Making your money work for you goes beyond an emergency fund or simply being debt free – although, both concepts are a necessity in this instance. It’s about taking the money you’re already making and making it generate returns for you.
But, how? There’s no simple answer or even a single way to do it, but these tips can help you get started.
Get out of debt.
First things first, if you have debt – get rid of it. After all, you can’t invest in your future if you’re giving your money to other people or lenders. The first step to a debt-free life is figuring out exactly how much you owe. Most people don’t even know how much debt they’re in, according to a study from The Federal Reserve. Once you know how much debt you have, decide how you’re going to pay your debt off.
The most important way to change the way you handle your money is to budget. By creating a budget, you are telling your money what you want it to do. When you assign each dollar into a category, you’re controlling where your money goes and what it does. It’s a great first step in reaching your financial goals. Think about it this way: your budget is like a fitness tracker in that it helps you monitor your money. When you monitor your money and know where it is and what it’s doing, it’s easier to make it do what you want it to do.
Utilize retirement accounts.
Don’t sleep on opportunities to invest in a 401(k) or Roth IRA. A 401(k) allows you to contribute pre-tax money into your account, and you may even be able to get free money from your employer in the process too. Think about it like this: You earn $100,000 a year and your company offers a 3% match on your 401(k). If you invest $3,000 (3% percent of $100,000), and your company matches that – $6,000 will go into your 401(k). A Roth IRA works just a little differently. Unlike the 401(k), a Roth IRA leverages after-tax income. However, when you begin to withdraw the money at retirement, you won’t pay taxes on your withdrawals.
Start a side hustle.
Uber, GrubHub, Instagram – all of these companies began with an idea that blossomed into billion dollar companies. What’s your passion and can you turn that into a billion dollar idea? Consider starting a side hustle and find ways to make some extra money. It could be a traditional second job, a work-from-home job, or turning your ideas into ways that add to your savings. If you can structure your budget and expenses around your primary source of income, any money you make from your side hustle ideally would go straight into your savings.
Create passive income streams.
Passive income is money you earn with little to no effort involved. Once it’s set up, passive income will earn you money while you sleep. For example, a rental property is a source of passive income. Creative passive income does require some type of investment upfront, whether that’s time, money or both – but it’s an investment that can lead to a bigger payoff later.
Building your future is important, and it takes a lot of hard work. At First Financial, we’re just as interested in your future as you are. We want to help you take the necessary steps to make your financial dreams come true. Maybe you need to consolidate your debt or look at options to pay off some debt. Maybe you’re looking to refinance your car in order to lower your payments and save a little money each month. Whatever it is, we’re here to help you. Stop by and see us or give us a call to get started!