Imagine you suddenly received $1,500, and you want to decide how to use it to improve your financial situation. Perhaps you got a small inheritance, a gift, a bonus at work, a graduation gift, or proceeds from selling your old car. How should you invest that $1,500 wisely for your future?

What did Twitter have to say?

I’m always interested in other people’s perspectives throughout the personal finance community. So, I took a poll on Twitter and asked people how they would spend $1,500.

61% responded that they would invest the money and 39% said they would use it to pay expenses or debt. No participants said they would do something fun or give it to charity.

There was one write-in response saying they would invest part and give part to charity.

Now, I understand that this was a very non-scientific poll. Plus, clearly many of my followers are fellow money nerds, because I think a random sample of the American public would include a higher percentage of spenders who would want to do something fun! But, it’s interesting to see how people responded.

The best ways to approach financially

I’m going to present some options, in the order of how I would recommend using the money — with my top recommendation first! Then, I will talk through some alternative approaches you could consider, too.

1. Pay for any current emergencies

If you are in the midst of an emergency like an unexpected healthcare cost, home appliance repair, or essential car repair, this is probably the best use for the money.

You’ve received this $1,500 at the perfect time and it will help meet a practical need in your life. Best of all, you will avoid the possibility of needing to take on debt to address this expense. As a reformed Dave Ramsey follower, I know that the first step to getting out of debt is to not go further into debt.

2. Pay off high-interest rate debt

There’s an urban legend that Einstein once said that compound interest was “the eighth wonder of the world” or “the most powerful force in the universe.” Compound interest really is a powerful force — and it can either work for you or against you.

If you are carrying a balance on any debt with a high interest, the power of compound interest is working against you! This is scary because, if you’re not making full payments, the loan balance is growing each month as it accrues more interest. Use this $1,500 to to help jump-start your journey to get out of debt, starting with the high-interest rate items.

3. Start or grow your emergency fund

Do you have a full emergency fund? Having some money set aside for emergencies is one of the core steps in improving your financial situation. Having some extra, liquid cash is necessary for unexpected expenses or job changes, and it can give you some major peace of mind.

I recommend having at least a few months of expenses saved. If you have no emergency fund yet, $1,500 would be a great start and a major improvement from $0. If you’re not quite at your emergency fund goal, use the money to make some progress!

4. Increase your employer-matched retirement contributions

I described a few detailed examples of this in a previous post. The conclusion? You should prioritize getting your full employer match (if one is available to you).

Some people like to say the employer match is “free money,” while others like to say it’s part of your compensation. Either way, I encourage you to get that full match since it can immediately accelerate your retirement savings.

More from Semi-Retire Plan: How to Invest in Real Estate with Just $500

You should only put money into a retirement investment account if you’re planning to keep it invested for the long-term. I recommend choosing diversified ETFs or mutual funds with low expense ratios within your retirement investment account.

5. Save for a necessary future expense

If you know of any unavoidable expenses coming up in the near future, you could use the $1,500 cover that expense.

6a. Pay off lower-interest debt

In option number 2 above, I said you could pay off high-interest debt. If you’ve made it this far to option number 6, go ahead and pay off any lower-interest debts like student loans or a second loan against your home.

6b. Increase your non-employer-matched tax-advantaged investments

I’m calling this one option 6b instead of option 7 because I think you could do this instead of paying off the lower-interest rate debt, or at the same time. Option 4 was to increase your employer-matched retirement savings, but if you made it this far, consider increasing your non-employer-matched investments.

Ideally, you should make a plan like Jim or Pam did in the Semi-Retire Plan explainer post. Intentionally choose a savings rate that will get you to your long-term goals.

If you’re not already hitting that target retirement savings rate for the year, use the $1,500 to help get there.

This is also a great point to start or increase your savings for your kid’s future college expenses!

8. Pay extra on the principle of your mortgage

Another good financial decision can be to pay extra towards the principle of your mortgage. This will help you pay off your mortgage early.

Some financial thinkers don’t recommend paying off your mortgage early, but I’m a fan of doing so if you can. You’re getting a guaranteed “return” on your investment by avoiding some of the future interest payments, and you’ll gain financial flexibility and peace of mind when that mortgage is out of your life.

Plus, paying off your mortgage can make your retirement expenses and savings math become much more feasible. Removing your mortgage payment from your budget will make your annual expenses significantly lower.

Want to learn how to walk through your own semi-retirement timing math? Check out the free semi-retirement workbook!

9. Make a taxable investment

One final way to use the $1,500 to increase your financial standing is to make a taxable investment. You could invest within a taxable brokerage account, but there are other choices you could consider too — like investing in real estate, starting a business, or trying out peer-to-peer lending.

Money isn’t only for saving

Just based on the numbers alone, these are your options for improving your financial situation. But life isn’t all about growing your net worth to hit a high score. Money has other uses.

The three things you can do with your money are giving, saving, or spending. We’ve considered all of the “save” options above, but giving and spending have a role in a healthy financial life too!

You could split the $1,500 into multiple segments and use parts of it in all three categories. Or, you could just spend it or give it all.

Spend the money

Even if you’re not yet financially independent, or even not yet out of debt, give yourself permission to enjoy life a little bit. Travel for a weekend vacation, buy that new pair of shoes you’ve been needing, or go out for a nice dinner.

Don’t tell the other financial bloggers that I said this, but, occasionally you need to shout “you only live once!” and go out with friends.

Give the money away

This isn’t often talked about in the personal finance community, so I recently wrote a post on this topic, but giving to a person, cause, or organization you care about is a healthy and worthy use of your money.

Consider giving some or all of the $1,500 to your church, a charitable organization, or someone in need.

My friend Micah McDonald from Deep Value ETF Accumulator says that if he received an unexpected lump sum, he would donate 10%, keep 10% for discretionary spending, and invest the other 80% in accordance with their current investment plan. A split approach like this is a great option. If you’d like to learn more about Micah’s story, check out our Sitting Poolside interview.

I love giving because it benefits the person receiving the money, but it also benefits the person giving the money. It feels good to support a cause you care about. Plus, giving reminds us that frugality or hoarding is not the purpose of life.

I like the idea of financial independence, but, remember that it’s a means to an end. Personal finance shouldn’t define you — it should be a tool that you wield to do things that matter in life.

I’m writing this post, but it’s something that I need a reminder about at times, too. It’s easy to get caught up in the pursuit of what feels like a video game high score… but at what cost? There’s value in moderation and keeping your life in line with your core values.

Personal finance is frustratingly but beautifully personal, so look to your long-term goals and build the future you want, step by step.

How would you personally choose to use $1,500 if you received it unexpectedly today?