There is really no simple answer to the question on how to make money work for you. There is really no easy or single way to do it. But what sets the wealthy and the not wealthy apart is that wealthy people are the ones who are earning the interest and the not so wealthy are the ones who pay the interest – that is how rich people actually make money work for them.
While saving money in your bank account can be good, remember that it is just one way of building your reserves. But, if your ultimate goal is to be able to reach true financial planning, here are some things that you can actually do:
Bank on fixed income securities
One of your options is to invest your money in the markets where you can earn regular interest. A specific example is by purchasing commercial papers issued by listed companies or the government-issued bonds. Remember that interest rates vary depending on the term. If you choose the longer terms, then the interest will be higher. The ones that are issued by the government are usually risk-free, but investing your money in public or private companies will entail higher interests because of the higher security risk that comes with it. Also, do not pre-terminate your money as you may be charged, or you may incur additional charges.
Put your investment in preferred shares
Purchasing preferred shares of listed companies in the stock market will give you a higher yield. Although there is only a few of them in the stock market, they are a good substitute for fixed income. Preferred shares are typically stable, and they offer around five to seven percent per annum. Make sure that when you purchase preferred shares, they are liquid so you can trade them whenever you need cash.
Make investments in growth and dividend stocks
If you are willing to take risks for greater returns, you can purchase long-term stocks. Choose lucrative stocks which have bigger potential for doubling its share price over the long periods of time and the ones with better earning prospects for growth because the share cost of the stock will increase as the earnings grow. If you are not so sure about this, another option you may take is investing in dividend stocks. It pays somewhat similarly to preferred shares, but the only difference is that the amount of dividends paid is based on net income.
Invest in real estate
Another investment you can make is in the real estate, where you can gain regular cash flows or simply gain long-term capital earnings. An example is purchasing a condominium unit for rentals. Or, you can also purchase a property and pay only the equity portion and then finance the remaining balance with the help of a bank loan. If you have saved money in the bank and your cash can afford it, you can buy raw lands because their value never depreciates. In fact, they have a huge potential to appreciate in the future, which is why this one’s really a wise investment.
Invest in a start-up business
Start-ups are a huge risk but they may be worth the risk. A lot of them do not succeed at first attempts but when they start generating gains, the results are also amazing. If you have read or heard on the news, there are just so many successful entrepreneurs who actually started from nothing or started with a very small capital. If you have that idea, that concept and you can see yourself managing a business of your own in the future, you might have that potential to be an entrepreneur. However, if you have hesitation to do your own start-up business, you can look for a business partner who is willing to invest with you. Risks can always be managed in a business especially when you know what you are doing, and you are passionate about it.
The very first thing and one of the most important things about investing is that you take the time to learn and keep yourself financially educated.