Money. The almighty dollar. Cold, hard cash. Whatever you call it, money plays a vital role in sustaining your basic needs and fueling your dreams. But if you don’t have a strategy to make your finances grow, your relationship with money can feel like a revolving door. You work hard for your money, so why not make it work for you? Below are six ways you can put your hard-earned money to work today.
The idea of saving may seem elementary, but it’s a lot easier said than done. The best way to do this is to automate your savings. Set up a rule in your online banking so that each time you get paid, a portion gets transferred to a savings account. Keep in mind, the interest rates in traditional savings accounts are quite low, so consider opening a high-yield savings account or money market account. These pay a higher interest rate, enabling your savings to grow faster.
Use Credit Cards Strategically
Credit cards can either be harmful or helpful to your finances. To achieve the latter means using them strategically to both build credit and take advantage of rewards programs (rewards = free money). Choose a card with a strong rewards system, and use it to pay for everyday or recurring expenses. Be sure not to carry a balance in order to avoid interest charges. Before you know it, you’ll be earning rewards that you can use for food, clothes, travel, etc. If your rewards come in the form of cash back, you could put those funds into a savings or investment account and let them grow even more. Just remember: the key to using credit cards the right way is to not exceed your budget. Having the latest gadgets is cool, but carrying credit card debt is not.
Take Advantage of 401K Matching
If your employer offers 401K matching, maximize the full amount they’re willing to contribute to take advantage of free retirement money. For example, let’s say your employer will match your contributions dollar for dollar, up to $1,500 a year. To max out that benefit, you would need to contribute $1,500. By doing so, you just turned that $1,500 into $3,000! Of course, each 401K plan varies, so check with your employer to learn about the specific terms of your plan. Again, this is FREE money! Make sure you are taking full advantage of it!
Open an IRA
Another way to grow your money is to open an IRA (individual retirement account). IRAs are tax-advantaged investment accounts designed to help you save for retirement. There are two primary types of IRAS: Traditional and Roth. With a Traditional IRA, you contribute pre-tax dollars, and the funds get taxed when you withdraw them in retirement (although you can withdraw early and incur penalties). Conversely, with a Roth IRA, the money you contribute is after taxes, meaning it will not be taxed when you withdraw at retirement age. Talk to your financial advisor to determine which type of IRA is best for you.
Open a Non-Retirement Account
In addition to saving for retirement, it’s also important to have financial assets you can leverage before then. Perhaps you want to buy a home, pay for college in the next few years, or even buy your dream car; that’s where non-retirement investment accounts can be beneficial. While non-retirement accounts are not tax-advantaged, you can access the funds at any time without early withdrawal penalties and minimum distributions (that is, withdrawals required by the IRS when you reach retirement age). Keeping in mind there is always risk involved when investing, a non-retirement account offers the opportunity to grow your money exponentially and use it to meet your goals at any age.
Purchase Real Estate
One of the smartest ways you can build your wealth is through homeownership. Owning a home helps you build equity, which grows as you pay down your mortgage and as your home appreciates in value each year. This equity becomes a valuable asset you can utilize later on. If you’re already a homeowner, buying a rental property is another way to make your money work for you, because it can be another source of income while helping you build your overall net worth. Check out this article to learn more about the financial benefits of owning a home.
Start implementing the above strategies today to make the most of your money and grow your wealth.