The term ‘make your money work for you’ is one of those cliché expressions that many of us may not even think too deeply about; what does it mean and why is it so crucial?
Quite simply, there’s no one answer. What works for one may not work for another and vice versa, but there are many options as to how you can make your income do more for you. You can go on to use your spare cash to earn great rewards by following these three steps, which should hopefully stand you in good financial stead:
1. Get out of debt
Before your money can really reap the benefits, one of the first steps you need to tackle is how you are going to get yourself out of any outstanding debts. Your hard-earned cash is essentially being thrown away by paying off credit card bills, or personal loans which can severely reduce the amount of cash you have spare for everyday living.
It may seem like a never-ending battle when it comes to paying off debt, but you should aim to pay off the smaller debts initially, before tackling larger ones. You will find that keeping to this structure will make these payments seem more manageable.
The next step to getting yourself out of debt would be to put any other spare funds into a savings account. It would be wise to save up at least a six-month emergency fund which you can dip into should you need to make any necessary purchases, and this will create a barrier between yourself and creating more debt.
2. Invest your money
Once you have managed to clear up any outstanding debts and start an emergency fund, it would then be wise to start investing.
Investments are essentially streams of passive income and may seem like a scheme to get rich quick; however, you will need to put a large sum of cash up front.
Investing could see you make a profitable return, but there are many types of investments available which you may decide to look into. These include buying shares in a company, a partnership in a business, selecting a high-interest savings account, investing in property; whether residential or commercial or becoming an options trader.
If you are new to investing and need some guidance in working out the risks involved, Tastyworks is a platform that enables investors to manage their money with powerful tools, screeners, and education and allow them to become more active in managing their portfolios.
3. Save it in a retirement fund
There are many reasons why you should invest your money in a retirement fund, and there is never too early a time to start thinking about the long-term future. The sooner you begin putting money aside for your retirement, the sooner you will discover the benefits.
For example, if you earn $30,000 annually, obtain 4% annual raises and wish to retire in approximately 30 years from now, you will save 4% of your income every year and earn a generous 8% return.
As a young adult, putting large sums of money aside for the distant future can be a challenge. However, you may choose to start off small and increase your contribution over time.