6 Simple Ways to Make Your Money Work for You
Unless you’re among the fortunate few who find themselves the recipient of a large inheritance, chances are you have to work for your money. But did you ever consider that your money can actually work for you, too?
That’s right. Many financial professionals recommend people think of every dollar they earn as a little worker who will then go out and earn even more! It’s your responsibility to figure out how to make your money work for you, and here are some thoughts.
Save, save, save. If you’re just spending every dollar you earn, they can’t start working for you, so the first thing you should do is reconfigure your budget to start saving. Compare interest rates on your bank accounts. For the most part, a savings account will accrue more than a checking account, so keep the bulk of your money there. Even though you won’t accumulate much this way, it’s a good start to get those dollars to work a little harder.
Leverage employer match. A lot of companies offer 401k matching contributions. For example, if you allocate 5% of your pre-taxed pay to a retirement account, they will also contribute 5% to this fund. If you’re not maxing out this benefit, you’re cutting your dollars off at the knees and not letting them do their job. If it seems unaffordable at the moment, take a second look at your budget and finagle it until you can come up with this sum to invest.
Start a savings snowball. When you invest your money, it often generates more revenue. Instead of taking that profit and spending it, further invest it. This is like a triple tier of little worker dollars, all dumping more money into your savings account. This is what is referred to as snowballing: taking the income from your investments and investing it further. Income on income on income.
Create a second stream. If your 9-5 simply isn’t bringing enough money home to begin making it work for you, you’ve got to come up with another plan. A second stream of income is key to pulling you into the next higher income bracket so that you can start saving cash and investing. You can do anything from freelance work, to a couple night shifts a week, to being an independent Representative and owning your own small business.
Take advantage of rewards. There generally are two camps of people: those who understand and are responsible users of credit cards, and those who think they are the root of all evil. We are talking to the former group here. If you’re going to be using a credit card to begin with, you should choose one that has the best rewards; ones that you’ll actually use. What’s the point of going with the card that offers the most in mileage points if you never fly? Who cares about pennies off the dollar on gas if you bike to work? The point is, find a card that works best for your lifestyle and then use it responsibly to get the most back.
Invest. Finally, if you’re utilizing the highest-yielding bank accounts and have maxed out a 401k and/or IRA and still have cash left over, it’s time to really make those bucks work by investing them in the stock market. And while it would require an expert in the stocks to explain the strategy of investing and pulling out of the market based on fluctuations, the simple key here is to just be in it. For the most part, your investments, when left long-term, will eventually pull through the highs and lows and yield a larger return than a typical bank account would.
When you make your money to work for you, you earn even more income on the income you’re already bringing home. And who can complain about that?