“Make your money work for you.” Most people have probably heard that advice at least once in their life. But is it easier said than done?
Anyone can find at least a single way to put their money to work. Below is a little guide to help potential investors get started.
So, how can you make money work for you?
Step 1: Save your money
Working a 9 to 5 grind isn’t the only way to earn money. Setting aside some funds is a great place to start. Open a bank savings account, and deposit money on a regular basis. This might not make anyone rich overnight, but it’s a secure way of growing one’s savings. The more one saves, the more opportunity they have to make their money work for them.
Step 2: Invest your money
Letting money accumulate in the bank isn’t always the best way to make money work, especially if one’s looking forward to buying a home. Let’s say the bank’s interest rate is at 2%. But what if inflation is at 2%? And what if the tax rate for that is 30%? That puts you in the negative.
Take this for example: someone saves about $100 to $500 a week. They can place that money into an investment portfolio. They can also practise instalment borrowing. For instance, they can invest $500 a month, and borrow a portion of that amount. Over time, their $500 investment can double or triple. Before they know it, they will be putting $3,000 a month into their portfolio.
That means investors are better off pulling their cash out of banks and putting them into investment portfolios. It’s more likely to grow at a better rate than money sitting in a bank.
Individuals may buy direct shares to generate investment returns. While it’s not exactly cheap, it’s still one way of putting one’s money to work. Investors may also opt to buy them in a managed fund, which should cost as little as $100 a month.
Those who want to purchase them in a managed fund can go online and do it themselves. They could also seek help from financial advisors to have a better grasp of the risks and rewards.
How old should you start investing in your future?
You can never be too young to start investing, Deborah Rognlien of the Intelligent Financial Group tells Dollars with Sense. She says that one must at least save $100 a month and allocate $,3000 to $4,000 as a cash holding account to establish a portfolio.
Investing your money is one way of making it work for you. However, market fluctuations and poor performing funds often dissuade potential investors. If you want to manage investments and keep it at a risk level that’s appropriate to your financial situation, you should ask for help from a financial advisor.
Seeking for professional advice to set and keep your New Year’s resolutions? Here at Dollars With Sense, we provide a free 30 minutes consultation where we provide you with valuable expertise and financial resources. So you can take control of your finance.