The smartest way to make money is to make your money make money for you. That’s not just a clever alliterating tongue twister. It is wise advice most financial experts agree with. Your money needs to be put into the kind of investment that will allow it to grow.
Wishful thinking doesn’t apply here. You need to be proactive with your cash. The good news is you don’t need a lot of money to kickstart your investment portfolio. Even $500 is a good place to start. Here are some ways to make your money make more money.
1. Find the Cash
First, you need that operating capital. We’re talking cash flow. Maybe you’ll apply your tax refund toward this plan. Good call. Another approach would be to start saving. There are plenty of ways you can save on grocery shopping and utility bills. The key is to take that money you would have spent and put it aside.
For instance, suppose you’re used to paying $100 a month for electricity, but you go on a spree turning off lights, washing clothes during off peak hours and unplugging all those energy vampires. Your next bill comes along and it’s just $80. That’s awesome, but now you need to take that $20 and set it aside.
The same principle applies if you make cuts in your daily life. Skip Starbucks? Put the $4 into a jar. Bag your lunch? Put the $15 you would spend on a sandwich into a jar. Swearing in front of your kids? One dollar in the jar for every cuss word. Before you know it, that jar will be overflowing with greenbacks. This can become your first investment nugget.
2. Sign Up For Your Company Retirement Plan
Most companies have a retirement plan that allows deductions to be taken right out of your paycheck and deposited into a 401(K). You don’t even get your hands on that money. That’s a good thing. You get to set the amount you invest.
It can be as little as 1% of your weekly paycheck. You’ll hardly miss that, but at the end of the year, you’ll have a nice little nest egg growing. Up for a raise? Then up your contribution. The big bonus if is your employer makes matching contributions. Talk about a sweet deal.
What if you’re working for a small company or self-employed? You can set up your own retirement plan with automatic withdrawals from your own bank account to go into a retirement plan. It’s still your money and you still have access to it. You would just pay a tax penalty for early withdrawals, as you do on all retirement plans.
3. Put Your Money Into Mutual Funds
Now we’re getting into some heavy-duty investment opportunities. Putting your money into a mutual fund is like putting your money into a giant pool of investors. Depending on the fund, you could be investing in commodities, technology and various businesses, or all of the above. As those entities thrive, your investment grows — making money from making money.
Mutual funds come with various levels of risk. A low-risk fund offers a small yield, but your initial investment is safe. There are also mid-level and high-risk funds. You also can be proactive and search out your own fund to invest in.
You might even explore investing in individual commodities like gas or oil. The caution is you have to be on the lookout for potential scams. There are some brokers who can sniff out your inexperience with investing and take you for that proverbial “ride”. See, for reference, “The Wolf of Wall Street”.
The other option is to work with a proven money manager like the one you would find at your bank. They’re going to take a small slice of the pie for their effort of managing those funds, but you won’t have to worry about moving things around. Just wait for your statements to see how you’re doing.
4. Invest in Savings Bonds
While you figure out where to put your money, you can park it in a savings bond. These are also known as U.S. Treasury securities. Yes, you’re investing in the good old U. S. of A. As you might expect, you’re not going to get rich off these bonds. However, you can get a little something even with a $100 investment. The bonds are also time sensitive. Once you invest, your money it is “stuck there” until the bond matures. That could be anywhere from 30 days to 30 years. You make the call.
Always keep in mind investing is a long game. You’re not going to strike it rich overnight. Again, that’s a good thing because it sets you up with a certain level of financial security.