but for me, this is the magic number in finance. You can do magic with this humble amount.
You see, I've read writeups about what to do P20,000, but in reality, not all have spare money of that amount. This only makes financial planning intimidating - and it should not be.
Even if you don't have vast resources, you can be financially free. To make the subject applicable to everyone, let's focus on my more practical magic number, shall we? Here are the five things you could do with your 5,000:
1. Pay off your debt.
This goes three ways. If your debt is higher than P5,000, pay at least a part of it. If you have multiple debts, prioritize the one with the highest interest rate. If your debt is lower than P5,000, keep the rest of the money for the following tips.
2. Use it for an emergency fund.
If you don't have one, use the P5,000 to start one (here are reasons why you should have an emergency fund). If you already have one, great, add P5,000 to it. Ideally, it should contain enough to cover you for 3 months if you're single and 6 months if you have a family in the case of an emergency.
3. Keep it or use it to buy something you've been saving for.
Do this only if you've already taken care of your tithes, bills, emergency funds, and if applicable, investments.
I am not ashamed to say that I enjoy looking at gadgets and bags. I'm a girl after all! However, I never buy them immediately. Instead, I set aside money from time to time until I can finally afford it. This way, I won't have to dip into my savings and/or have to borrow money to buy something unnecessary.
4. Invest in effective investment tools.
P5,000 is a magic amount because many investment funds only require this to open an account. Here are a couple of options you can consider:
a. Directly invest in stocks through COL Financial.
b. Open a mutual fund account in reputable companies like Sun Life Financial.
But why stocks and mutual funds? Why not place your money in the safest place ever namely the bank? There are three reasons:
- Money is so safe in banks that it grows so little. 5% to 7% growth is already considered generous.
- Apart from the poor growth rate, your money is tax-deductible. Think 20% deduction.
- To grow your money, banks invest in investment tools mentioned above; in other words, they are virtually middlemen. It is more prudent to just skip them.
To give you a clear comparison, let's say that you put in P5,000, never add any more amount to it, and leave it alone.
After 5 years at 7% interest, your investment will have a potential total value of P7,013.
After 5 years at 20% interest, your investment will have a potential total value of P12,442.
(I used this investment calculator.)
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5. Donate it.
Let me clarify that this is different from the tithes. Tithes are a regular, ideally first, deduction from your income, while in thos case, we're talking about extra money (read: leftover).
There are many organizations you can donate to. ALS is a worthy cause, but it's already raising millions of dollars. I suggest you look into donating money to concerns away from the limelight but need urgent help like the genocide of Christians in Iraq and Syria. Organizations are listed here.
What about you? If you have spare money just lying around (no matter the amount), how would you use it?
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