Working hard for your money can feel like an uphill battle. You're constantly juggling bills, trying to save for the future, and maybe even dealing with debt. What could finally free you from this money struggle? Learning how to make your money work for you.
While it may sound like a pipe dream, making your money work for you is possible with the right mindset and financial habits. Over time, you can build a solid foundation that leads to financial success while putting less energy into hustling or trading your time for money.
Here are a few tips to get started. By the end of this post, you'll know how to make your money work for you so that you can finally take steps towards financial freedom.
What Does It Mean to Make Your Money Work for You?
Most people are used to the traditional way of working: trading their time for money. You work an hourly job, get paid every two weeks, and use that money to cover your living expenses.
There's nothing wrong with this system, but it has drawbacks. The biggest one is that you can only earn a limited amount of money since there are only so many hours in the day.
Your working hours will eventually compete with other important areas of your life, like your health, relationships, and personal hobbies.
Making money work for you changes the game by allowing you to earn income without trading your time. This could mean investing in a business, real estate, or even stocks and bonds.
At the root of it, making your money work for you is about creating passive income streams. Passive income is money you earn without putting in active work.
Another main theme of money that goes to work for you is accumulating dividends and interest over time. This means you can earn more money over time with less effort or hours. Your income will scale along with your investment.
The goal of making your money work for you is to eventually have a consistent stream of income that doesn't require much effort to maintain. This gives you more time and energy to focus on the things that matter most to you in life.
Some benefits of making your money work for you include:
- More time freedom since you're not trading hours for dollars
- The ability to make money while you sleep or are on vacation
- Scaling potential to earn more money as your investment grows
- Less stress because your income is not dependent on working long hours
- More time to diversify your income sources
Now that you know what it means to make your money work for you let's look at some specific ways you can make this a reality.
9 Ways to Make Your Money Work For You
Check out these great options for people in a variety different positions to make good decisions with their money!
1. Start a Niche Site As An Eventual Passive Income Stream
Learning how to build a niche website is a great option if you're looking for ways to make your money work for you. This is a type of website that focuses on one specific topic.
Niche sites work because they allow you to build an audience around a specific topic and rank for related keywords much quicker than growing a general website. And there's a tons of great niche markets out there.
Once you have an audience, you can monetize your website through advertising, affiliate marketing, selling products and services, and more.
This option is best for people who are interested in web design and marketing.
Building and maintaining a niche site can be tricky, but plenty of resources are available to help you. Once you've built your site, it can provide you with a passive income stream that will grow over time.
Suppose you want to earn passive income by recommending products and collecting commissions. In that case, The Affiliate Lab and The Authority Site system are great ways to learn the ins and outs of affiliate marketing and SEO.
If placing ads on a website feels like a good way to earn income, Ezoic can help you get started.
If you have the money and want to save time, Niche Website Builders is a full-service publishing and marketing platform that helps brand, build, grow, and monetize your website. Again, this option is ideal for people with investment capital who can keep the process as passive as possible.
This option is helpful for those who have some time or money to invest in building their niche site. It's also a good option for those who want to transition out of their full-time job and into a more passive income stream.
2. Eliminate Debt
Many people think of debt as something that drains your money. But by strategically eliminating your debt, you may do better financially than ignoring it and investing in something else.
For example, since most debt is compounding, you're avoiding the accumulating interest when you pay off the debt on time. This could save you hundreds or even thousands of dollars in the long run.
Many debt calculators can give you a better idea of how much money you could save by paying off your debt early.
Here are some of the primary ways you can get rid of debt:
The Snowball Method:
This method was popularized by Dave Ramsey and involves paying off your debts from smallest to largest. The idea is that eliminating your smaller debts will give you the momentum to tackle the bigger ones.
Start by making a list of all your debts from smallest to largest. Then, create a budget and put as much money as possible towards the debt with the smallest balance.
Once that debt is paid off, you can take the money you were putting towards it and apply it to the next debt on your list. You repeat this process until all your debts are gone.
The Debt Avalanche Method:
This method is similar to the Snowball Method, but instead of listing your debts from smallest to largest, you list them from highest interest rate to lowest.
By first attacking the debt with the highest interest rate, you save more money in the long run since you're avoiding compounding interest.
This method lists all your debts from highest to lowest interest rate. Then, create a budget and put as much money as possible towards the debt with the highest interest rate.
For both of these methods, it's important to remember to pay off the minimum balance on all accounts, no matter how you prioritize them. This will help you avoid late fees and damage to your credit score.
Debt repayment is best for beginners who are looking for a simple way to make their money work for them. All you need is a list of your debts and some willpower to stick to your repayment schedule.
Refinance Your Debt
If you have good credit, you may be able to find a lower interest rate by refinancing your debt. This could help you save money on interest and pay off your debt faster.
To refinance your debt, you can either get a personal loan or transfer your balance to a 0% APR credit card.
This is a great option for those needing to repair their credit and reduce the image of compounding interest in their finances.
3. Open a High-Yield Savings Account
One of the easiest ways to make your money work for you is to open a high-yield savings account. This type of account typically offers a higher interest rate than a traditional savings account, which means you earn more money on the money you deposit.
The best part is that high-yield savings accounts are FDIC insured, which means your money is protected for up to $250,000.
Some banks that offer high-yield savings accounts include Ally Bank, SoFi, and Capital One.
To open a high-yield savings account, simply go to the website of the bank you're interested in and follow their instructions.
Depending on your financial situation, you may want to deposit just a portion of your savings into this account and use the other part to pay off debt or invest.
Remember, it's important to have an emergency fund in case you encounter unexpected expenses. A high-yield savings account is a great place to keep this money since it's easily accessible but still earns interest.
This option is best for people who are looking for a safe place to grow their money without taking on any risk. It's also a good move for those who have an increase in their income and don't want to immediately spend it.
4. Create a Budget
Budgeting is one of the most important steps to making money work for you. A budget helps you track your spending, find ways to save money and make sure you're using your money to align with your goals.
If budgeting feels like a chore, it will not work for you. So it's essential to find a way that works for you and that you can stick to.
You can manually track your spending or use an automated budgeting tool like Mint. If you're not tech-savvy, you can hire a bookkeeper or accountant to help you set up your system.
Setting up the budget is one part, and having a good philosophy behind your budget is another. You need to ensure you're not depriving yourself of everything you enjoy. You'll also want to ensure that your budget reflects your current earnings and your long-term goals.
Creating a budget is a great way to take control of your finances and make your money work for you. It doesn't have to be complicated, but it does require some effort on your part.
If you're looking for a place to start, use the 50-30-20 rule as a guideline. 50% of your income should go towards essentials like rent, food, and transportation. 30% can be spent on things you want but don't need, and 20% should be saved or invested.
This option is best for people who are looking to get a better handle on their finances. A budget can help you find ways to save money and make sure you're spending your money in a way that aligns with your goals.
5. Earn Rewards Whenever Possible
You should always be earning rewards whenever you make a purchase, whether with cash, a debit card, or a credit card. These rewards can come in points, miles, or cash back.
There are many different ways to earn rewards. But one of the easiest is to use a credit card that offers rewards. Make sure you're using the card responsibly by paying your balance in full each month and not spending more than you can afford.
There are a few different rewards credit cards, but some of the most popular include cash back, travel, and points.
Joining loyalty programs is another great way to earn rewards. Many retailers, gas stations, restaurant chains, hotels, and airlines have loyalty programs. They allow you to earn points or miles every time you purchase.
Sites such as Rakuten and Honey also offer rewards when you shop online. Rakuten gives you cash back on your purchases. Honey gives you coupons, discounts, and a percentage of your cashback.
Many of these methods can be stacked to maximize your rewards. For example, you can use a points credit card to earn rewards on your purchases and then purchase your items through Rakuten to get cash back.
This option is best for people who are looking to start making their money work for them but don't have extra money to invest. You can take the few percentages you get back in cash. Then put it into a savings account or invest it to start growing money.
6. Set Up Automations
These days, there are many different ways you can automate your finances. Not only do these methods save you money, but they also save you time.
Some people choose to set up autopay for their bills, so they never have to worry about late payments or accruing interest.
Banks like Acorns round up your purchases to the nearest dollar and invest the difference, which can help you grow your money without even realizing it.
You can also automate your investments by investing in the stock market and letting robo-advisors do the work for you. This saves you time and is much cheaper than hiring a traditional financial advisor to manage your accounts.
Automations great for people who want to grow their money but don't have the time or knowledge to invest on their own. They also help you save money by avoiding late payments and interest.
7. Take Advantage of 401K Matches
If you have a 401K through your employer, ensure you're taking advantage of any employer matches into your retirement funds. This is free money that can help you grow your retirement savings.
For example, if your employer offers a 50% match on up to $2000 of your 401K contributions, they will contribute $1000 to your account if you contribute $2000.
This is a great way to grow your retirement savings, and it's essentially free money. Even if you can't contribute the full amount, any contribution is better than none.
This option is best for employees who are looking to save for retirement but don't have a lot of extra money to invest. It's also a great option for those who haven't started investing when they are younger who want to catch up.
8. Max Out Your Retirement Accounts With Mutual Funds
If you can max out your retirement accounts, you should do so. This will help you grow your money and reach your financial goals quickly.
There are a few different types of retirement accounts, but the most common are 401Ks and IRAs. If you have both, you can contribute up to $18500 to your 401K and $5500 to your IRA each year.
If you're 50 or older, you can contribute an additional $6000 to your 401K and $1000 to your IRA.
There are a few different types of mutual funds, but index funds are typically the best option for retirement accounts. They have low fees and offer a way to invest in a basket of different stocks.
This option is great for people who have enough income to max out their retirement accounts. It's also a good option for those who want to retire sooner rather than later or achieve financial freedom or FIRE.
9. Invest in Real Estate
Real estate investment is a great way to make your money work for you. It's a long-term investment, but it can provide financial security.
There are a few different ways to invest in real estate, but the most common is through rental properties. This involves buying a property and then renting it out to tenants.
You can also invest in real estate through crowdfunding platforms. This is a newer way to invest, but it's becoming more popular. It allows you to pool your money with other investors and then invest in a property.
Investing in a home for yourself is also a form of real estate investing. This is a good option if you're looking for a place to live and want to build equity in a property.
This option is best for people with capital who are interested in long-term investments and are willing to take on some risk. It's also a good way to diversify your investment portfolio if you already have other assets in the stock market.
The Bottom Line
Learning how to make your money work for you is a smart financial move. It can help you achieve your financial goals and build long-term wealth. There are a few different ways to do this, so find the option that best suits your needs.
Then get started and watch your money grow!
The post How to Make Your Money Work for You: 9 Tips for Financial Success appeared first on Niche Pursuits.