Do you just let your money sit passively in a checking account? By doing this you’re letting your dollars lose their value with inflation. With money just sitting idle, you’re missing opportunities for financial growth. You should be putting your money to work for you instead. When every dollar has a job, whether it be to pay off debt, invest, or save you’ll reap the benefits. Here we’ll talk about 6 smart ways to put your money to work.
1. Automate Your Savings
Before spending any of your money, you should pay yourself first and put money into a high-yield savings account. This easily can be automated to come out of your checking account with each paycheck or deposit. You can use apps like Acorns, YNAB, or Qapital to round up purchases and save spare change. A good rule of thumb is to aim to save 20% of your income and adjust this number as your income increases.
2. Invest Consistently
You can start small with investments by opening a brokerage account and investing in EFTs or index funds. You can invest a fixed amount monthly so that every dollar has a job. With easy tools like Coinbase or Robinhood, you can invest right from your phone. Even small amounts like $50 per month can grow significantly over time. Make sure you are diversifying your portfolio so that you can make the best investment decisions.
3. Create Sinking Funds
If you anticipate large expenses, you can create sinking funds. Set aside money monthly toward large expenses like car repairs, vacations, taxes, etc. Keep each fund organized and keep putting money into it so that you don’t incur debt when large expenses happen.
4. Maximize Employee Benefits
If your employer offers benefits like retirement accounts or other pre-tax benefits, make sure you are taking advantage of these financial opportunities. For example, make sure you contribute enough to your 401(k) to get the full employer match. It’s free money! This money can make a difference as you save for retirement over time. When you sign up for health benefits, make sure you explore HSAs, FSAs, and other pre-tax accounts to reduce taxable income. This can help you save money on health-related expenses.
5. Pay Off High-Interest Debt First
Don’t overpay on interest on your debt. Use the Avalanche method to pay down your highest interest debt first so that you don’t throw away money over time as interest accrues. This way you can keep your debt manageable and continue to pay it down within a reasonable amount of time.
6. Manage Your Spending
Make a budget and allocate your money toward needs, wants, savings, and debt repayment. Using budgeting apps can help you stay on track and make sure that every dollar has a job. You can use methods like the 50/30/20 rule to manage your money and help set a realistic budget.
How do you make your money work for you? Share your thoughts in the comments.
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Teri Monroe started her career in communications working for local government and nonprofits. Today, she is a freelance finance and lifestyle writer and small business owner. In her spare time, she loves golfing with her husband, taking her dog Milo on long walks, and playing pickleball with friends.