
I'm 23. I have $3000. How can I best use it to make more money? - nimbleNima
Hello fellow HN readers,<p>The title gives the gist. I'm in college. I'm $6000 in credit card debt, and at 12% APY I'm paying $60/month in interest. If I pay off half of it, then my interest drops to $30/month. In other words, it's an investment that makes me $30/month. I've read into CDs and IRAs, and I find them meaningless, since their returns are insignificant, and any accrued money will be offset by inflation.<p>I want to know, from any multimillionaires here, what is the best course of action? Speak authoritatively. How would YOU use this money--if it was all you had--to snowball it into more? I'm open-minded.<p>Thanks
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moocow01
12% after taxes is an incredibly difficult return to achieve (you're talking
around an 18% return y-o-y). If someone promises you this rate of return make
sure the fund manager's last name isn't Madoff.

You are much better off paying down your credit card debt. Sorry I wish I
didn't have to sound like Suze Orman.

~~~
colanderman
As a bonus, paying down your debt will likely increase your credit score, thus
decreasing the expected value of future loans you may take out (e.g. car,
house).

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bpodgursky
If there was a foolproof way to make > 12% interest, the credit card company
would have invested in it instead of investing in you.

Pay off your debt.

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joshkaufman
Since you're on HN, I assume you already have a good computer. Invest the
money in books that will teach you how to start a profitable and sustainable
business, and purchase any additional tools you need to start producing and
shipping. (Here are the books I recommend: <http://personalmba.com/best-
business-books/>)

I've easily spend $10k in books (and $20k+ in training) over the past ten
years, and can't think of any other investment that has an ROI that's remotely
close. Example: after reading _Value-Based Fees_ by Alan Weiss, I tripled my
profitability pretty much overnight. The book cost $40.

Buying every book on my recommended list would set you back about $1,500.
(Less if you hit the library, and buy only the books you want to keep for easy
reference.) The rest can be spent buying tools, specialized training, and
inexpensive test marketing.

As long as your first idea isn't very capital intensive, $3,000 can take you
far if you use it to invest in your own knowledge and skills.

~~~
polyfractal
I'm going to be adversarial and say that no one needs to spend $10k in books
and $20k in training to learn programming or tech-related skills. There is
plenty of material on the internet to get you rolling without a dime invested.

If you own a laptop and can use your schools internet - start learning.

And stop spending your money. Go freeze your credit card in a block of ice or
something.

~~~
joshkaufman
And I'm going to agree with you - if you're learning programming, there's no
reason to spend $10-20k. All you really need is a good computer, some
relatively inexpensive software, and a few subscriptions to online services
that will save you time and headaches. Beyond that, all you need is free time,
a project to work on, and a willingness to invest the effort.

I spent that much because I was learning and doing much more than programming,
and even then, some of my spending was inefficient due to lack of good guides
and less useful online material at the time. I bought a ton of things that
weren't that useful in the end. Even with the "waste," it's still the best
investment I've ever made.

I think it's entirely possible to be too frugal when it comes to learning. If
you can take a course that costs $1-2k, and it directly teaches you things
that help you make 5-10x more money on a recurring basis, that's a bargain.

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john_b
As others have pointed out, obtaining a 12% after tax return is not something
you can count on no matter how you put the money to use. As you've pointed out
CDs will produce a negligible return and also come with liquidity
restrictions. Investing in stocks (bonds are not an option to beat a 12% after
tax rate of return) will not produce that kind of return without you taking on
a severe level of risk.

It's hard to give a good answer without knowing what kind of income you have
and how regular a source it is. The more regular your income, the more
aggressive you can be paying down your credit card debt. But if you expect to
go a while without a significant source of income, you will need to keep more
cash on hand.

You could ask family or close friends for a no-interest loan to help you get
your credit card debt down to $3000 or lower. Depending on how much they are
willing to loan you, you might be able to use some of your cash to pay it off
completely.

The bottom line is that, realistically speaking, you are not going to be able
to "snowball" $3000 into anything when you owe $6000. Your snowball needs to
be pushed uphill right now (pardon the mixed metaphor). When you get over that
hill you can start thinking about rolling it down the other side.

In the meantime, you can do as Mr. Kaufman suggested and spend a small amount
on educational books that will prepare you for the day when you are in the
black.

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whichdan
If I had $3k in the bank and $6k in debt, I'd be very wary of moving any of it
around. What happens if your car breaks down and you need $1k in repairs? Your
CC limit only goes so far. And if you don't have a car, I'm sure you can think
of another example..

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signalsignal
Make iOS apps to help with managing credit card debt. $99 developer fee and
depending on whether or not you already have a Intel-based Mac with at least
10.6

Here are some examples:
[http://www.topappcharts.com/search.php?string=debt&show=...](http://www.topappcharts.com/search.php?string=debt&show=search&price=any)

They probably make $100 or more daily.

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the-come-ons
I am not a multimillionaire yet, sorry.

If $3000 was all that I had, the one thing I would do would be to a) get a job
or b) get a second job (work hard while you can). I would then immediately pay
down my credit card with the $3000. Then, with the money from my paychecks, I
would save $1000 into a regular savings account (for emergencies). More work
more money. Then I completely pay off my debt. I sure as hell hate debt! After
my card is paid off, I start adding that old credit card payment to my savings
plus anything extra that I possibly can.

It is more advantageous for you to stay out of debt now (and forever). I think
you will feel better.

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thoughtsimple
If you feel that you have stable employment or means of supporting yourself,
pay off the credit card as soon as possible. If your financial situation is
not that solid, put the money in a savings account for a rainy day.

I don't subscribe to the theory that says you should always use your available
cash to pay off debt. Having no ready cash can leave you in a world of hurt if
the unexpected happens. While $60/month is no fun, it is manageable and not a
financial risk.

Oh yeah, one more thing, stop using your credit card.

~~~
orangecat
_Having no ready cash can leave you in a world of hurt if the unexpected
happens._

He has a credit card with at least a $6k limit...

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int3rnaut
I think the smart money is probably to pay off your debt, but I'm going to
repeat what an older gentlemen once said to me, because it meant so much to
me.

    
    
      "Sooner, rather than later, Invest in yourself."
    
     I don't know if that will really help you with your predicament, but truly, sometimes the best thing you can do in life when the chips are down is just to bet on you.

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SatvikBeri
Honestly, that level of cash is insignificant in terms of earning money.

Focus on the skills you have that help you earn money. I don't know whether
you have a job or a business, but you'll get much more by investing there. For
example, if you work as a programmer, you can probably get a $10k salary bump
by learning how to negotiate.

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itsokintheory
Unlike the OP, I have no debt and $6000 in the bank. A soon-to-be grad
student, I'm also looking at a pretty low income for years to come. So I'd
like to be able to reasonably quickly free up my assets. Is the money still
best left in the bank?

~~~
manicbovine
Yes, keep it in a decent bank, and don't bother with bonds or equity.

If you find some project that you're passionate about, then don't be afraid to
burn through a little bit of your savings in order to learn and explore.

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jacknews
Absolutely pay off personal debt first. The only place for credit is so that
you can use other peoples money to take on business or investment risk. The
creditors ultimately shoulder the risk for your venture.

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polyfractal
Just to clarify a point, IRAs are long-term investing vehicles for retirement
savings. They are not meaningless, but they are only useful in the context of
40+ years.

Don't worry about them now because you have no money (and need to pay off that
debt), but once you get a steady income and have your debt under control -
start investing money into your retirement.

A little money put into an IRA now will make a huge difference 40 years from
now.

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amorphid
If you really want a good investment, figure out how to how sell something at
a higher price and get someone else to do the work at a lower price. Then use
your $3K to seed the business and use the business to pay off your credit
card. It's all about cash flow.

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junto
Debt is a cancer. Try your hardest to be free of it and you'll sleep soundly
at night. That is the best investment you'll ever make.

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ilitirit
Pay off your debt.

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tmather99
Put all $3K on NY Giants to win!

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up_and_up
Wait a few months, then buy Facebook stock. ;)

$3000 is not much for starting a business etc.

~~~
up_and_up
Why was this downvoted? Buying Facebook stock is a perfectly reasonable
suggestion.

~~~
polyfractal
And besides, buying Facebook stock right now is just plain stupid. It's a low-
float IPO designed to make people who already own the stock rich. By floating
a low number of shares, people who own the shares create artificial demand

The stock is being sold at nearly 25 times sales...Amazon is selling for about
2 times sales. Seriously? This is just a get-rich scheme for current Facebook
shareholders.

Not saying anything is wrong with it. But you should definitely wait to invest
until after the pop and the prices slide back to something reasonable.

Also, the OP has no business investing in stock right now. Unless you have 10k
to throw around as disposable income, investing should be off the table.

3k is almost starving and homeless territory. Pay off your debt and get a
part-time job.

~~~
Prizzle
$3,000. I would leave $2,500 in the bank (on the CC). Explore manufacturers in
China – Perform a few searches on ebay to see which products are the most
popular – Import a few widgets with the $500. Ensure you can sell for more
than the product costs and shipping expenses are. Review ‘Product
Differentiators’ online to ensure that you can sell your product for a higher
price than others by describing it better and introducing a higher perceived
value.

Could work...I would say $6,000 in the hole - $500 will not really change your
predicament?

