Hi Gilda,
What are you waiting for? Take it all to Vegas and gamble! Just kidding.
$10,000 certainly is a nice little chunk to have in the bank, but the real question I would ask you is:
is it the only 10K that you have? If so, I'd advise you to just hold on to it in cash and keep the whole sum in a liquid, FDIC-insured certificate of deposit, savings or money market bank account. In the mean time, keep saving some more on the side and make sure your 10K yields a bit of money too (even though interest rates are really low these days, so it unfortunately won't amount to much). This is a conservative, boring approach, but I personally like knowing that I have
12 to 15K lying around that I can use
in case of an emergency.
By
emergency, I really mean an
emergency: do not under any circumstance use it for anything frivolous (learning to distinguish "wants" from "needs" really helps). Think of it as a
security cushion that will remain untouched until you really need it (maybe you won't need to use it at all). In my opinion, a
need is an unexpected event such as:
- you have to move and pay for expenses and a security deposit,
- your car died and needs repairs,
- you get sick or injured and medical bills keep coming (though your insurance should hopefully help cover most of it),
- you lose your job,
- a close relative passes away and you have to plan a funeral (God forbid)
To me, a
want is using your savings for anything stupid such as:
- a newer, trendier car when the current one is still good, because you
deserved it (whatever this means...)
- paying for an expensive vacation because, well, you deserved it
- buying a bigger TV when the older one is not big enough to impress the neighbors (and because you deserved it)
- giving in to your kids' one and every whim (don't they deserve it?)
Sure, you can give in to your wants and be financially foolish from time to time; we ain't all monks and everyone's got to live a little, right? Just keep a security cushion in the bank to fall back on. 10K is a good start.
A couple more things:
1) In
this previous article, I gave more details about how I think you should prioritize financial allocation. It includes paying for credit card debt (or any kind of
bad debt like that).
2) This
Ask MCC entry tells you if you should save your 10K or use it to pay back debt.
