“Make that money do the work” is the most common advice on personal finance. However, it’s often not obvious how to achieve it.
In real life, it may mean putting your money into an interest-paying account, such as an investment account that has high yields or a retirement account.
It could also be investing in a company, real estate, or professional certifications that allow you to study further.
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“Make the money you earn work for you” is such standard financial advice for individuals that could be considered a cliché.
But what exactly does it imply? What’s more, how are you going to do it?
There’s not a single answer or a particular method to accomplish it. In reality, nearly everyone has at least one way to make money work. Here, Business Insider rounded up eight strategies to help you get going.
1. Make sure you open a high-yield savings account
Sean Gould, a wealth strategist at Waddell and Associates and a certified financial planner, shares that before sending your cash off to perform all the work, you’ll need be able to keep an emergency account that has around six months of your expenses that you’ll need to pay in cash.
The best place to store it is an FDIC-insured high-yielding checking account and bank account which will yield more money as it is waited for.
Savings accounts generally offer an interest rate of around 0.01 percent, while a joint check account can be described as the equivalent of putting your cash in the bed. However, high-yielding checking and savings accounts have interest rates that go over 1 percent, which is 100 times more than you would otherwise.
They are typically accessible at Online banks.
This helps to reduce costs by avoiding mortar and brick sites. They also reduce costs by not using bricks and mortar.
2. Develop passive income streams
According to Investopedia, passive income is a term often used to refer to the amount of money earned with minimal effort.
After setting up IP, passive income streams make your money even while you sleep. It sounds too fantastic to be accurate, isn’t it? However, don’t be afraid it’s not an easy-to-make-money scheme. Creating any kind of passive income will require an initial investment of time or funds but could lead to massive rewards later.
Common types of passive income are an investment in real estate and silent partnership in business. Still, it is also possible to earn passive income through any method, from making YouTube videos to advertising affiliate marketing on your blog.
3. Place it in retirement accounts
Retirement accounts, such as 401(k)s or IRAs, are investments, which means your savings are invested into the markets and can increase exponentially.
“The most important thing is to have the money from the form of a 401(k),” says Gould. “Save as much as you can for your money to be tax-efficient and access money from the stock market. The first bucket out of your emergency fund includes the 401(k) that is up to the match [if your employer has one for you]. Don’t offer free money.”
Following that, Gould explains, you’ll be able to deposit money in the form of an IRA.
“Another excellent tool that many people don’t consider is HSAs,” He states, referring to accounts to which those who have high-deductible health insurance coverage are qualified. “If you put money aside within an HSA you won’t lose it and, if you face healthcare costs you are able to pull the funds out without having to pay tax on it. If you reach the age of 65, it becomes the status of an IRA and you aren’t punished for using it to pay for other expenses. You are able to pay Medicare costs as well as long-term care costs.”
4. Place it in the market
Gould says the next step is to open investment accounts if you’ve maxed out the funds in your 401(k) or Roth IRA accounts. “The crucial thing is taking part in the market.” Investing in the stock market or money market account
Markets are nothing like trying to predict the markets. In and out of the market, profit from favorable market conditions and limiting losses when the market falls is a tactic that most experts discourage.
Gould says worrying markets could be evened out in time, leading to an overall increase. To reap the benefits of this benefit, you should not be a part of your investment.
He also advises, “Don’t keep more than three or six months of cash. People love the ease of cash, but they’re burnt from the 2008 and 2009 recessions, but inflation will eat away at the cash you have. Being comfortable isn’t the best way to make money.”
5. Select credit cards that offer rewards that you need.
Credit cards may not seem like spending money; however, choosing a card that offers credit card rewards appropriate to your needs (read airlines miles cards aren’t ideal for people who aren’t interested in traveling) is that every dollar you pay for your card will serve two purposes.
“As an expert in financial planning, we aren’t a fan of debt however, if you have enough cash and stability within your budget and are able to pay your debt each month, there are excellent credit cards available,” says Gould.
If you’re in outstanding credit card balances, this method isn’t the best option. The only way to make your money work for you with your card is to pay your credit card debt each month.
6. Join as a silent participant in a new venture
Starting your own business could be risky. If everything goes smoothly, it could certainly be worth it. Another investment option or investment strategy is to reap the rewards of a successful new company without the burden of getting your business up and running is to be a silent partner that invests capital but doesn’t manage any of the day-to-day business operations.
The possibility has advantages and disadvantages. You won’t be able to have any input about how the business operates or the everyday decisions employees make. However, you’ll get a portion of any profits that the company earns without working any hours of work.
But, you are still at the risk of losing money if your venture fails.
7. Invest in real estate
If history has taught us anything, it is that housing is not a risk-free investment. However, if you have cash available and are comfortable with risk investing in commercial or residential real estate might be a good choice.
Real estate investments are a double-edged proposition: You can think about buying a single house that you live in as an investment. Or, you can invest in more than your house, in land for sale or homes or stores to rent. Gould says that extending your investment beyond your property “depends on the market you’re in and your desire for rental properties,” Gould says. “In the majority of markets, if you are able to manage the hassles and have enough space, it’s an option.”
However, in diversifying your investments, Gould says to bear in mind that many homeowners have found real property. To be the biggest asset they have in their portfolios and warns prospective real property investors to be cautious of weighing their portfolio of theirs towards one type of asset.
8. Achieve a professional level or certificate
Another way your money can benefit you is to increase your value in the market for jobs. “If you have the time and money to spend on continuing your education, you could increase your marketability to earn more,” Gould says.
This doesn’t mean you have to sink hundreds of thousands of dollars into graduate schools. Being more attractive as a professional or employee can be as easy as attending a seminar. To boost your public speaking skills or take a class to learn Microsoft Excel.
If you’re looking to expand your skills but don’t have enough funds to do it, there are tons of free online courses.
bottom line, rental income, certified financial education instructor
Jason writes about all financial topics such as loans, debt solutions, and bankruptcy. He is an expert when it comes to subjects like APR, loan fine print, debt collection laws within the United States. With his in-depth knowledge of all things financial, he is a great asset to Greendayonline.