5 smart ways to put $1,000 to work

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If you have $1,000, we have five smart ways to put that money to work and let you enjoy the results in days, not decades.

IF you are carrying a monthly balance of more than $3,000 on your credit cards...

Use the $1,000 to reduce that debt and save yourself hundreds if not thousands of dollars in future interest payments. Our most recent survey shows consumers are paying an average of more than 14% a year for variable rate cards and 13% a year for fixed-rate cards.

That's a lot. If you make the minimum monthly payment on a $3,000 loan at 14%, you'll spend more than $2,400 in interest over the next 200 months paying it off. So we want you to stop working for the bank.

Here's what to do:

Step 1. Gather all of your credit card bills and find the interest rate you are being charged for each one. Stack the bills one on top of the other, from the highest to the lowest interest rate.

Step 2. If $1,000 is enough to payoff the card with the highest interest rate, send in enough to do just that. Apply whatever's left over to the bill with the second-highest interest rate.

Step 3. If $1,000 isn't enough to payoff the bill with the highest interest rate search down through the stack until you find a card whose balance is $1,000 or less. Send in enough money to wipe out that debt. Apply whatever's left to the bill with the highest interest rate.

Step 4. Take the credit card out of your wallet and store in a drawer or file cabinet with your bills. Don't use it but don't cancel it, either.

When next months' bills roll in you'll be thrilled to open at least one credit card statement that shows you owe a big, fat "0," nothing, nada. It's a great reward for doing a smart thing and shows that you can liberate yourself from credit card debt.

IF you owe less than $3,000 on your cards but are paying monthly checking account fees...

You'll worry less and enjoy life more once you've socked away enough money to weather a layoff or pay big, unexpected bills. How much is enough? Three to four months' worth of paychecks.

Obviously that $1,000 can help, but what if you could also use it to reduce your monthly bank fees? Here's what to do:

Step 1. Grab your latest bank statement and look for anything that looks like a $5 to $10 monthly fee for nothing more than the privilege of having your checking account. Accounts that require you to maintain a minimum balance to avoid such fees are just as bad.

Step 2. If you are paying such fees -- or have to maintain a minimum balance to avoid them -- visit your bank's Web site or a nearby branch. Find out how much savings you must have to qualify for a "free" checking account that imposes no maintenance fees, no matter how low your checking account balance might fall. Most banks will add traditional savings accounts and certificates of deposits (or CDs) together when calculating the minimum amount.

Step 3: If that $1,000 pushes you over the minimum amount, then invest it in a six-month to one-year CD. Interest rates are still high and most banks are now paying right around 3.5% to 3.75% a year on such deposits. Shop around using our CD rate comparison chart and you should be able to find a bank offering 5% or more.

Step 4: Use your savings to qualify for a free checking account.

You'll feel smarter as soon as your next bank statement arrives. Monthly fees will no longer be winging you for $60 to $120 a year and that new CD should add at least $80 to your savings over the next 12 months.

Your $1,000 investment could put you as much as $200 ahead over the course of a year. That's a 20% return on your investment and any pro would be proud to claim those kinds of numbers.

IF you owe less than $3,000 on your cards, have free checking but don't have a rainy day fund...

As we said, you'll worry less and enjoy life more once you've socked away enough money to weather a layoff or pay big, unexpected bills. Three to four months' worth of paychecks is a good start.

That $1,000 will do the most good in a six-month to one-year CD. You should be able to get one that is paying 3.5% to 3.75% a year -- the national average on such deposits.

But if you shop around, and are willing to send your money to a new bank across town, or across the country, you should be able to earn 5% or more. The best CD rates are easy to find on our comparison charts. Deposits are federally insured at all of the banks in the tables and we'll tell you how to contact them, too.

Imagine how good it will feel to open a new statement where your balance just grows and grows, but is there in case of an emergency.

IF you aren't contributing -- or aren't contributing very much -- to your 401(k) plan...

Use that $1,000 to take a big step towards financial independence. With so many bills going up and up we know how hard it is to save. But we think you can do it with this simple plan:

Step 1. Put the $1,000 in a savings account that easily allows you to transfer money to your checking account.

Step 2. Call whichever mutual fund, insurer or money management firm manages your employer's 401(k) plan, or hop on the plan's Web site, and arrange for an extra $100 a month be deducted from your pay.

Our "5 simple rules for a successful 401(k)" will help you get started and make the most of your retirement savings.

Step 3. Watch your paycheck to see when the contributions begin and the amount that your check falls. At the end of the month move enough money from your savings account to your checking account to makeup the difference.

Step 4. After six months, move only $50 a month into your checking account.

Step 5. After nine months, reduce that again to $25 a month.

Step 6. After a year, stop altogether and see if you can pay your bills without it.

You'll be delighted when you receive your next -- or perhaps first -- 401(k) statement. You are making regular contributions towards your retirement and building real wealth. Your savings will grow even faster if your employer matches all or part of your contribution -- money you were just not getting before.

IF you have an IRA instead...

That's just as good a place for your $1,000.

If your employer doesn't offer a 401(k) plan, an Independent Retirement Account is the next best thing.

Our "6 simple rules for a successful IRA" will not only help you get started, they'll help you boost your contributions, invest wisely and make the most of your retirement savings over the years.

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