Money might not be able to solve all your problems, but having financial security and stability in your life definitely reduces your stress levels and helps you plan for the future. To achieve this goal, you need to know how to make your money work for you.
In this article, we discuss five of the best ways to make your money work for you and the pros and cons of each one. Hopefully, by the end of this article, you’ll be inspired to start proactively managing your money and get a hold of your personal finances.
What Does “Make Money Work for You” Mean?
As soon as you get to a place in your life where you start to have excess funds at the end of the week, it would be best if you started thinking about how you start making your money work for you.
What we mean by this is taking control of your finances by investing your money to build more financial stability and security in your life. Once you start investing your money, it makes more money, and the power of compound interest kicks in. Over time, you can turn a small amount of savings into a large nest egg to use for special occasions or your retirement.
Five Ways to Make Your Money Work for You
You can find many great ways to start making your money work for you. Each has its own pros and cons and risk profile.
Here are five of the best:
1. Open a High-yield Savings Account
If you’ve found yourself with spare cash in your bank account, you might have opened a savings account separate from your checking account to try and earn some interest from your money. However, rather than accept mediocre returns from a standard savings account, the better option is to open a high-yield savings account through your existing bank or find a second bank to access higher interest rates.
When you separate your savings from the money you need for your week-to-week living costs, it makes it much easier to avoid spending your savings and makes saving a regular habit. Interest rates are low at the moment, but if you do your research, you’ll find some great high-yield savings accounts out there to put your money into.
2. Get a Card with Cashback Rewards
Another simple way to start making your money work for you is to swap your credit card for one that has better cashback rewards. When you first got your current credit card, you may not have paid a lot of attention to the cashback rewards that came with it. Often, you’ll be able to get a better deal from your current credit card provider or find a new credit card company to use.
Lots of credit cards offer 5% or more in cashback rewards. Over 12 months, this can add up to a lot of money that can then be used to pay off debt or invest. You may also find some retailers offer better cashback rewards, which are worth investigating when making significant purchases.
3. Develop Sources of Passive Income
The ultimate goal for anyone looking to make their money work for them is to generate passive income. Passive income means income that you receive without doing anything significant to make it. For example, as a passive income idea, you could set up a blog about a topic you’re an expert in and start to earn advertising revenue when people read it. After the initial time to write the content, it earns money even when you sleep.
Another common passive income opportunity is to start investing in the stock market. Over time, you begin to see passive income from dividends and stock gains. If you don’t have time to manage your investment portfolio, or you simply don’t know how, you can open an account in an investment app where you get a team to manage investments for you. Even though having a team sounds like an expensive thing to do, you can get started with as little as $100 and pay only $5 monthly management fees if you deposit less than $10,000 in your account. This makes investing accessible to more people who want to earn passive income and make money work for them.
4. Invest in Real Estate
Real estate investments are among the best ways to make your money work for you. The reason is simple: leverage. When you invest in real estate assets, you can leverage a deposit and borrow the rest of the required investment from a bank. Over time, your real estate asset earns rental income, which pays off the loan principal. The equity you build up in your property can then be leveraged to purchase even more real estate!
The most common type of real estate investing involves buying a residential or commercial property to rent out or buying a house to live in yourself. However, you can also find a host of real estate investment trusts (REITs) and other funds you can buy into. You don’t always need a huge deposit to get started in real estate investing.
5. Invest Your Money
Investing your money in assets that appreciate over time and generate income is the top way to make your money work for you. There’s no shortage of investment platforms to use to begin buying stock, cryptocurrencies, bonds, and many other assets.
How to Make Your Money Work for You: The Bottom Line
While almost everyone earns money through a job, not everyone understands the power of investing their money to build wealth. The good news is that starting to put your money to work for you can be done right now. You don’t need a huge amount of money to get started.
Even if you start investing a small amount into stocks or crypto assets over time, the power of compound interest means it can turn into a large amount. You’ll literally start to earn money while you sleep.
