Ways to Make Your Money Work For You, this is something of a cliche in the world of Personal Finance. It sounds like one of those buzz phrases like “buy the dip” or “diversify your portfolio”. Of course, everyone would love to have their money work for them, who would not?
Having your money work for you is the best way to separate yourself from the 9-5 “Living for Money” life cycle, produce passive income, and raise your net worth.
But how is it actually done? What does it even mean to have your money work for you? We’ll dive into what it actually means to have your money work for you and share five quick, different scenarios (all very realistic).
These are many ways we brought to you to make your money work for you which is possible 110%.
NOTE: We found a few of these tales simpler to get the point across. Try and listen to the logic behind it and not get hung up on numbers.
What is “Make Your Money Work For You”
In the simplest form, the phrase “make your money work for you” means that you use dollars that you have to create more dollars.
This goes against most people’s conventional lifestyles. 95% of the world is used to working hard, getting paid dollars, and spending those dollars.
However, there is a more optimal strategy. The strategy used by the wealthy is to be smart with how they spend their money. The wealthy spend their money in areas where it can grow.
In doing so, they let their dollars go to work to make them flourish and earn more dollars.
Making your money work for you is done through a technique called investing. When you invest your money, you put it in a place that will allow it to grow and produce dividends.
A few of the classic examples of where you can invest your money are:
- Real Estate
By putting your money in any of these 4 places, you’re giving your money the opportunity to grow into more dollars.
The only other ingredient to this formula is time. For your money to grow, you need to give it time.
Now let’s take a look at a few specific examples of when people invested their money and how it paid off for them.
1. How To Make Your Money Work For You You: Stocks
Warren serves as a Sales Associate for a California software company. This makes only $45,000, which is well below the $70,000 Average California Household Income.
Fortunately, he is able to keep his expenses low (no children, a car paid off, cooks at home often) and is able to set aside $10,000 after a year’s job.
He never said he was a great investor, but he wants to put his cash to expand elsewhere.
Luckily, the tech world has given him knowledge of a few exciting by working ups and coming financial companies: Acorns, Robinhood, and Titan.
After doing some research, he opts to go with Acorns because it gives him the most control.
He then reads a few books on beginner investing, does extensive research, and takes action. He buys 50 Shares of the Vanguard Total S&P Fund for approximately $200/share for a total investment of $10,000.
Warren enjoys a nice Bull Market over the next year. The index increased by 20.44%. During that period of the time, the Fund also pays out a quarterly dividend of $1.39/share.
After 1 year (and minimal effort after the initial research) Warren now has $12,044. He has also earned an extra $266 in dividends during the year.
Warren earned $2,310 in passive income in one year from his investment. This is the equivalent of:
- 192 working hours ($12/hr minimum wage in CA, higher than most in the country).
- $10,000 for 415 years in the Savings Account ($0.05 percent/year).
2. How To Make Your Money Work For You: Online Business
The following is a paraphrased and simplified story from MJ Demarco’s The Millionaire Fastlane.
MJ wants to be rich. Nonetheless, he may argue with Story # 1 stating that 20 percent is an optimistic return to focus on year after year, and getting rich this way would take too long. MJ doesn’t want to hold stock and wait, he wants to be a millionaire while he’s young.
He leaves his job as a limo driver in Chicago and spends his savings to relocate to Arizona. He then spends his time buying everything he can read (books, courses, etc.) on website design.
During his time in the Limo Industry, he realized that there was a need for people looking to easily book a limousine. He sinks the rest of his cash into buying a domain and building a website to fill that need.
In his first month, he makes exactly $0 but helps lots of people find limousine rental companies. He realizes that he is receiving a significant number of emails each day from people who use his website and are grateful.
MJ decides to adjust the model of his website and turns it into a Lead Generation site. He takes the people who inquire about Limo Rental Companies on his site and “sells” them to the companies.
He’s earning $137 for the second month. In the third month, he’s going to make $842. He earned $1,700 in the fourth month, enough to support his living expenses.
As the platform receives visitors, word of mouth travels, and SEO rises. It adds to even more travel, which creates even more revenue.
MJ has transitioned from Wealth Equation #1 to Wealth Equation #2 (see below). #2 is much more lucrative.
3. How To Make Your Money Work For You: Real Estate (simplified)
Robert just turned 40 and has been working hard and saving diligently for most of his life. He has a solid Nest Egg of $100,000 set aside already and wants to put it someplace that it will grow.
Robert has never bought a stock before and they don’t really make sense to him. However, he has always been good with numbers and decides that real estate is his game.
He lives in Memphis, Tennessee, and decides that the easiest place to find an Investment might be in his own backyard.
Robert finds a 1 bedroom, 1 bathroom apartment for sale at the cost of $100,000 and decides that the price is right. He determines that the average rent in the area is $800 so this investment will make sense financially.
He takes and heads to the bank to get a loan. They require that he puts down a 20% Down Payment but will finance the rest of the cost for him. His investment now looks like this:
Robert has spent $20,000 and converted it into a $400 a month car. This does not even include any consideration of the value of the property.
4. How To Make Your Money Work For You: Physical Business
Julian stays in a trailer park in Nova Scotia and does not lead a glamorous life. He has no money set aside, holds a dead-end job, and has had trouble with the law.
Nevertheless, the opportunity comes when he collects a $5,000 inheritance. He wants to start building a better future for himself so that he can get out of the trailer park.
So he decides to start up a business in the trailer park selling ice cream. The $5,000 was invested into an ice cream cart and inventory.
Julian then hires a friend to sell the ice cream for a few hours during the day and pays him a wage of $10. Each Ice Cream Bar sells for $3 and costs Julian $1 because he buys them in bulk.
Julian’s Business sells 2,000 Ice Cream Bars during the first month and earns a profit of $2 on each bar for a total monthly profit of $4,000. His friend works 5 hours each day 6 days a week and Julian pays him $1,200 at the end of the month.
By spending his money on an Ice Cream Cart and Inventory Julian was able to turn his initial inheritance into a business that produces a monthly profit of $2,800.
5. How To Make Your Money Work For You: Sharing Economy
Jessica doesn’t have too much money to invest and has never really read a lot on the topic. She lives with her sister in a 2 bedroom apartment in San Francisco and makes $30,000/year.
Jessica feels like she isn’t making forward progress financially, however, she enjoys her job and does not want to change her lifestyle drastically. What she only wants is to make a little extra cash so she has more spending money.
So she hops on the Internet and looks around on what she can do. Here she learns about SpareRoom and Turo thus gets a good idea.
She realizes that while she doesn’t have any money to invest, there might still be a way to make her money work for her. Since she has a car but barely uses it, she can rent it out for most of the time rather than let it be unused.
The car rents for about $50 per day for 10 days out of the month. This brings in an additional $250 for both Jessica and her sister.
Additionally, they agree to move into the same room and lease out the second bedroom to help cover the cost of the rent. Jessica advertised the room in SpareRoom and get a renter.
They pay roughly $1,800 total in rent but they are able to lease the second bedroom for $900. They now pay only $900 total which frees up $450 for each of them.
In total, by utilizing the Sharing Economy they have created an additional $700 each in cash each month ($250 profit from Turo and $450 saved in rent).
1.) Spend Money on What Makes You Money – In each of these cases, money was spent on something that will earn more money. This can be an asset (like stock or a building), a business, or self-improvement that can increase their earnings.
2.) Research – When you determine what investment is correct for you, take the time to carry out a detailed investigation. When there are no big warning flags, so it’s time for #3.
3.) Take Action – None of these tales would have been realistic without intervention. If you have done the proper research and are comfortable making the commitment, do it.
3a.) Be Patient – Investing isn’t a fast get rich scheme. Even in the case of MJ Demarco (which was the shortest one), it took several months for his company to be profitable. In most instances, it will take longer. Only look at it.
Hopefully, you’ve found this article helpful and it has cleared up what it means to have your money work for you. Now that the ideas are flowing, you can get started making your own money do the same for you!
Read also how to make money without a job.