Make Your Money Work For You (3 Steps)

Making your money work for you is one of the most common clichés out there when speaking about money. You see quotes like “Don’t work for money; make it work for you” – Robert Kiyosaki or “The rich don’t work for money. They make money work for them”, but in the literal sense, what does “making your money work” really mean and how to do it? Well, for starters there is no clear answer to this question. In fact, if we take a few seconds and think about it, there are tons of answers that we can come up with. However, for each of the answers, we thought about, we imagine our money “doing” something for us, either it’s paying off debt, traveling, dining out, saving, investing, etc. Developing smart practices in how we utilize our money will ensure that we enjoy the benefits of financial stability. Here is a 3 step guide to making your money work for you.

Step 1: Purpose

Making your money work for you has to be backed by a clear purpose in mind. For example: When you have a specific purpose that you want to achieve, you can then tailor your investing, saving, and spending practices to achieve it. Before putting your money to work, the questions that you should ask are: what are your goals, and what’s the purpose for achieving that goal?

Step 2: Create a Plan

Yes, if you guessed that this was going to be a step, then you are smart. Creating a plan is essential when embarking on financial goals, it will provide you with a roadmap to navigate to the objective. When determining how you are going to make your money work, you begin by creating a budget, which is the financial term for a plan. Using a budget is a way to balance your income, expenses, and your financial goal. It is a way to understand and have a relationship with your money. For example, how much do you spend on non-essentials? How much is in your emergency saving account in case of an emergency? What are your total expenses? Can you take advantage of investment opportunities? These are all questions that can be answered by planning out your goals and using a budget. By starting your process with creating a budget you will understand your money much better in order to make a wise decision when making your money work for you. Remember, a budget is a plan for all of your money — that includes money the stuff you enjoy, too.

Step 3: Timing

Have you ever heard the concept “time is money”? It is one of the most frequently used, and most important concepts of finance. It is the idea that money that is available at the present time is worth more than the same amount in the future.  When you are constantly making various financial decisions you should always consider the time value of money. Savings or investing your money instead of spending it today can result in a greater amount in the future. Every time you spend, save, invest or borrow money, you should always consider the time value of that money spent. For example, spending money from your savings means that you have lost any future interest that can be earned on your savings account. You will have fewer savings if an emergency expense does arise, however, what you purchase with those funds may have a higher priority than those future earnings. 

The Bottom Line:

In closing, it is always good to look at money from a qualitative approach, because it is a tool and like all other tools they are needed and used to help us fill specific needs. I will leave this quote with you, that can help you put money into perspective “If money is all you have at the end of the day, then you are doing it all wrong.”