Eight Ways To Ensure Your Money Is Working For You
“Make the money you earn work for you” is well-known personal finance advice that could be considered a cliché.
But what exactly does it mean? More importantly, what can you do about it?
There’s no one-size-fits-all answer or a singular way to go about it. In reality, nearly everyone has at least one method to make money. Here’s how.
1. Make sure you open a savings account that is high yielding
Sean Gould, a wealth strategist at Waddell and Associates and a certified financial planner, says that before sending your funds to perform all the work, it’s best to keep an account for emergency savings that has around six months of your living expenses in cash.
An ideal place to keep it is an FDIC-insured high-yielding saving or checking account, which will yield more money as it sits.
Savings accounts typically offer an interest rate of around 0.01 percent. A standard check account can be described as the equivalent of putting your cash in the bed. But high-yield savings and checking accounts offer interest rates higher than one percent — which is 100 times more than you would otherwise.
They are typically available on online banks keep costs lower by not having brick-and-mortar establishments.
2. Create passive income streams
According to BankruptcyHQ, passive income is often used to refer to the amount of money earned with little to no effort required.
After you’ve set it up, you’ve done that. Passive income streams can earn your money even while you sleep. It sounds too fantastic to be accurate, you might think? However, don’t be afraid — this isn’t an opportunity to make money fast. Creating any kind of passive income will require an initial investment of time or money; however, it can result in massive rewards later.
Common types of passive income are purchasing real estate or partnerships within businesses. However, it is also possible to earn passive income through any method, from making YouTube videos, to affiliate marketing through your blog.
3. Place it in retirement accounts
Retirement accounts, such as 401(k)s and IRAs, can be described as investment accounts. That is, your savings are positioned on the stock market and can increase exponentially.
“The crucial thing is to make the money from an 401(k),” says Gould. “Save the most you can for your money to be tax-efficient and to access money from the market. The first bucket that isn’t part of your emergency savings will be the 401(k) that is up to the match if your employer offers onefor you]. It is not a good idea to give away money for free.”
Following that, Gould explains, you’ll be able to deposit money into the form of an IRA and a Roth IRA.
“Another excellent tool that many people don’t think of is HSAs,” the expert refers to the savings accounts to which those who have high-deductible health insurance coverage are qualified. “If you put money aside inside an HSA you won’t lose it, and if you incur healthcare expenses you can take the cash out and not have to pay taxes on it. Once you reach age 65, the money becomes the status of an IRA and you aren’t punished for taking it to pay for other expenses. Instead, you could pay Medicare expenses and long-term health costs.”
4. Place it in the market
Gould says that if you’ve exhausted your 401(k) or IRA accounts, next, you need to consider the investment accounts. “The crucial thing is taking part in the market.”
Markets are nothing like trying to predict the market: pulling money in and out to profit from positive market movements and reduce the risk when the market falls is a method that experts recommend against.
As time passes, Gould says, worrying markets could level out, which will result in an overall increase. To reap the benefits of this benefit, you must let your investments be alone.
He also advises, “Don’t keep more than three or six months in cash—many people like the convenience of cash since the recessions of 2008 and 2009 burn them. However, inflation is going to eat away at the cash you have. Being comfortable isn’t an effective way to earn money.”
5. Make sure you choose credit cards with rewards that you need.
A credit card may not seem like investing your money; however, selecting a credit card with rewards that match your needs (read airlines miles cards aren’t ideal for those who aren’t interested in traveling) is that every dollar you pay for your card can be used twice.
“As an expert in financial planning, we don’t like the idea of having debt however if you’ve got enough cash and stability within your budget and are able to pay your debt every month, there’s fantastic credit cards to choose from,” says Gould.
If you’re in outstanding credit card balances, this method isn’t the best option for you. The most important thing to make your money work for you with your cards is to pay your debt each month in total.
6. Join as a silent participant in a new venture
The idea of starting your own business could be risky; however, if everything goes according to plan, it could undoubtedly yield rewards. Another method to reap the rewards of a new venture that succeeds without the burden of getting a business up and running is to turn into a quiet partner who invests in the capital but does not handle the day-to-day business operations.
The opportunity comes with positives and negatives. You won’t have any input in the way the business operates or the everyday decisions employees make. You’ll be paid a percentage of any profits that the company earns without having to work long working hours.
But, you are still at the risk of losing money If the venture falters.
7. Invest in real estate
If the past has given us any lessons, the lesson is that housing isn’t an investment that can be guaranteed. If you have cash and risk-aversion, investing in commercial or residential real estate might be a good choice.
Real estate investing is a double-edged proposition: You can look at buying a house that you live in as an investment. Or, you could put your money into something other than your home in land for sale or houses to rent or stores. Extending your investment beyond your property “depends on the market you’re in and your desire for rental property,” Gould says. “In the majority of markets, if it’s possible to manage the hassles and have space, you can consider it.”
However, in the interest of diversifying your portfolio, Gould says to bear in mind that a lot of homeowners have found real estate to be the most significant asset they have in their portfolios and warns prospective real property investors to be cautious of weighing the portfolio too much towards the same type of asset.
8. Achieve a professional level or the certification
Another way your money can benefit you is to boost your value in the market for jobs. “If you have the time and money to spend on the pursuit of higher knowledge, you can increase your marketability and earn more,” Gould says.
This doesn’t mean you have to sink hundreds of thousands of dollars in graduate schools. Making yourself more appealing as a professional or employee can be as easy as attending a class to boost your public speaking skills or taking a course to learn Microsoft Excel.
If you’re looking to expand your knowledge, however, don’t have enough funds to get started, plenty of free classes are available on the internet.