How to Make Your Money Work for You: 9 Simple Steps

How to Make Your Money Work for You


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Learning how to make your money work for you is a very important step to financial freedom. While working hard for your money may be necessary, you’re essentially trading your time for money.

The problem is that we all only have the same 24 hours in each day. Considering this, no matter how hard and how much you work, you will only be able to make so much money.

On the other hand, with your money working for you, you will have limitless earning potential.

With that said, if you want to build true wealth, you need to figure out how to make your money work for you instead of the other way around.

This often comes in the form of investments and passive income, which is the focus of this article. So, without further ado, let’s begin.

How to Make Your Money Work for You

Here are 9 simple steps you can take to make your money work for you.

Although the first few steps may not seem necessary, they are preliminary to the financial foundation you need to begin making your money work for you by investing and creating streams of passive income.

1. Create a budget

How to Make Your Money Work for You - Create a Budget

How will you make your money work for you if you don’t even know where it’s coming and where it’s going? Considering this, the first step you should take in your journey to financial freedom is creating a budget.

Not only will it help you track your expenses, it will also improve your financial discipline and ultimately how you manage your finances.

With a budget, you’ll be telling your money where to go and what to do instead of it having a mind of its own. In other words, when you’re strategic with your spending, you’re the one in charge of your money.

The goal of your budget should be to:

Keep in mind that budgeting isn’t something you do once. You should consult your budget on a monthly, weekly, and even daily basis. Whenever your financial situation changes, it’s important that you adjust your budget accordingly.

2. Switch to a High-Yield Savings Account

If you currently have a traditional savings account, there’s no reason you shouldn’t switch to a high-yield savings account or at least have one in addition to your current savings account.

This is the easiest way to begin making your money work for you.

While they’re practically the same thing, high-yield savings accounts offer higher interest rates. Simply put, they are a great way to save for short-term expenses, while earning more interest.

However, they typically have limited accessibility, meaning you can’t make deposits or withdrawals as frequently. This can be a good thing because it will prevent you from dipping into your savings to pay bills.

If your bank doesn’t offer a high-yield savings account, you should consider an online bank that does.

3. Build an Emergency Fund

A high-yield savings account is also where you should keep your emergency fund.

Simply put, an emergency fund is 3 to 6 months’ worth of expenses that you save specifically for financial emergencies like your car breaking down, unexpected medical bills, a major home repair, or even loss of your job.

Having an emergency fund to cover these expenses will prevent you from going into debt (or further into debt) and paying high-interest on something like a credit card.

4. Become Debt-Free

Whether you have credit card debt, student debt, or any other debt, you’re paying interest – sometimes 20% or more – meaning you’re paying in addition to the original cost of whatever you bought.

When you’re in debt, your money is working against you instead of for you. Considering this, becoming debt-free is one of the first steps you should take to make your money work for you.

Instead of using the money you would be making debt payments with, you can use it to invest in income-generating assets instead.

Choosing a Debt Repayment Method

The two most popular debt repayment methods are the debt snowball and the debt avalanche.

Simply put, the debt snowball method is a debt repayment strategy in which you pay off your debts from smallest to largest. You make the minimum payments on all your debts and put any extra money towards your smallest debt. Once it’s paid off, you focus on your next smallest debt.

As you pay off your debts, you will more and more money for your next debt, which is why this method is known as the debt snowball. This is a great option if you’re feeling overwhelmed and need some motivation.

On the other hand, the debt avalanche method is a strategy in which you focus on your debt with the highest interest rate first, such as credit cards. This method will help you pay less interest over the life of your debts and is a great option if you only have a few.

5. Maximize Credit Card Rewards

How to Make Your Money Work for You - Maximize Credit Card Rewards

While credit cards can lead to high-interest debt, if you have the right financial discipline, there’s no reason you shouldn’t be using them as a way to make your money work for you.

Some credit cards offer cash back and other rewards up to 5% or even more on certain purchases, meaning you will be making money just for buying the things you normally would.

There are even credit cards that offer sign up bonuses worth $300 or more. Considering this, strategically using credit cards is a great way to make your money work for you.

However, keep in mind that this only makes sense if you’re already free of credit card debt and pay off your card in full each month. If you carry a balance month-to-month, you’ll be paying interest that far exceeds any rewards you earn.

Also be sure to not make any unnecessary purchases just to earn rewards points, as that defeats the purpose.

6. Avoid Paying Fees

Somewhat similar to avoiding paying interest, you should also avoid paying fees that are charged by financial institutions.

Here are countless fees you should avoid paying:

Investment fees: While paying an investment advisor a percentage of your account balance for management and advisory services may help you feel better about your investments, it might not be the best option for everyone. Even a small fee on only 1% can significantly impact you return. For example, for every $100,000 you invest, you will pay $1,000 per year in fees. Fortunately, many competitors are no offering the same services for little to no fees with the help of robo-advisors.

Bank and credit union fees: Bank and credit union fees include overdraft fees, account minimum fees, monthly maintenance/service fees, excessive transactions fees, out-of-network fees, insufficient fund fees, wire transfer fees, early account closing fees and more.

Automated teller machine fees: If you’re not careful, automated teller machine (ATM) fees can rack up. According to RealSimple, in the U.S., the average ATM withdrawal is $4.64. The easiest way to avoid ATM fees is to simply only use ATMs that are associated with your bank. However, if you’re traveling, this can be a challenge if your bank doesn’t have many networked ATMs. Fortunately, more and more banks and credit unions are offering free ATM withdrawals as part of customer benefits.

7. Invest, Invest, and Invest Some More

Once you have created a budget, built an emergency fund, and paid off your debt, you should start investing as much as possible if you’re serious about making your money work for you.

By putting your money into investments, it will work for you by growing on its own through interest and/or the value of whatever you invested in appreciating.

Depending on your risk tolerance, it’s important you have a diversified portfolio. The less diversified your portfolio, the more risk will be involved.

While some people are hesitant to invest at all because of the risk associated, there’s no better way to make your money work for you and the earlier you start, the better.

With that said, when you do invest, it’s important that you have a long-term mindset. Most successful investors make an investment and then allow it to sit while it grows for several years or even decades before touching it.

With that said, here are several ways to invest your money:

  • 401(k)
  • Roth IRA
  • Stocks
  • ETFs
  • Mutual funds
  • Index funds
  • Bonds
  • Options
  • Real Estate
  • Business

8. Create Passive Income

Passive income is the prime example of making your money work for you, as you are not trading your time for money.

It’s also the number one sign of financial freedom. If you have ever heard someone say they make money in their sleep, passive income is what they’re referring to.

Simply put, passive income is money you earn from an income source that you’re not actively involved in on a day-to-day basis. It’s also money you can earn passively at any time of day, whether it’s 10 p.m. or even 3 a.m.

Here are several examples of passive income:

  • Dividend stocks
  • Physical books or e-books
  • Online courses
  • Peer-to-peer lending
  • Mobile apps
  • Rental properties
  • Real estate investment trusts (REITs)

9. Increase Your Earning Potential

Investing in yourself to increase your earning potential is a great way to make your money work for you in the long run.

For example, you can learn a side hustle, become certified, learn a trade, or even go back to school to get a college degree. The more expertise you have in your field of work, the more you’ll earn. You may even be able to negotiate a raise or earn a promotion.

Simply put, the more you earn, the more money you will have to work for you, the more you will be able to earn from passive income and investments.

More Ways to Make Your Money Work for You

Here are a few other ways you can make your money work for you:

  • Get rewarded for spending: In addition to maximizing your credit card rewards, you can take it a step further by downloading a rebate app, joining loyalty programs, and even using coupons.
  • Claim your tax credits: You may have tax credits available if you paid more tax than you were liable to. The excess amount can be later adjusted against tax liabilities.
  • Automate payments and savings: To avoid missing payments and paying fees as a result, you should set up autopay for as much as you can. This includes bills, monthly subscriptions, savings, investments, and so on.

Final Thoughts on Putting Your Money to Work

As provided above, there are several ways to make your money work for you – from maximizing credit card rewards to investing in dividend stocks.

While earning passive income isn’t easy, the key is simply getting started – create a budget, pay off your debt, and then determine what you’re going to invest in. The sooner you start, the quicker you will build momentum.

With that said, you should take the necessary time to determine the best way to make your money work for you. Read books about investing, take online courses, talk to experts, and consult your financial advisor. It’s time to put your money to work!

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