If you’ve a spare £300 this month, you might be wondering what you could do with this money. It might not seem like a tremendous amount of cash at first, but even this small sum could help improve your financial position. Today, I’m going to highlight three smart money moves anyone can make with a couple of hundred pounds in spare cash right now.
Smart money moves: Reduce debt
When it comes to smart money moves, one of the most sensible and straightforward things anyone can do with spare cash is to reduce debt. Paying off outstanding borrowing is always practical from a financial perspective. This is because interest rates on debt are generally higher than those offered on cash savings accounts.
Therefore, it generally makes sense to pay off borrowing before putting money away in a savings account. There’s no sense paying 25% interest on credit card debt when you’re only receiving less than 0.5% on your cash savings.
The best strategy to use when paying down debt may be to pay off any high-interest borrowing first. Another approach is to pay off small debts. This might mean it takes longer to reduce your outstanding indebtedness, but it could also help you clear up your finances faster. You may also want to close some unneeded accounts to reduce your temptation to borrow in future.
Invest in education
The best smart money moves don’t necessarily involve investing and saving. Indeed, the most overlooked and straightforward approaches anyone can use to improve their financial position over the long run is education.
If you’re serious about getting to grips with your finances, then spending money on books may be one of the most sensible decisions you could ever make. You don’t have to fork out a lot of time or money, and there are thousands of different books and educational resources out there.
Even if you spent a couple of £100 on books and financial education resources, the potential return on this small initial investment could be substantial. The great thing about this strategy is that even if you spend £100 on financial resources, there’ll still be a couple of hundred left over to squirrel away into a savings pot.
Invest for the future
When it comes to smart money moves, investing for the future is a very sensible choice. It’s possible to do this even with a few hundred pounds today.
There’s a whole range of platforms and providers that allow you to get started investing with a regular monthly plan from as little as £25. The best way to invest this cash could be via a low-cost FTSE 100 tracker fund.
According to my calculations, an investment of just £250 — with subsequent monthly deposits of £25 — in the FTSE 100 growing at an average rate of 8% per year could be worth £15,500 within two decades. That’s why this could be one of the best smart money moves you could make today for the long term.
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Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.