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Top 5 Smart Ways to Make Money Work for You

date January 23, 2022 time 6 min read 180 views

Due to lack of experience, some people fall into a stage of uncontrolled spending to enjoy life. However, understanding how to make money work for you as soon as possible could help you lead a safer and more stable life without regrets.

“Make Money Work for You” means attempting to keep track of your financial health to improve your financial stability and success.

The period 18-25 is usually the time when we are just starting to get used to personal finance management. But some people fall into financial distress due to overspending without a plan. So, understanding how to make money work for you wisely will help you secure your financial future. If making your money move is a game, how do you become a winner? Let’s dive in.

1. Creating a Budget

Budgeting allows you to better understand where your money comes from and how you spend it. Let’s go over the 6 basic steps to figuring out how to make money work for you in personal budgeting:

Budgeting with irregular income will allow you to know exactly where your money comes from and how you spend it. Let’s go over the 6 baby steps to figuring out how to make money work for you in personal budgeting:

Step 1: Layout Your Finances

First, gather all valuable information or reports about your finances. The more information you can extract, the better you understand your spending habits as well as the financial goals you set for yourself.

Step 2: Determine Your Income

All the money you make in a month is the income you need to record. Accurately summarizing it might help you understand where your income comes from and how much money you have. Then allocate it to different categories in your budget.

Step 3: List out monthly expenses

List out all the expenses you anticipate incurring in a month to determine your current spending. Also, look through your bills and receipts from the last three months that may include: Rent, insurance, entertainment, dining, transportation, debts, etc. 

Budgeting allows you to better understand where your money comes from and how you spend it.

Step 4: Plan your budget

To plan your budget, you should consider using the “50-30-20” budgeting method: 50% into your needs, 30% into your wants, and 20% into your savings and debt repayments. If your expenses exceed your income, consider this method because debt will put you under financial strain and make it difficult to meet your future financial goals.

If you’re in a situation where expenses are higher than income, look for items with variable costs that can be reduced. For example, instead of eating out, cook for yourself. If cutting variable costs isn’t enough, you should consider reducing fixed expenses and doubling your money to balance the budget. Make an effort to keep your income higher your expense.

2. Get Out of Debt

Getting out of debt is one of the most common tips on how to make money work for you, but few people find a wise way to pay off debt. The method that most people apply when faced with debts is to pay regularly according to the term of each debt. This approach sometimes makes you feel overwhelmed by the successive “deadline” of debts day after day. Thus, let’s watch out for the Debt Snowball method with 4 basic steps which might help you control the debt repayment process:

Step 1: List all of your debts from the smallest to largest by the total amount (without interest), then break down the minimum amount you have to pay each month.

Step 2: If you wonder what to do with savings, prioritize to pay for small or urgent debts, with the rest paid at the minimum.

Step 3: After paying off debt, add the amount paid to the next smallest debt.

Step 4: Repeat this process until all debts are paid off.

After completing the smallest debt, you can use money left over to pay off a part of your “waiting list” debts, easing the financial burden of the next process and getting out of debt faster. 

3. Create an Emergency Fund

One bad day, your beloved car broke down unexpectedly. You have to spend a lot of money on spare parts replacement and repairs. If you do not have money available, you will have to borrow it, which might cost you monthly interest, affect your savings in the coming months and keep you far away from your goal to turn $1000 into $5000

To avoid falling into such a case, prepare contingency funds for emergencies for unexpected situations. This amount should be equivalent to your living expenses, ideally, 6 months at least. Others might feel secure enough to keep a fund that covers as little as three months, but we don’t recommend it. As we’ve said already, no career path will make you 100% financially secure. So, the size of your contingency fund will depend on your circumstances. 

Furthermore, put your emergency fund into a high-yield savings account to make more money while it’s sitting in your bank account for such a long period. That might be a smart way to make your money work for you.

4. Invest in yourself

Investing in yourself is a profitable and long-term sustainable investment regardless of the time or age- it’s essential. Learning how to manage your finances and save to secure your financial future is one of the keys to being a better version of yourself. 

If you just jump into this new world, look for some financial literacy books to get some great ideas that might be useful for you. Especially, investing more in personal experiences such as traveling, studying, and building a healthy lifestyle will always be the best way to help each of us improve our quality of life as well as get closer to the best version of ourselves.

Investing in yourself is a profitable and long-term sustainable investment.

Moreover, improving your job skills is also a smart way to make your money work for you. While it may not appear to be directly related to your finances, job security is an important component of your financial health picture because it determines your monthly income.

5. Save and Invest Your Money

Aside from financial planning, let’s start putting money aside for goals to save $5000 in 3 months, such as retirement, entertainment, emergency purposes, etc. By setting specific savings funds, you can track your process on saving goals. Saving even when we are young, even in our 20s, will make us feel more secure and live more leisurely. No matter how little you save, look for ways to increase your savings over time. Small gains will amount to high returns over the long run. 

If you don’t want to put your savings on for years, one of the best alternatives to savings accounts is to invest.

There are two main ways to make money: actively or passively. In this case, we would like to talk about the second one, saving or investing the money you have in stocks, bonds, mutual funds, real estate, or other financial instruments. Investing in the stock market is a great way for the average person to build wealth if you have a thorough knowledge of the stock market; otherwise, you will easily lose all of your money due to ignorance. 

You can consider investing in etfs or bonds, even if the interest rate is not high. Because the slow but steady growth of cash flow is the key to the success of financial management. Alternatively, you can diversify your portfolio to spread out risks. 

Saving, even when we are young, will make us feel more secure and live more leisurely.

How to make money work for you is a big wonder for many people. All ways we break down above are the best ways to make your money work for you; however, it might not help you if you don’t take any action. Take the first step, and you will see the light ahead.

Regardless of how you save or invest, having a specific set of goals that will help focus your spending, motivate you, and identify types of suitable investments for you is how to make your money work for you.

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George Schooling

George Schooling

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