The week didn’t start out so well: you totaled your car. But things started to look up when you contacted Junk Cars For Cash St. Louis and were paid top dollar for your wrecked car. Now you’ve got a nice chunk of change in your pocket.
Maybe that vintage Fender Telecaster you saw online is calling your name. Or you’re thinking about getting away this winter—windsurfing in Baja California would be a blast. Before you get carried away, though, you might want to think about doing something a little more practical with your payout.
What You Can Do With Your Junk Car Cash
If you’re one of the 70% of Americans using high-interest credit cards, whittling down your debt might be the short term best investment you can make with your cash after selling your junk car or motorcycle. Depending on how much debt you carry, reducing your credit card balances by even a small amount can wind up saving you a significant sum each month. Also, consider getting better rates.
If you’re not saddled with a lot of debt, consider making a long-term investment with your junk car cash. Depending on your tolerance for financial risk, either opening an Individual Retirement Account (IRA) or setting up an online brokerage account could work to your economic advantage.
Starting To Save After Selling Your Car Can Be A Good Idea
An IRA can be as simple as a savings account. Chances are the bank that handles your checking account will be happy to open one of these basic IRAs for you, with no minimum deposit. The funds you invest grow at the rate of a typical Certificate of Deposit which, to be honest, is not terribly fast. You can also open an IRA that allows you to invest in stocks and bonds, where the rate of growth is potentially faster. The best IRAs feature a range of investment options that help you manage risk and allow you to tailor a portfolio that corresponds to your investment goals. All IRAs offer the advantage of tax-free savings; you can invest up to $6,000 per year ($7,000 if you’re over 50) in your IRA and pay no tax on the income you deposit there. The only catch is, you lose those tax savings to penalties if you withdraw your money before you reach the age of 59 ½.
Depending on your financial savvy and comfort, you can choose a self-directed IRA or a managed IRA. Under a managed IRA, you trust an institution’s experts to allocate your investments for you. You will pay a fee for that expert service, so when choosing an IRA, take the time to understand the fees you will be charged. If you’re new to investing, the financial gains you enjoy by having a specialist manage your account may be well worth the relatively modest service charges.
If the idea of tying up your cash until retirement age doesn’t sit well with you—and if you are willing to take on additional risk to boost your earning potential—you might elect to open an online brokerage account. These accounts don’t offer the tax advantage associated with saving for retirement but give you the benefit of keeping your assets liquid.
The best online stock brokers make trading easy even for beginning investors. Trading platforms have become simple and intuitive for anyone accustomed to working on a computer. If you’re new to investing, look for a firm that requires low minimum investment and allows you to trade as few shares as you wish per transaction. Some firms allow you to trade “stock bits”—portions of whole shares that allow you to make a very small financial commitment while you become comfortable with trading. While most firms will charge a transaction fee for each trade you make, some offer low- or even no-fee transactions. You might choose to start out with a managed portfolio, then as your confidence grows, switch to a self-directed approach. Many investment partners afford you that flexibility and make turning your crash into cash, even more, rewarding down the road.
If you’ve totaled your car and need to sell it to junk cars for cash located in St. Louis, it might be your opportunity to start saving and preparing for your future.