Your income from your job isn’t the end of your money-making capabilities; it’s just the start. With the right planning, you can put your money to work and help generate even more money that can have a significant impact on your financial standing.
With the cost of retirement going up all the time, it’s imperative that everyone finds ways to maximize their bank balance, and the earlier you start, the better. In this post, we’re going to run through some of the smartest ways to use your money to make more money, as well as offer some tips for first-time investors.
Put It In a (Good) Savings Account
Have some money, but don’t know what you want to do with it yet? At the very least, put it in a savings account. This will help to keep your money safe and, thanks to interest rates, ensure that it’s slowly been steadily growing.
This might sound like an easy option — and it is — but it can also be highly effective when spread over many decades. With compounding interest, even putting away a couple of hundred dollars a month can result in hundreds of thousands of dollars by the time you retire, if you start early enough. Shop around for the best interest rates, since they can vary widely.
Put It in the Stock Market
There’s an element of risk involved in putting money in the stock market since there’s a chance that you get nothing in return. But there’s a good reason why so many people choose to — for decades now, the stock market has been remarkably consistent. You won’t get rich overnight, but it’s an excellent long-term strategy. You can put money in individual stocks (think: investing in Apple), but most people will find it’s best to invest in an ETF, such as the S&P 500. With that, you’ll have a (very small) slice of the 500 biggest companies on the stock exchange.
Take a Course
Most tips related to making your money grow involve a relatively hands-off approach. But you can also use your money to maximize your earning power. The better educated you are, the more likely it is that you’ll land one of the higher-paying jobs. To get to that level, you might have to invest thousands — but once you have, you may well earn tens of thousands more each year. It’s best to speak to people in your industry to learn which qualifications you need to reach the next level.
Invest in Real Estate
Real estate has historically been one of the best investments you can make, especially since the return on the investment can be significant. There are risks involved with investing in real estate, and it’s not something that you should jump into. If you’re not interested in buying and selling homes yourself, then take a look at real estate syndication; with this, you’ll join with other investors to buy real estate, with the profits split between members. This option is appealing
because grouping together with others allows individuals to access more profitable real estate deals.
Start or Invest in a Business
Another option is to start or invest in a business. If you have a good idea and a can-do attitude, then investing your money into starting your own operation may be recommended. While it’s not easy to build a successful business, the returns can be life-changing. If you’re looking for a more hands-off approach, then investing in another business might be better. With this, you’ll provide funding in exchange for equity; if the business does well, then you’ll do well.
Tips for Investing Your Money
Some options, such as saving your money or taking a course, are not ‘investments’ in the true sense — they’re just effective ways to keep or use your money and can be considered an investment in yourself. Other options, such as investing in stocks, real estate, or businesses, are real investments. There’s no guarantee that you’ll get out what you put in. That doesn’t mean that you shouldn’t do it, however — if the opportunity is a good one, then you should do it. Before investing, follow these tips.
Do Your Research
Not all investments are the same. There are some deemed very risky, and some that are comparably safe. It’s important to conduct as much research as possible before investing, especially if you’re investing in a business. You’ll lose nothing by really taking the time to understand what you’re investing in, but if you jump in too quickly, then you’ll be running a risk.
It’s OK to Start Small
It’s easy to get carried away with the possibilities of investing, but it’s best to walk before you run. Starting with a few small investments will be better than throwing all of your money into the game as soon as possible. You can always invest more once you’ve got the hang of things. It’s also fine to start even if you don’t have much capital. As we said above, even saving a small amount each month can lead to a lot of cash in the future. Only have $100 spare a month? Put it in a savings account.
Diversify Your Portfolio
Even if you think a business will succeed, it’ll still be extremely risky to wrap up all of your financial future in its success. Every experienced investor knows the importance of diversifying their portfolio. Spreading the risk might reduce the amount of your returns, but it’ll increase the chance that there are returns.
Stay Patient
Finally, remember that investing is not a ‘get rich quick’ scheme. In fact, if you see any investment labeling itself as such, you should run in the other direction. The best investments are the ones that slowly but surely improve your financial standing over many decades. If you’ve done your research and made a sound investment, then it’s best to just forget about it, rather than checking to see how it’s getting on every day. Remember — it’s a marathon, not a sprint.
