When you reach $75,000 in savings, you likely have enough of an emergency fund to cover essentials like housing and food for a few months, said Todd Stearn, founder and CEO of The Money Manual. “So go make your money work for you. If you don’t, inflation will act as a tax that reduces your nest egg each month.”
How? You might be surprised to learn that the best investments to make when your savings near the six-figure mark don’t include the latest hot stock or crypto coin. Here are three solid ways to invest your money once you have $75,000 in savings.
For short-term savings — money you plan to use within the next few years — it’s important to keep your funds fairly liquid and protected from loss while earning the best return possible. Stearn recommends putting some of your savings into an FDIC-insured high-yield savings account, money market account or certificate of deposit (CD).
In the past decade or so, these types of accounts paid next to nothing in interest. But since the Federal Reserve started raising its target rate in March 2022, interest rates have been on the rise. Now, you can find deposit accounts that pay 5% APY and up. If you were to put your $75,000 into a one-year CD at 5%, for example, you’d earn $3,750 in interest by the time the CD matures.
If you have outstanding debt, it’s a good idea to focus on paying that off once you have a solid amount of savings. When you have debt, especially high-interest debt, the interest accumulates over time. Every dollar of interest you pay is essentially a dollar lost. By paying off debt more quickly, you gain that money back.
It’s not exactly an investment in the traditional sense, but eliminating debt provides a return on your money. Take this example: Say you have a $20,000 car loan at 8% APR with five years left to repay it. Over the course of those five years, you’d spend about $4,332 in interest. Now say you focused on making extra payments toward your loan and paid it off in two years instead. You’d save $2,623 in interest charges, which would not only be money back in your pocket, but funds available to save or invest instead.
Stearn notes that another valuable side effect of getting rid of your debt is that your credit score will improve. This makes it easier to borrow money at affordable rates, as well as rent an apartment, open utility accounts and even get certain jobs.
Since you have your short-term savings needs taken care of, you can focus on saving for long-term goals. For many people, retirement is a big one. And it’s nearly impossible to save enough money to live off of in your golden years without investing it in the market.
If you have access to an employer-sponsored retirement account, such as a 401(k) or IRA, that’s the best place to start. “These retirement investment products have huge tax advantages,” Stearn said. “The money will multiply over the years.”
Additionally, if your employer matches your contributions, that’s free money. So you should contribute at least the minimum amount required to receive your full employer match.
But it’s important to understand that these accounts are just a place to hold your investments; they’re not the investment itself. You’ll still need to choose the specific stocks, bonds, mutual funds, etc. that you want to invest in, and the options available will depend on your particular plan. Most, however, should give you the option to invest in target-date funds and index funds, which tend to be reliable choices. Still, it can be a good idea to speak with a professional advisor about the best investments that match your risk tolerance and savings goals.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
So, you’ve got $75,000 sitting around and you’re wondering what to do with it? First off, congrats! That’s a serious chunk of change that can open up a world of possibilities Whether you’ve saved diligently, received an inheritance, or sold some assets, having $75k gives you options that many people dream about
I’ve been researching investment strategies for years, and I’m excited to share some smart ways to make your money work for you. Let’s dive into the various paths you could take with your $75,000 and how to maximize its potential.
Creating a Solid Financial Foundation
Before we jump into the exciting investment options, let’s make sure we’ve got the basics covered:
Emergency Fund First
The safest investment approach for many is going to be a diversified portfolio. If you have $75,000 to work with, for example, you might want to keep $15,000 of that in the bank as an emergency fund and invest the remaining $60,000. You could open a traditional savings account at a brick-and-mortar bank.
Having this cushion means you won’t need to tap into your investments if unexpected expenses pop up Most financial experts recommend having 3-6 months of living expenses set aside.
Pay Off High-Interest Debt
If you’re carrying credit card balances or high-interest loans, paying these off should be a priority. Think about it – if you’re paying 18% interest on credit card debt but only earning 7% on investments, you’re losing money overall.
For example, if you have a $20,000 car loan at 8% APR with five years left to repay it, you’d spend about $4,332 in interest over those five years. But if you focused on making extra payments and paid it off in two years instead, you’d save $2,623 in interest charges! That’s not only money back in your pocket but funds you could redirect toward other investments.
Investment Options for Your $75,000
Now let’s explore how to make your money grow
1. High-Yield Savings Accounts and CDs
For short-term savings or money you’ll need in the next few years, consider putting some cash into FDIC-insured high-yield savings accounts, money market accounts, or certificates of deposit (CDs).
With today’s interest rates, you can find accounts paying around 5% APY. If you were to put your entire $75,000 into a one-year CD at 5%, you’d earn approximately $3,750 in interest by the time the CD matures. Not too shabby for a zero-risk investment!
Here’s a quick comparison of what different interest rates would earn you annually on $75,000:
| Interest Rate | Annual Interest Earned |
|---|---|
| 0.20% (typical brick-and-mortar bank) | $150.15 |
| 2.00% (online bank) | $1,515.06 |
| 5.00% (competitive CD rate) | $3,750.00 |
2. Retirement Accounts
If you’ve got your emergency fund squared away and minimal high-interest debt, boosting your retirement savings is a smart move.
If you have access to an employer-sponsored retirement account like a 401(k) or IRA, that’s usually the best place to start. These retirement investment products offer significant tax advantages, and your money will multiply over the years.
Plus, if your employer matches your contributions, that’s essentially free money! At minimum, try to contribute enough to receive your full employer match.
Just remember that retirement accounts are simply vehicles to hold your investments – you’ll still need to choose specific investment options within them.
3. Real Estate Investments
With $75,000, you’ve got several real estate options:
- Down payment on a primary residence: In many markets, $75k makes a solid down payment on a home.
- Rental property: In some areas, you could purchase a rental property outright or make a down payment on one.
- Real Estate Investment Trusts (REITs): If you don’t want the hassle of being a landlord, REITs allow you to invest in real estate without owning physical property.
Real estate can be a great way to diversify your investments and potentially earn around 10% annualized returns, which would generate about $7,500 annually on your $75,000 investment.
4. Stock Market Investments
The stock market has historically provided strong long-term returns, though it comes with volatility. With $75,000, you could build a well-diversified portfolio of:
- Individual stocks: If you have knowledge about specific companies
- Index funds: Lower-cost way to own a slice of the entire market
- Exchange-traded funds (ETFs): Similar to index funds but traded like stocks
- Mutual funds: Professionally managed portfolios
Stocks have historically returned about 7% annually after inflation, which means your $75,000 could generate around $5,250 per year on average. Of course, returns vary widely year to year.
5. Bonds and Fixed-Income Securities
If stock market volatility makes you nervous, consider allocating some of your $75,000 to bonds. These fixed-income securities typically offer more stability than stocks but with lower returns.
At a 2.5% annualized rate of return, $75,000 in bonds would produce about $1,875 annually. While this might not sound exciting, bonds can provide ballast to a portfolio during stock market downturns.
Sample Portfolio Allocation for $75,000
Here’s how you might divide up your $75,000 based on a moderate risk tolerance:
- $15,000 (20%): Emergency fund in high-yield savings
- $5,000 (6.7%): Pay down high-interest debt
- $25,000 (33.3%): Stock market investments (index funds/ETFs)
- $15,000 (20%): Retirement account contributions
- $10,000 (13.3%): Bonds or fixed income
- $5,000 (6.7%): Alternative investments or “fun money”
Alternative Uses for Your $75,000
Money isn’t just for traditional investments. Here are some alternative ideas:
Starting a Business
$75,000 can provide decent startup capital for many types of businesses. Whether it’s an online store, consulting service, or local brick-and-mortar shop, entrepreneurship could potentially offer the highest returns of all (though with significant risk).
Education and Skills Development
Investing in yourself through education or skills development can pay dividends throughout your career. This might include:
- Graduate degree
- Professional certifications
- Specialized training
- Career coaching
Creating Passive Income Streams
Use your capital to build sources of income that require minimal ongoing effort:
- Create and sell digital products
- Build a content website with affiliate marketing
- Purchase vending machines or laundromats
- Invest in dividend-paying stocks
Life Experiences and Quality of Life
Sometimes the best investments aren’t financial. Consider:
- Taking a sabbatical to travel
- Making home improvements that increase your enjoyment
- Supporting causes you care about
- Helping family members with education costs
Balancing Risk and Return with $75,000
When deciding what to do with $75,000, understanding the relationship between risk and return is crucial:
- Higher potential returns generally come with higher risk (stocks, real estate, starting a business)
- Lower risk investments typically offer lower returns (savings accounts, CDs, bonds)
Your personal risk tolerance, time horizon, and financial goals should guide your decisions. For instance:
- If you’re young with decades until retirement, you might accept more risk for growth potential
- If you’re close to retirement, preserving capital might be more important
- If you need the money within a few years, keeping it in safe, liquid investments makes more sense
The Power of Diversification
Rather than putting all $75,000 into one investment, spreading it across different asset classes can reduce your overall risk while still allowing for growth.
The safest investment approach for many is going to be a diversified portfolio. If you have $75,000 to work with, you might want to keep $15,000 of that in the bank as an emergency fund and invest the remaining $60,000.
Diversification means you’re not devastated if one investment performs poorly, and you’re positioned to benefit from strong performers.
Getting Professional Guidance
With $75,000 at stake, it might be worth consulting with a financial advisor who can provide personalized advice based on your specific situation. Look for fee-only advisors who aren’t incentivized to sell you particular products.
A good advisor can help you:
- Clarify your financial goals
- Create a tailored investment plan
- Navigate tax implications
- Adjust your strategy as your situation changes
My Personal Take
If I had $75,000 suddenly appear in my account, I’d probably take a balanced approach. First, I’d make sure my emergency fund was solid (about $15k). Then I’d pay off any lingering high-interest debt. For the remainder, I’d probably put about 60% into a mix of index funds and ETFs, 20% toward retirement accounts, 15% in bonds or fixed income, and keep 5% for a “fun investment” like cryptocurrency or a passion project.
The key is making deliberate choices rather than letting that money sit idle or spending it without a plan. With some thought and strategy, your $75,000 can grow substantially over time and help secure your financial future.
Final Thoughts
Having $75,000 to invest puts you in a fortunate position with many options. Whether you choose to focus on building wealth through traditional investments, creating income streams, improving your earning potential, or enhancing your quality of life, the important thing is making conscious decisions aligned with your values and goals.
Remember that the “right” choice varies based on your age, existing financial situation, risk tolerance, and personal objectives. What works for someone else might not be ideal for you.
Whatever you decide, avoid the two biggest mistakes people make with windfalls: letting the money sit in a low-interest account where inflation erodes its value, or spending it impulsively without a strategic plan.
With thoughtful planning, your $75,000 can be a powerful tool to help you build the future you envision. So take some time to consider your options, maybe get some professional advice, and then make your money work as hard for you as you worked to earn it!
What would you do with $75,000? I’d love to hear your thoughts and plans in the comments below!
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When you reach $75,000 in savings, you likely have enough of an emergency fund to cover essentials like housing and food for a few months, said Todd Stearn, founder and CEO of The Money Manual. “So go make your money work for you. If you don’t, inflation will act as a tax that reduces your nest egg each month.”
How? You might be surprised to learn that the best investments to make when your savings near the six-figure mark don’t include the latest hot stock or crypto coin. Here are three solid ways to invest your money once you have $75,000 in savings.
For short-term savings — money you plan to use within the next few years — it’s important to keep your funds fairly liquid and protected from loss while earning the best return possible. Stearn recommends putting some of your savings into an FDIC-insured high-yield savings account, money market account or certificate of deposit (CD).
In the past decade or so, these types of accounts paid next to nothing in interest. But since the Federal Reserve started raising its target rate in March 2022, interest rates have been on the rise. Now, you can find deposit accounts that pay 5% APY and up. If you were to put your $75,000 into a one-year CD at 5%, for example, you’d earn $3,750 in interest by the time the CD matures.
Find Out: 5 Things Warren Buffett Says To Do Before a Recession Hits
If you have outstanding debt, it’s a good idea to focus on paying that off once you have a solid amount of savings. When you have debt, especially high-interest debt, the interest accumulates over time. Every dollar of interest you pay is essentially a dollar lost. By paying off debt more quickly, you gain that money back.
It’s not exactly an investment in the traditional sense, but eliminating debt provides a return on your money. Take this example: Say you have a $20,000 car loan at 8% APR with five years left to repay it. Over the course of those five years, you’d spend about $4,332 in interest. Now say you focused on making extra payments toward your loan and paid it off in two years instead. You’d save $2,623 in interest charges, which would not only be money back in your pocket, but funds available to save or invest instead.
Stearn notes that another valuable side effect of getting rid of your debt is that your credit score will improve. This makes it easier to borrow money at affordable rates, as well as rent an apartment, open utility accounts and even get certain jobs.
Since you have your short-term savings needs taken care of, you can focus on saving for long-term goals. For many people, retirement is a big one. And it’s nearly impossible to save enough money to live off of in your golden years without investing it in the market.
If you have access to an employer-sponsored retirement account, such as a 401(k) or IRA, that’s the best place to start. “These retirement investment products have huge tax advantages,” Stearn said. “The money will multiply over the years.”
Additionally, if your employer matches your contributions, that’s free money. So you should contribute at least the minimum amount required to receive your full employer match.
But it’s important to understand that these accounts are just a place to hold your investments; they’re not the investment itself. You’ll still need to choose the specific stocks, bonds, mutual funds, etc. that you want to invest in, and the options available will depend on your particular plan. Most, however, should give you the option to invest in target-date funds and index funds, which tend to be reliable choices. Still, it can be a good idea to speak with a professional advisor about the best investments that match your risk tolerance and savings goals.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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The Best Financial Strategies by Income: $40k, $75k, $100k+
FAQ
What should I do with $75,000?
- Free your income. …
- Create cash flow. …
- Put a down payment on a property. …
- Save for long-term growth. …
- Increase your net worth. …
- Start a business. …
- Take care of business. …
- Make a difference.
Is 75K a lot of money in savings?
When you reach $75,000 in savings, you likely have enough of an emergency fund to cover essentials like housing and food for a few months, said Todd Stearn, founder and CEO of The Money Manual. “So go make your money work for you. If you don’t, inflation will act as a tax that reduces your nest egg each month.”
How to turn $10,000 into $100,000 quickly?
What is 4% interest on $75000?
If you want to invest $75,000 over 2 years, and you expect it will earn 4.00% in annual interest, your investment will have grown to become $81,120.00.