October 24, 2024

How to Make Your Money Work for You: 8 Practical Options

You clock into work every week to earn a paycheck. The dollars you earn should be pulling their weight, too.

Putting your money to work is crucial for building wealth over time. Instead of letting it sit idle in a low-interest account, you can invest in stocks, open high-yield savings accounts, or explore passive income options. All of these strategies can help your money grow faster than inflation eats it away.

This guide will teach you how to make your money work for you. We'll cover smart investing, saving strategies, and even tips for earning extra cash.

8 ways to make your money work for you

Here are seven ways you can learn how to grow your money.

1. Invest wisely

When looking into how to make money with money, investing is one of the first options most people encounter. Some smart ways to invest money include:

High-yield savings accounts. High-yield savings accounts offer better interest rates than regular savings accounts so your money works harder to earn more without you lifting a finger. This option is one of the closest to "easy money" when making investments since you can count on a low but consistent return.
Stocks and bonds. Buying a share in a company (stocks) and lending money to governments and corporations (bonds) are some of the most common ways to expand your funds. Government bonds are the safest option but have lower returns, while stocks are higher risk but could earn you more money.
Real estate investment trusts (REITs). Another option is investing in property to rent out or buying shares in REITs, which are organizations that invest in and manage real estate, typically commercial properties. Buying into these funds gives you exposure to real estate investment without having to purchase and manage properties yourself.

There are a variety of strategies for timing your investments. One of the most common and easiest to implement is dollar-cost averaging. Using this method, you regularly invest a fixed amount at set times — e.g. every week or every month — regardless of ups and downs in the market. This helps smooth out the impact of market volatility for a long-time return.

It's also a good idea to diversify your investments across multiple assets to manage risk. Having your emergency funds safe in a savings account and retirement in the stock market, for example, keeps your money growing in different ways. This way, you're not putting all your eggs in one basket, which means it won't tank your entire portfolio if one asset performs poorly.

2. Start a side hustle

One of the most obvious ways to increase your income is to put your skills to work outside your regular job. A side hustle can be anything from freelance writing to dog walking to selling handmade crafts online. Consider your talents and interests: What can you do in your spare time that others might pay for? Bonus points if it's something you enjoy.

With some extra setup and a little luck, you can also create passive income streams so you have money coming in continuously with minimal ongoing effort. Examples include:

Creating and selling an online course
Writing and selling an ebook
Starting a popular blog on evergreen topics — subjects that don't go out of date — and earning through ads or affiliate marketing

The money you earn from a side hustle is a great way to expand your savings without needing to tighten up your budget. You can invest those extra funds to make progress toward your financial goals without needing a major lifestyle adjustment.

3. Use tax-advantaged accounts

401(k) and individual retirement accounts (IRAs) help you have more financial stability in retirement and let you keep more of your money at the same time.

401(k) accounts are usually offered by employers. You contribute pre-tax dollars, which lowers your taxable income today. Many employers also offer matching contributions, which is essentially free money.

IRAs come in two primary forms: traditional and Roth. With a traditional IRA, you contribute with pre-tax dollars, which lowers your taxable income for the year. However, you'll pay taxes when you withdraw the money in retirement.

Roth IRAs work the opposite way: You pay taxes on the money now, but your withdrawals in retirement are tax-free.

In both accounts, you can invest your money in stocks, bonds, and more to help your money grow.

4. Automate your savings

Set up automatic transfers to your savings account each payday. You can do this easily in the EarnIn app with the Tip Yourself tool. This "pay yourself first" approach makes sure you're saving before you have a chance to spend, removing the temptation to skip saving and helping to build consistent habits.

5. Peer-to-peer lending

Platforms like Prosper and LendingClub let you lend money directly to others. You can earn higher interest rates than a savings account, but there's also more risk involved. Always do your research and consider your risk tolerance before trying this option.

6. Use cash-back apps and credit cards

Many apps and credit cards offer cash back on your purchases. This can be a good way to earn on regular expenses like groceries and gas, which leaves you more money to put to work. Just remember to pay off your credit card balance in full each month to avoid interest charges.

7. Pay off high-interest debt

Paying off high-interest debt doesn't directly make you more money, but it's one of the most effective ways to improve your financial situation. Paying lots of interest every month is like tossing that money in the trash instead of putting it to good use.

8. Access your pay as you work with EarnIn

One of the smartest ways to make your money work for you is to stop waiting days and weeks for your paycheck. With EarnIn’s Cash Out tool, you can access up to $150/day and up to $750/pay period of your own pay to cover anything from surprise expenses to everyday costs without dipping into your savings or taking on debt. Talk about putting your money to work…

Setting the stage: 4 essential steps

Before you start implementing new strategies, it's important to lay a solid foundation. Here are four of the most impactful steps you can take:

Budget wisely and track spending. Understand where your money is going. Create a budget that accounts for all your income and expenses to help you identify areas where you can cut back and save more. Budgeting apps make this process a lot easier if you’re struggling to keep track of spending.
Build an emergency fund. Aim to save 3-6 months of living expenses. Having this safety net will help you avoid going into debt when unexpected costs come up, protecting you from paying interest in the future. Plus, putting your emergency fund in a high-yield savings account helps it grow in the background.
Define your financial goals. Think about what you want to achieve in the short and long term. Do you want to save for a down payment on a house, start a business, or retire early? Having clear goals helps guide your financial decisions.
Educate yourself about personal finance. Read books, follow financial blogs, or take online courses. The more financially literate you are, the better decisions you'll make with your money.

Access your pay early with EarnIn

Take control of your finances and access your hard-earned money as you earn it with EarnIn’s Cash Out tool. Cash Out keeps your money flowing to your pockets — up to $150/day and up to $750/pay period — so you can focus on your goals. Start using EarnIn today and experience the difference every day payday can bring.

FAQs

What's the best way to start investing with a small budget?

Even with limited savings, safer investment options like low-cost index funds and exchange-traded funds (ETFs) are still on the table. ETFs are like a basket of stocks and bonds, allowing you to invest in a number of stocks and bonds with a smaller amount of money. This diversity makes them a lower risk investment, and many brokers offer fractional shares, letting you buy portions of expensive stocks.

Remember that no matter your income level, if you're able to set aside some money for investing, you're building positive habits that will pay dividends not only in monetary gains but also in your financial journey.

What are some of the safest ways to grow my money over time?

High-yield savings accounts, government bonds, and certificates of deposit (CDs) — a type of limited-term savings account that pays a fixed interest rate — and are low-risk options that offer better returns than regular savings accounts.

How do I choose between paying off debt and investing?

Generally, if your debt's interest rate is higher than your expected investment returns, focus on paying off the debt first. You'll also want to concentrate on paying down debts if the balance is high enough to affect your ability to handle daily expenses.

For lower-interest debt with low balances, you might consider investing while making smaller payments to pay off the debt while your assets grow.

Please note, the material collected in this post is for informational purposes only and is not intended to be relied upon as or construed as advice regarding any specific circumstances. Nor is it an endorsement of any organization or services.

¹Tip Yourself Account funds and Tip Jars are held with Evolve Bank & Trust, member FDIC and FDIC insured up to $250,000. Tip Yourself is a 0% Annual Percentage Yield and $0 monthly fee service deposit account. For more information/details visit Tip Yourself Account Terms.

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