Last updated Jul. 11, 2023 by Charles Zemub
how to make money work for you
You’ve worked hard for your money; it’s time your money repays the favor by working hard for you. But the question is, “How can you make your money work for you?” The concept of money working for you simply means your money is putting more money into your pocket.
Note, however, that making money work for you is not a sprint; it’s more like a marathon that requires financial smartness, diligence, and planning. Would putting your money to work make you rich? Yes. But you’ll need to make some hard financial decisions to achieve that.
What Are the Ways You Can Make Money Work for You?
Some of the financial steps you can take to make the most of your money include automating your savings or bill payments, getting rid of debt, cutting out bad financial habits, opening a high-yield bank account online, learning to budget, and starting to invest.
Investing in stocks, real estate, mutual funds, government bonds, exchange-traded funds, or a business (whether yours or someone else’s) are all excellent examples of how you can make your money work for you.
By the end of this article, you’ll have unlocked some not-so-hidden secrets about how the top 1% of the population makes money work for them.
1. Learn How to Budget
To make the most of your money, you’ll need to utilize an effective budgeting system that gives you insights into your expenses, empowering you to save effectively and only spend on essential needs and wants.
With budgeting, every single dollar you earn is accounted for and assigned to a spending category.
Some of the importance of budgeting include to:
- Reduce your spending
- Understand where your money is going
- Identify bad financial habits
- Pay off debt
- Avoid creating new debt
- Prioritize spending on things that are important to you
- Save for the future
Don’t know how to start budgeting? Here are some simple budgeting steps to help kickstart your budgeting journey:
- Layout Your Finances
- Figure Out Your Net Income
- Plan Your Budget
- Review and Adjust
2. Get Out of Debt
If you’re in one, getting out of debt is a priority when it comes to making money work for you. Debts are financial restraints that can prevent you from saving or investing.
There are many options for paying off your debts, whether setting up new repayment strategies or developing more robust savings tactics.
It’s one thing to decide to get out of debt, but having the money to do that is another thing. You may need to save up first and cut down on some expenses to free up funds for that purpose.
If you’re struggling with the idea of getting out of debt, try following the step below.
- Start by paying off the smaller debts.
- Put away the leftover money into a high-yield savings account.
- Avoid taking any new debt.
- And eventually, you’ll have enough saved to pay off even the larger ones.
3. Open a High-Yield Savings Account
If you’re looking to build wealth to achieve your financial goals, opening a high-yield savings account may be worth considering.
While high-yield savings accounts and traditional savings accounts might work similarly, the former offers a greater annual percentage yield (APY); you’ll earn more in interest.
However, as with traditional savings accounts, you’ll still be required to pay income taxes on the interest. Notwithstanding, they work best for saving towards pursuing significant, short-term expenses.
One of the major advantages of using high-yield savings accounts is its limited accessibility feature. Frequent withdrawals are not allowed, as with your regular checking account.
Monthly limits on withdrawals and deposits also help you guard against temptations to dip hands into your savings. Check out these Best savings accounts and Interest rates.
4. Consider Passive Income Streams
The workforce environment is rapidly evolving, and the increasing cost of living and surge in prices has caused consumers to seek alternative means of scaling up their income. Passive incomes are becoming the haven for many looking to keep up with financial demands.
A passive income refers to the money that’s earned outside your regular salary or wages and usually requires little to no active involvement. The concept here is to put something you own to work instead, for example, a rental property, a product, stocks, and more.
While some of these passive incomes might need some initial effort, it’s not the same as your 9-5 job. One of the best ways to pad this type of income is to have a side hustle. The extra cash flow can be diversified into your savings, weekly necessities, or debt repayment.
5. Consider Investing as a Part of Your Financial Plan
First, start by assessing your financial situation to determine the ideal amount you’ll be able to invest on a long-term basis. To achieve a well-rounded financial portfolio for long-term goals such as retirement, you’ll need to include investing as part of your plan.
While investing would potentially yield more returns than money in a savings account, there’s no guarantee of the reward. Unlike savings accounts, the market can influence your investment portfolio balance.
Many people shy away from investing because of the risk involved, mostly because they don’t fully understand how it works. Here are two of the best investment options to consider:
- Stocks
The stock market might be intimidating for new investors, but with a little effort, the risks are well worth the payoff.
Stocks are legal representations of a company’s legal ownership; when you buy a stock, you automatically become a part-owner of the company.
Investing in stocks might be a good method to increase wealth over time gradually.
Investing in mutual funds or index funds is one of the simpler methods to get started in the stock market. These investments are similar to a collection of several equities and other assets that appreciate over time.
Newbie investors would find mutual funds a better way to create an income because they take little effort and planning to get started.
The most important thing to understand about stock investing is that it is a long-term endeavor. Don’t be alarmed by short-term volatility events like a pandemic and withdraw your funds; markets are robust, and your patience will pay off in the end.
- Real Estate
Real estates are very well-known and preferred to bonds and stocks because it’s a tangible asset. When investing in real estate, you know for certain that its value would appreciate with time and have a sense of ownership of the assets.
However, maintenance costs are the major hurdle you’ll have to cross when it comes to real estate investments.
6. Automatic Savings or Bill-Pay
An autopay or an automatic payment system is a great option to avoid missing bill payment deadlines. This technology automatically deducts funds from your credit card or bank account to meet a specific payment.
You won’t have to worry about the pressure of juggling repayments once it’s all set up. Your only concern would be to ensure you have enough funds in your account deductible.
Since 35% of your overall FICO score depends on your history of paying bills on time, utilizing an autopay system would be beneficial for building your credit score.
Another advantage of autopay systems is that contributions to savings or retirement accounts can be automated. This takes away the thinking process of whether to make the payment, allowing you to commit without exercising much willpower.
7. Get Rewarded for Spending
There are tons of rebate apps, coupons, and retailer loyalty programs that would offer you rewards for spending. You can also use reward credit cards or Cashback apps to save money on bills at your favorite store.
However, this is only plausible if you fully pay your statement balance when due. Tesco ClubHouse Scheme is the best way to get started if you want to be rewarded for spending.
8. Claim Your Tax Credits
The difference is recoverable as a tax credit if you are charged more tax than you are obligated to pay.
The credit can be applied to future tax responsibilities, i.e., the credit is completely deductible from the amount of tax you must pay, regardless of your tax bracket. This is why you should always ensure to claim your tax credits if you have them. Want to know the 10 Best Tax software? Check here
9. Credit Card Rewards
Swiping your card all over the place won’t make you rich in a matter of days. But if you use your credit cards in the right way, you can get some money to pay for things.
Debt-free people can use the extra money to pay for things like a trip or that flat-screen TV they always wanted. Can you pay off a credit card with another credit care?
When you want to make money with credit cards, get a card that pays you to shop. Cash-back credit cards are a type of card that gives you money back when you spend money. It all depends on which card you get. For some purchases, you can get cash-back rewards of 1% or even 5% if you use the right card.
As long as you use this credit card, you can get 5% cash back on your purchases in rotating ways such as gas, groceries, and restaurants. You can get up to $1,500 in cash back in a given quarter.
So let’s say you spend $1,500 on qualifying purchases. Isn’t that great if you get $75 back in your pocket? In addition to getting 5% cash back, you also get 1% cash back on all other purchases.
Even if it seems insignificant, making money simply by spending money you would normally spend is always a plus. However, keep in mind that making additional purchases only to earn rewards points defeats the purpose of reducing unnecessary expenditures.
Conclusion
Thanks for reading till the end of this article. By now, you must have learned to appreciate things like investing, earning passive income, paying off debt, opening a high-yield bank account, and effective budgeting.
Note that no two people experience the same financial situation, and what is better suited for one might be harmful to the other. However, you can learn to make your money work for you with a little more effort.
