Saving money in this day and age can be challenging. This article will answer the question of: is $10,000 a lot of money?
To answer this question as quickly as possible, yes, $10,000 is a lot of money for the large majority of people, but also no, because it won’t cover living expenses for an extended period.
I know that answer is confusing, but hear me out, $10,000 is a significant amount of money, but it often won’t cover more than four months of living expenses for a single person.
Without trying to deter you, this article will answer the question, ‘is $10000 a lot of money?’ I’ll also dive into what $10k can buy and give four recommendations on using the money efficiently.
Anyways, without further ado, let’s unpack the question of ‘is $10000 a lot of money?’
Is $10,000 a Lot of Money?
$10,000 is a lot of money, but it also isn’t in many circumstances. $10K is an outstanding amount for a 17-year-old living at home rent-free with zero expenses, whereas it isn’t a lot of money for a 32-year-old renting in a capital city.
Let me break this down to explain my mixed answer.
A 17-year old living at home may have expenses of a phone bill and gas for their car. Let’s say they spend $80 a month on gas, $70 a month on their phone, and $100 a month on miscellaneous purchases.
This comes to $250 a month in living expenses, meaning it would take them over three years to burn through the $10K.
Now, a single person’s estimated average living expenses are $2644 a month, provided they live independently.
They would spend 10,000 dollars within four months compared to over three years for someone living at home.
See why it’s a difficult question to answer. Because there are so many factors that determine how much your living expenses are, including age, location, rent price, transportation, healthcare costs, and more.
$10,000 will often cover around four to six months of living expenses for the average American, but this doesn’t factor in if you have children.
So while 10,000 dollars is a lot of money, it also isn’t in many circumstances.
Is $10000 a lot of money for savings?
Regardless of what I’ve just said, $10,000 in savings is a very comfortable figure.
If you have $10K in savings, you’re doing better than 86% of American’s. Seriously, if you’ve reached that figure, pat yourself on the back for your effort and determination. 😊
Reaching a figure like 10,000 dollars has most likely taught you how to budget and spend your money wisely and will equip you with the skills needed to save to $20K, and so on.
These skills are essential and will be vital in helping you get a downpayment on a house.
Now, if you’re wondering how much money is needed to become financially independent, here’s a rough guide because $10K is not enough.
To become financially independent, you should have 25x your annual expenses in your investing portfolio.
This means that the average single person in the USA can technically become financially independent with a nest egg of $793K.
What Can $10,000 Buy?
Another question that goes hand-in-hand with is $10000 a lot of money is ‘what can $10,000 buy?’
Ten items that $10,000 can buy:
- A downpayment on a house: $200K home with a 5% downpayment.
- A semi-inground pool: Costs from $6000 – $10,000.
- Used car: You can get great deals on used cars.
- A premium hot tub: High-quality with efficient insulation.
- 6x iPhone 13 Pro Max 1TB: They’re quite expensive.
- Furnishing a new house: Couches, beds, and appliances all add up quickly.
- A wardrobe overhaul: $10K is enough to buy everything you need.
- Louis Vuitton case with mirror: If a normal makeup case doesn’t suffice ($9,050).
- Traveling: $10K is enough to visit many countries.
- 40x Supreme Clay Bricks: Build a house with style. 🤣
Hopefully, this list has given you an idea of how much and how little $10K can buy.
I hope you’ve realized that some of these ideas are a joke, and I do not recommend buying 40 Supreme Clay Bricks for 10,000 dollars (unless you want to).
Anyways, we’ll now move on to what I recommend you should actually put your $10K towards.
What Should You Do With $10K?
Now that we’ve established the question of: is $10000 a lot of money? We’ll now discuss what you should do with it.
If you have this amount saved after you’ve paid off all of your living expenses, here are four ideas I’d recommend putting your money towards.
Keep it in savings
If you have 10,000 dollars, the first strategy I recommend is to keep it in your savings account.
Is $10000 a lot of money to have in savings? Of course, it is!
I know it’s a sluggish start, but it’s the safest method if you don’t want to risk your money and like it all in one place.
The best place you can store it is in a high-yield savings account, which pays 10 to 25 times more interest every year than a regular savings account.
So, instead of spending the money, why not keep it in a high-yield savings account, which will slowly grow over time?
Now, if you’d like to save money in a fun way, I’ve created several free money-saving challenge printables. They’re such a great way to save money and perfect for kids too.
Experiment with investing
Another strategy I’d highly recommend to do with your $10K is to experiment with investing.
Investing is a great way to compound your money over time and create a passive income stream.
While I’m no expert with investments, I’ve received average returns of 12% from $5000 within the past year. That’s a $600 increase without having to do anything.
I must comment and say that although I’m making returns on my investments, it isn’t physical money that I can spend.
You have to be in it for the long run with investing, and you can’t expect to become rich quickly.
So, while I’m technically making returns, I’m not spending the money, and I’m letting it compound over time.
Anyways, I think that $10,000 is such an incredible figure to begin your investing journey, and quite frankly, it can set you up on a path to financial freedom.
Don’t believe me?
Suppose you invested $10,000 into the S&P 500 with average returns of 10.7% and contributed an extra $250 a month for 40 years. In that case, that number could turn into over $2.2 million. 🤯
That showcases the power of compound interest and time.
Start an online business
Is $10000 a lot of money to start an online business? Of course, it is!
$10K is a lot of money, and if used correctly, can propel an online business into a success.
If you have an idea for an online business, then use the $10K to help create your dreams.
Four online business ideas:
- Start a blog: $150 is more than enough for a domain name and three years of hosting. You could invest a further $2K – $5K into content, which could roughly get you 60 – 150 articles (1000 – 1500 words each).
- Start a YouTube channel: Free – unless you want to buy a new camera, microphone, and lighting setup. Starting a blog/YouTube channel are very cheap and risk-free.
- Open up a print-on-demand shop: Platforms like Printful and Shopify can help you start up a clothing business. You’ll have to pay for designs, advertising, and more.
- Dropshipping: Much like print-on-demand, you don’t ship/buy products until the customer purchases them.
While there’s no guaranteed success going down any of these pathways, at least you’ve experimented with something different and didn’t just end up on the usual route (college and a job).
The method I’d highly recommend is starting a blog, but creating a YouTube channel is pretty risk-free too.
You can read all my beginner’s blogging tips here.
Pay off debt
The last strategy I recommend is to pay off all of your outstanding debts. While it isn’t an exciting method, it’s one that you’ll be thankful for after you’ve done it.
Instead of paying the stupidly high-interest rates on credit cards or student loans, why not try to pay them off as quickly as possible?
Unless your money is invested and makes good returns, there’s no point in having money saved with outstanding debts. It’s basically like throwing money away.
I recommend paying off debts with the debt avalanche method.
This method involves paying off the highest-interest debts first, then the second-highest interest rates, and so on.
Paying off your debts this way will help you avoid as many interest rate charges as possible and make it easier once you begin.
For example, let’s say you have $10K in debt. List all of the debts by their balances, interest rate, and minimum payment.
Allocate the minimum payment to all debts every month and pay off the highest interest rate first.
Once that’s paid off, move onto the second-highest interest rate, and so on until all the debt is paid off.
Again, while it is a tiresome method, it is one that you’ll be thankful for after you’re debt-free.
So that wraps up the question of ‘is 10000 a lot of money?’
As I’ve stated, 10,000 dollars is a significant milestone to hit in your savings, so be proud of yourself if you’ve reached that figure.
Nonetheless, while it is a lot of money, it isn’t in many circumstances and will only cover 4 – 6 months of living expenses for the average single person in America.
This is why it’s essential to use the money efficiently through saving, investing, starting an online business, or paying off debt.
If you waste money on materialistic products, you’ll be back to square one. Whereas if you use the money efficiently, you could start your journey towards financial freedom.
Anyways, the choice is up to you, but I’d highly recommend using it efficiently.
Is $10000 a lot of money to you? Or, let me know what you would do if you had $10K to spend.