One of the biggest driving factors we hear from people joining the FIRE movement is that they are sick and tired of their job and want to quit. People, ourselves included, want the ability to own their time, not just their stuff. But in order to no longer work for money, your money has to be working hard for you. As we start off a new year, we figured we’d tackle one of our favorite personal finance topics: how to make money work for you. Below, we cover six main ways to put your money to work.
1. Have your priorities and goals figured out
Like you, your money needs goals if you hope for it to succeed. If you don’t have a plan for your money, it will go here, there, and everywhere. Since we don’t have weird alternate universe wormhole portals, your money can’t be Everything, Everywhere All at Once. Just look at the financial struggles the family faced in that movie. No one wants IRS agent Jamie Lee Curtis showing up at their door.
Having priorities and goals for your money is so important, we made it the first rung of our FIRE ladder. Without this critical foundation, your personal finances will crumble.
2. Treat debt like the plague
If you have debt, you’re not dead yet, but tis more than a scratch. High-interest debt, in particular, makes you The Black Knight, trying to win the financial fight with no legs or arms.
If you’re investing hoping to make 8%-12% returns but have credit card debt or personal loans at 10%-30%, your money is currently working against you, not for you. The faster you can turn the war and storm the enemy’s gates, the sooner you can return to Camelot.
On second thought, let’s not go there. ‘Tis a silly place.
Debt snowball, debt avalanche, debt roulette—the strategy you use to get out of debt matters less than making the decision to pay off your debt and sticking with that goal.
Start your debt-free journey today.
3. Make a budget
Given that we’re The Budget Brigade, this one’s probably implied. But a budget is one of the best ways to make your money work for you, so hear us out.
When you budget, you are giving your monthly income marching orders. With a zero-based budget (our favorite), you give every dollar you make a job. Do you want a new car? A vacation to Hawaii? What about paying off that pesky debt we just talked about? Or saving up for your first home purchase? A budget can help you achieve each of your goals by focusing your spending and putting your money where YOU want it.
Visit our Budgeting Station to jump on board the budgeting train today.
4. Invest wisely
Wealthy people understand that when you invest, your money works for you while you sleep. How? Through the wizarding magic of compounding interest. “Geminio!”
The gains on your investments continue to grow, coupled with what you continue to invest, which makes your money multiply over the years and decades you work toward your financial independence.
If you stay focused and invest regularly, eventually your investments can out earn your day job. With two pensions, my family member makes more now than they ever made from one of their jobs.
While pensions have gone the way of cable TV, there are other tax-advantaged accounts to help you build your wealth generating machine.
It’s okay to put money into volatile, high-risk investments (like crypto) once you’ve gotten your shit together BUT it should be a small portion of your net worth so you don’t get crushed if the floor falls out from under it. If these high-risk investments become nothing, it shouldn’t matter to you at all.
The rest of your investing should go into long track record successes like low cost, straight forward index funds. Wise investing isn’t sexy while it’s a working girl, but when it comes time to retire, that baby’s a 10.
Visit our Retirement Station to learn more about investing for your financial freedom.
5. Put your cash reserves to work
The job of sinking funds like your emergency fund, house down payment, and new vehicle fund isn’t to make you money. These dollars need to be around when you’re ready to pull the trigger on a two-bedroom townhome or on the new-to-you Toyota. One of the worst things that can happen is having your cash reserves invested and the market be down 20% when you need to withdraw the funds.
While you don’t need to make money on your cash reserves, you don’t want to lose money on them either. If you park them in a regular checking or savings account, little pennies dribble into your bank account as interest payments. At a rate of around 0.1%, these funds don’t keep up with annual inflation rates, which means your money loses buying power every year you leave the cash there.
By putting your sinking funds and emergency fund in a HYSA (high-yield savings account), you can make a higher return than a traditional savings account. While the difference won’t make you a rich bitch, it will help you keep up with inflation and keep your money working for you versus snowballing backwards.
Cash reserves are a balance of stability and opportunity cost. Don’t get greedy and try to turn your designated, non-retirement savings into money printing machines. But don’t let them collect lent under your couch cushions either.
6. Monetize your hobbies
Hobbies are a great way to destress after a long day at work, to meet others with similar interests, and to plain have fun. Not all hobbies are money makers, but a lot can be if you get a little creative.
If you have a hobby or topic you’re passionate about, start a blog. Become an influencer. Start a streaming channel or become an e-gamer. Offer custom orders of the trinkets you make. Share your music or stories with the world.
You may not become ultra successful, but you’ll never know if you don’t try. Just don’t funnel a bunch of money into the hopes that “one day” you’ll strike it big. Contrary to what popular advice dictates, you don’t need to spend money to make money, you need to invest it. Don’t rob from your retirement for a chance at becoming an “overnight” success. But if you can turn your hobby into a side hustle? Game on, man.
Visit our entrepreneurship station to learn more about side hustles, self-employed finances, and more.
Make Your Money Work For You
Six steps might make it sound easy to make money work for you, but implementing these steps takes practice. A lot of generating wealth is being intentional with your spending and saving and doing it every single month.
Building new habits takes time. Don’t get frustrated if you falter in the first few months. We all do. Keep at it and we promise you’ll see the dividends of your efforts.
Have a recommendation we missed? Drop it in the comments below!