It goes without saying that a penny saved is a penny earned (assuming that penny is earning an interest rate that outpaces inflation). In our current economy – with the financial experts insisting our next president will see help the U.S. to navigate another big recession (or not) – it’s no longer a question of whether one should put aside money each month.The real question is how can you save and grow your money simultaneously? We’ve got answers.
Here, we will unleash to you top 9 ways to save your money and make it grow.
- Eradicate the debt
- Have a savings safety net
- Pay off your mortgage as quickly as possible
- Diversify your investment
- Keep investing
- Keep yourself informed
- Invest in things that you understand (and can control to some extent)
- Get life insurance
- Modify your investment strategy as you get older
Eradicate the Debt
The first step to growing your money is to get rid of consumer debt. This doesn’t include any debt you assumed for the sole purpose of increasing cash flow (like a hard money loan to rehab a piece of property you’ve acquired). Try to pay off all your non-mortgage related debts. These include credit card debts, student loan and any other loans. Dave Ramsey’s popular debt snowball can give you a practical strategy for how to do this.
Have a Savings Safety Net
Have some cash set aside somewhere that is easily accessible to you and your spouse in the event of an emergency. As a general rule, gurus always advise people to have enough money set aside to cover three months of expenses in case there’s trouble at work or you can’t work for a while. We like to say have five months of living expenses set aside, just in case. That means having enough stashed away in cash to cover your house payment, fuel expenses, homeowner’s / renter’s insurance, auto insurance, groceries, utilities, cell phone and internet expenses, and your other core monthly expenses.
This is the ONLY money we could see you possibly putting in a low-yield savings account. Try to go for a high-yield savings account that delivers a 2% to 3% return. Most savings accounts won’t come close to this interest rate, but get as close as you can. There’s no reason you shouldn’t be able to grow your money… even if it’s just sitting in a traditional bank savings account.
Pay Off Your Mortgage
Although most financial advisors would preach to you about getting insurance instead of paying off your mortgage, we advise you otherwise. You grow your money by eliminating unnecessary debt, and a mortgage on your primary residence is an unnecessary debt. You should try to pay off your mortgage as quickly as possible. This will give you a peace of mind and you can then stop worrying about keeping up with your house payments and redirect a significant portion of your income toward lucrative investments.
Diversify your investments
While we live and breathe real estate, we really don’t expect you to restrict your investing to just real estate. Instead, focus on diversifying your investments. Don’t discount stock and bonds IN ADDITION to a hefty and profitable real estate portfolio.
Make saving and investing a part of your regular budgeting. Plan to put money in your account even if you have only a small amount left by the end of the month. In the long run, this will prove to be beneficial.
Keep Yourself Informed
Information is power. Stay informed about the local, national and global financial conditions. Try to learn as much as you can about how money works. Read the finance section of the newspaper and subscribe to periodicals like The Wall Street Journal. You may not understand everything in the beginning, but learning the language of money is like learning any new language: You have to keep at it until it starts to make sense.
Invest in Products You Understand
As a general rule, you should only invest your money in things you understand. Financial planning is not the time to be competitive and try to one-up your brother-in-law or invest in a stock because you got a “tip.” Learn as much as you can then develop an investment strategy that helps you leverage your knowledge to make more money. When it comes to your money, be proactive about learning; don’t just hope for the best.
Get Life Insurance
What happens to your family if something happens to you? Make sure your family covered so that in the event of your passing, they don’t have to struggle with the finances in addition to having to come to grips with losing you. Not sure how much life insurance you need? Bankrate.com has a life insurance calculator to help you determine how much life insurance you need.
Modify Your Investments as You Get Older
You can invest in risky things during your twenties, thirties and forties. But as you grow older, your investing style, your financial needs, and your overall investor profile will change. We recommend real estate investing because it gives you a stable, almost fool-proof return on your investment.