10 Best Money Moves To Make Every Time $5,000 Is Deposited in Your Checking Account

If you’re receiving $5,000 as part of your monthly income, you’re in an ideal position to build up your wealth — as long as you make the right money moves once that deposit hits your bank account.

Read Next: How Can You Withdraw Money From a Bank Account? 3 Ways To Know

Find Out: 5 Subtly Genius Things All Wealthy People Do With Their Money

“When handling a $5,000 deposit, it’s crucial to approach the situation with a well-rounded strategy that addresses immediate needs, future growth and financial security,” said Brendon McCullough, founder and managing director of Dealhack .

Here are some of the top savvy money moves to consider, according to experts.

Build or Reinforce an Emergency Fund

Your first priority should be ensuring you have a solid emergency fund . Financial experts typically recommend having three to six months’ worth of living expenses saved.

“This fund serves as a safety net for unexpected expenses, such as medical emergencies, car repairs or job loss,” said McCullough. “If your emergency fund is lacking, allocate a portion of the $5,000 deposit to bolster it.”

Ben Klesinger, co-founder and CEO of Reliant Insurance Group and Helping Hand Financial, also advised building up an emergency fund. “Having extra cash on hand for unexpected bills is reassuring. Aim to save enough to cover three to six months of essential expenses. Even putting aside $1,000 of the $5,000 for this fund is a good start.”

Learn More: I’m a Bank Teller: 4 Reasons You Should Withdraw Your Savings Right Now

Pay Down High-Interest Debt

High-interest debt, such as credit card balances, can significantly hinder financial progress.

Allocating funds to pay off or reduce high-interest debt, according to McCullough, can save you money in the long run by decreasing the amount of interest you’ll accrue. “For example, paying off a $5,000 credit card balance with a 20% interest rate can save you about $1,000 annually in interest payments.”

Klesinger agreed that it’s crucial to pay off high-interest debt first. “If you have any credit cards or other loans charging over 10% interest, use that $5,000 to pay them down or pay them off. That’s an instant savings and reduces your long-term financial stress.”

Invest In a Retirement Account

Contributing to a retirement account is another strategic way to ensure long-term financial stability. Depending on your situation, experts recommend contributing to an IRA or 401(k) .

“These accounts offer tax advantages that can help your money grow more efficiently over time,” said McCullough.

Klesinger shared the same advice. “Max out any retirement contributions you’re eligible for, like an IRA.” In 2024, you can contribute up to $7,000 to an IRA if you’re under 50 years old — those 50 and older can contribute up to $8,000.

“Putting that money into the market now allows it to grow tax free over the long run. Time is your greatest ally when building wealth,” Klesinger explained.

By regularly investing, you take advantage of compound interest, which can substantially increase your retirement savings over the decades.

Diversify Investments

If your emergency fund is robust and you have no high-interest debt, you should also consider investing in a diversified portfolio.

“Diversification helps mitigate risk by spreading investments across various asset classes, such as stocks, bonds and real estate,” said McCullough.

Investing $5,000 into a diversified index fund or ETF, he explained, can provide growth potential while managing risk. “Historically, a well-diversified portfolio has yielded an average annual return of about 7%-8%.”

Enhance Your Skills or Education

“Investing in yourself is one of the best financial decisions you can make,” said McCullough.

Consider using part of the deposit to enroll in courses or certifications that can advance your career or improve your earning potential. “For example, a project management certification or an advanced coding course can open doors to higher-paying job opportunities.”

Contribute to a Health Savings Account (HSA)

If you have a high-deductible health plan, contributing to an HSA can be a smart move.

“HSAs offer triple tax benefits: contributions are tax-deductible, earnings grow tax-free and withdrawals for qualified medical expenses are tax-free,” McCullough explained. “In 2024, you can contribute up to $3,850 for individual coverage or $7,750 for family coverage.”

Consider Real Estate Investments

If you’re open to a longer-term investment, real estate can be a lucrative option.

“While $5,000 won’t buy a property outright, it can be used as part of a down payment on a rental property or invested in Real Estate Investment Trusts (REITs),” McCullough advised.

This kind of investment can provide a steady income stream and potential appreciation over time.

Donate to Charitable Organizations

According to McCullough, allocating a portion of the deposit to charitable donations can provide not only a sense of fulfillment but also potential tax benefits.

“Donations to qualified charities can be deducted from your taxable income, reducing your overall tax liability,” he said.

Enhance Your Financial Knowledge

Experts recommend using a portion of the funds to access financial planning resources or consult with a financial advisor .

“Professional advice can provide personalized strategies tailored to your unique financial situation, helping you maximize the impact of your $5,000 deposit,” said McCullough.

Save for Future Goals

Lastly, consider setting aside funds for future goals, such as a home purchase, vacation or major life event.

McCullough noted that having a dedicated savings account for specific goals can help you stay focused and motivated, ensuring that your financial decisions align with your long-term aspirations. “By implementing these strategies, individuals can effectively manage their $5,000 deposits, ensuring that their money works for them both in the short and long term.

“It’s all about balancing immediate needs with future growth and security.”

Klesinger agreed. “That’s what I’d recommend doing to set yourself up for future financial success … Pay down debt, contribute to retirement, start an emergency fund and invest for the long run. Simple steps, but powerful when done consistently over time.”

This article originally appeared on GOBankingRates.com : 10 Best Money Moves To Make Every Time $5,000 Is Deposited in Your Checking Account