Making Your Money Work for You - A Beginner's Guide

Let’s say you’re one of those who are determined to wizen up by investing your money. The problem is you don’t know where to start or how to start because you don’t have the excess funds to use as investment. However, if you’re seriously considering the best ways to make money work for you, starting with a savings deposit wouldn’t be a bad idea at all. Be ready to take risks but you should aim to minimize that risk by initially taking on low-risk ventures.

Here are some steps you might want to consider so you can put your plans into motion instead of waiting for the extra funds to materialize.

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Re-channel your expenses and convert them into an investment product. Don’t be too ready to part with fresh money you will be earning from your current job or taking out a loan to use as investment fund. Instead, just re-channel the money you have been spending in the past for things you can actually do without.

If you’re paying for Cable TV that’s about $50 per month, then you can use this to open a savings account. Actually, you only need about $25 as an initial deposit to open a savings account that earns 0.35% APY or Annual Percentage Yield. During the first month, the $50 Cable TV money will stay intact as your savings account and will yield a gross interest income of $0.01458. This was simply computed as $50 x.0035 x 30/360= $0.01458.

This may not seem much at the end of the month but you have to keep in mind that this money could have been spent for Cable TV instead. On the second month, your Cable TV money will again be added to your savings account deposit and your total account balance will be $100.01458. Your interest for the month will be compounded by simply following the same method of computation. $100.01458 x 0.0035 x 30/360= $0.02917 as your yield for the month.

By adding the monthly $50 Cable TV money for the next ten months, your account balance will be $600 plus minimal interests earned. If you have other expenses which you can divert to your savings account instead of using it up as an unnecessary expense, re-channel them instead in order to build your investment fund.

Start placing your money in a higher-yielding Certificate of Deposit (CD) and lock the interest rate based on the prescribed period. In as much as you were able to keep the Cable TV money intact for a year, you can invest it in a CD for a one year term. If a 1-yr CD has a yield of 1.43% APY, your $600 will earn a gross interest income of $8.58.

Of course you won’t be content with this kind of earnings but our objective here was to re-channel money that could have been spent elsewhere, but was used instead to build your investment funds.

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In the process of finding the confidence to invest your money in higher yielding but riskier investment products, learn about the tricks of the investment trades yourself. There is no better way to make your money work for you than by trusting your own knowledge and intuition. In fact, you can find a lot of free financial education courses online and some good examples are those provided by Cable Network News or CNNMoney.com as Money 101. (See the link in the Reference section of this article.) You can jumpstart to Lessons 4 to 7 where the site will teach you the rudiments of basic investing, to investing in stocks, bonds and mutual funds.

Acquire practical training while investing as a beginner, then take online courses about business investments or foreign exchange trading including courses that deal with market analysis. You may think of them as too high-brow but things like these become easier if you’re actually doing it hands-on. Your aim here is to develop your judgment skills. You will eventually reach a point of being able to analyze for yourself which ventures are the best ways to make money work for you.

In the future, as your investment options get to be more complicated, it would be best if you hired the services of a financial advisor. What is suggested here is to ask for referrals and look for someone who is not only competent but also trustworthy. A financial advisor can give you guidance on how to invest in something like Mutual Investment Funds as your start-up venture.

Some Mutual Investment Funds will allow you to invest for as low as $100, which of course will earn you a relatively low income but slightly higher than depositing the same amount in a savings account. This investment scheme is offered by venture companies who pool investors’ money. The venture company will invest a large amount of the pooled money in high yield investment products like Money Market Placements, Treasury Bills, stocks and bonds and similar medium.

The income that an investment will yield will be divided among the clients who chose to include their money in that particular placement. Shares will be in proportion to the amount of your investment less the fees and charges that the venture company will charge you for handling your account. This is where your financial advisor will come in handy. Your advisor will analyze if the money-making schemes of the venture company are really aimed at finding ways to help you earn substantially.

Some consider this as one of the best ways to make money work for you, but there is the possibility that the venture company may only be making a show of it and is not really making earnest efforts. They have their priorities set on ensuring that their regular sources of fees and charges are kept at comfortable levels rather than take real risks in investments backed by research and expert analysis. Simply put, you might be paying high costs for mediocre efforts.

You’re on the right track if you’re now thinking about investing and all that stuff, but this doesn’t mean it will come easy either. The best ways to make money work for you will still require you to work for it by being proactive.

Reference:

• Money 101- A step by step guide to gaining control of your financial life. http://money.cnn.com/magazines/moneymag/money101/

Image Credist:

• By Andrew Jameson / Wikimedia Commons
• By Jocelyn Augustino / Wikimedia Commons