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Introduction
I am not a financial advisor. I am not a lawyer or accountant. I am just a person who was taught to save money and make sound financial decisions.
Everyone will have their own opinions on where exactly to put their money. Some would invest in index funds while other would put it into real estate.
I am not here to specifically tell you where to put your money.
I would like to guide you on principles that can help you get ahead financially. These are principles that involve money. They are not ideas like quit eating out to save money.
Today we are going to talk about putting your money to work for you. We are going to talk about making money with your money.
Daily Purchases
Daily purchases add up. Usually, people would say quit shopping and spending money at all. While I agree with this today instead I am going to advise you to make the most out of what you are spending.
Find all the apps!
Use reward programs to get cashback.
My favorite is Fetch!
Here is a quick list:
- Fetch Rewards
- Ibotts
- CoinOut
- Paribus
- Coupons.com
- TopCashback
- Punchcard
- Receipt Hog
I actually need to check more of these.
The apps that simply involve taking a picture of the receipt are the best.
I don’t have time for scanning through to find the deals of the week.
I also recommend making the most out of credit card points. You should only make purchases on credit if you have the funds to pay the bill at the end of the month. Find programs that give you the best cash!
I recommend shopping consistently at the same stores and using their reward programs to the maximum. For example, I grocery shop at Kroger. They now print me off coupons for items I buy weekly. I also can use points to get reductions on fuel prices. If I shopped at many different groceries I would not maximize these points.
Another place we consistently shop is Menards. We do not jump around to other home improvements stores like Lowe’s or Home Depot. The reason for this is we take advantage of the rebate program. Because we consistently shop there we know how to best maximize it.
Large Purchases
When you plan to make a large purchase have the discipline to save up for it and pay it in full.
If you buy a new car and are going to have to make payments on it, make those payments before the purchase. For example, save $200 every month until you can buy the car. Don’t buy the car and then pay the $200 every month because you are going to be paying interest on that loan.
Save up and then make the purchase. Pay it all upfront whenever possible.
Let’s say you purchase a $15,000 car.
You could save up $300 for 50 months to purchase that car with cash. The car will cost you $15,000.
Now if you get a car loan at 3% interest rate and pay it for 50 months your payment will be $320. If you take this route the car will cost you $15,976.
If you are a disciplined person you will save that $976.
You also have the luxury of saving without the stress of needing to make the car payment. If you are saving the money ahead of time, but an emergency comes up and you are unable to that month you will be fine.
If you have a loan payment you cannot skip a payment. You have the added stress of needed to make your car payment every month.
Loans and Debt
When you owe money try to pay it in the best way possible.
For example, certain loans are interest-free for a year. It is ok to take that year to make the payments. Make sure though that you pay it off before interest starts.
Let’s just take a basic example. Say you purchased a $500 couch interest-free for a year. You make $50 payments. I typically would say pay it off in full. It is never a bad idea to do so, especially if you are bad with money.
However, if you are organized with your money you will pay that balance down over the year. Throughout the year you will have more money in the bank which can be earning interest.
My husband intentionally pays all our bills close to the due date. A lot of people would say this isn’t worth it. But any habit done over a long period of time makes an impact. He sets reminders on the calendar so payments are never late.
If you have loans or debt make sure you understand them. People have been caught off guard in the past with balloon payments and interest rate fluctuations.
You need to know exactly what you are getting into. Understand the terms and expectations.
Keep track of your debt. Know exactly where and how much you have if any!
Pay off the loans or debt with the highest interest rates.
Saving for the Future
Of course, you want to be saving for the future!
My first step would be to switch to an online bank such as Ally. They are going to have higher interest rates on savings accounts.
Shop around and find the best rates possible. Also, look for joining bonuses for opening an account.
I don’t recommend going out and opening a dozen accounts. I think that is a lot to manage. In general, I would say have a checking account and saving account and be responsible with your money, but that isn’t realistic for everyone.
If you need the separation make multiple accounts.
Make an account for your car. This account is a savings account to add money to each money. This will build over time and be the money you used to purchase your next vehicle without requiring a loan. Start making payments on your future car TODAY!
After you build up your savings a bit start to invest. You can take a lump sum to invest or invest $20 a week. Find what works best for you but start investing as soon as possible.
The more money you have in an account or an investment the more it will grow. Take a $1,000 investment versus a $10,000 investment
| 5 % Return Every Year : Initial Investment | $1,000 | $10,000 |
| Year 1 | $1,050.00 | $10,500.00 |
| Year 2 | $1,102.50 | $11,025.00 |
| Year 3 | $1,157.63 | $11,576.25 |
| Year 4 | $1,215.51 | $12,155.06 |
| Year 5 | $1,276.28 | $12,762.82 |
| Year 6 | $1,340.10 | $13,400.96 |
| Year 7 | $1,407.10 | $14,071.00 |
| Interest Earned | $407.10 | $4,071.00 |
This is a quick and easy example. We put a lump sum of money into an account. We don’t add or subtract any money. We walk away and forget it for 7 years. During those years it earns 5% interest.
At the end of the 7 years, you have the money you initially invested plus the interest you earned.
In the first example, with the initial investment of only $1,000, you earn $407.10 in interest.
In the second example, with the initial investment of $10,000, you earn $4,071.00 in interest.
This is how the rich get richer.
The more money you have to invest the more money you will make.
I would like to also note that the longer you let your investment ride the more money you will make.
The key with that is to start now! The earlier the better. You can’t go back in time and get more months or years.
Start investing now and you will thank yourself later.
Pro-Tip: Interest is a good thing when you are earning it. Interest is a bad thing when you are paying it.
Specialized Accounts
Some of these accounts may be specific to Americans, so sorry if you don’t find this topic helpful for your country.
I recommend taking advantage of specific accounts where it benefits you most.
Some of these accounts include:
HSA-health savings account
IRA-retirement
529-College
401K-retirement
These accounts typically have tax benefits. The HSA for example allows you to put your income into the account to pay medical bills. You get to skip paying income tax on that money.
I am not going to taking you through all of these accounts. They each come with their own set of rules. Get a financial adviser and go to them with these questions. Ask them the pros and cons of these accounts.
Make the most of your money.
And on a final note educate yourself. Take the time to read books instead of watching Netflix.
It is your life and your money. Take control of it.
Conclusion
You are going to spend money in life. There is no way around it. When you do spend and save we want to make the most of it. Make your money earn you more money.
Make efforts in the small everyday actions, such as snapping a shot of your receipt. Make the big decisions such as jumping into the stock market. And take control of your large purchases such as buying a car.
Don’t let your finances control you. You control them. Direct them to work for you.
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