One of the most common pieces of financial advice is “use your money to make money.” What isn’t quite as common is knowing how to actually do that. Here are a few ideas to help you out.
Start a Passive Income Stream
Passive income is defined as money that can be easily earned while you expend little effort. This might be something like setting up a drop shipping online store that sells comfortable dress shoes or investing in real estate. Once you have your passive income stream set up properly, it can earn money for you while you’re sleeping or doing anything else.
There are so many people who make money by investing in the stock market. If you’re looking to make money by doing this, remember that actually being in the stock market game isn’t the same thing as attempting to time the stock markets. Putting money in and pulling it back out in an attempt to take advantage of fluctuations that might be favorable or in an attempt to minimize losses when there are market dips isn’t advised. If you’re going to invest in the market, do it and then leave it alone. For the most part, playing the stock market is a long game, not a get-rich-quick scheme.
Before you decide to send your money off to do any heavy lifting for you, you really should have an emergency fund with enough money to cover about 6 months of your total living expenses – in cash. A smart place to keep it — and one where it can earn you money — is in a high yield savings account that’s insured by the FDIC. Your typical savings account generally offers interest at about 0.01%, while a high yield one can be 1% or higher, which earns you 100 times what your typical savings account does.
Accounts like IRAs and 401(k)s are essentially investment accounts with high compounding interest rates that allow your money to grow at a rapid pace. The key here is to save as much as you can every year so that it can earn interest as efficiently as possible. In other words, whatever amount your employer matches is what you need to be putting in so that you get the maximum savings and aren’t giving away any free money.
Some of you might be wondering how this is a good way to make money, but consider this – investing in the stock market is basically gambling like you do in a casino. And while going to the casino can be a lot of fun, if you’re responsible and hoping to generate a quick windfall, gambling could be the way to go. Just remember: never bet more than you can afford to lose!
Above all, remember that you don’t need to be a financial guru in order to make your money work for you. If you’ve got an idea that you think can make your money work for you, research it. If the pros outweigh the cons, go for it.