How to Make Your Money Work for You? (4 Steps)

Posted by Grace under Investing, Personal Finance on December 15, 2015

The 4 steps on how to make your money work for you. An interesting question from Brandon J. a reader in Canada asked; “you said you can retire as early as you can by means of making your money work for you, how can I do that?”

If you want to make your money work for you, all you need to do is to invest it to make more money. Making your hard-earned money work for you is a great idea especially if you are planning to generate passive income for your retirement years. But, the question is how can you make your money to generate more money? As I have said you need to invest it.

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Investing is a part of your financial success. You need only not to save it in the bank, but, you need to know how to invest it to multiply. Through investing, you are making your money work hard for you.

The idea is to let your money take your place in working hard. You as a man are working hard to earn. You are so lucky because you are planning to make your money work for you. Not all men know how to apply this. They just know how to work hard. But, making their money working hard for them, they are not interested.

How to Make Your Money Work for You (4 Steps)

Follow this step by step guide so that someday your hard earned money will take your place and start earning passively.

Step 1. Save 20% of Your Income

Save 20% of your income. Save 1,000 dollars per month if you are earning a net pay of $5,000 per month. You need to decide where to invest the 20% of your income.

There are many types of investments that can help you make your money work hard for you such as stocks, mutual funds, bonds, CDs, real estate and even starting your own business.

I prefer to invest in paper assets because I want to really make my money work hard for me. The idea is to generate passive income wherein I don’t need to use some of my effort and time to earn money.

How to Make Your Money Work For You

Image Credit: emdot on Creative Commons 2.0 via Flickr — day in the life: lunch money

Step 2. Invest Money and Reinvest the Profits

If you are making use of compound interest, you can easily accumulate enough money. What I mean is about “enough money”? You have to earn enough money that earns your monthly income. Continue step 3 to know about it.

Step 3. Accumulate Enough Assets

If you really want a great results, you need to accumulate enough assets. If you are earning $5,000 per month. What is the amount of money that earns $5,000 with an interest rate of 10%?

You need $60,000 per year, right? How much money you should have to earn that amount with an interest rate of 10%?

All you need is $600,000 total assets that earns 10% to make $60,000 passively per year or $5,000 per month.

Step 4. Experience the Reality of Making Your Money Work for You

Now you are experiencing the reality on how to make your money work hard for you. As long as you accumulate enough money to earn your monthly income, you can reinvest to make more money or use the profits to replace your monthly income.

Tips and Warnings

If you want to make your money work harder for you, start by managing all your hard-earned cents. It is not easy to accumulate enough money that earns profits passively. Be wise in choosing the investment vehicle. You need to carefully plan your investment. Do not be in a hurry but do not procrastinate. Educate yourself on investing. Make sure you invest in the right vehicle. Track your investments. Think about your investment goal. When do you want to achieve your “target earning asset”? In the example above, it’s $600,000 that earns $60,000 per year.

Now you know how to make your money work for you. Start saving and investing money to reach your target earning asset early.

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