How Can You Make Your Money Work Harder For You? (2024)

Making your money work for you essentially means to use your money to make more of it. And while this might sound like a bit of a conundrum, there are a gamut of financial decisions that can help you do this.

Preliminary Steps

Before embarking on a journey to save, grow and invest your money, there are certain steps that must be followed to lay the groundwork.

Create a Budget

As dull as it may sound, creating and sticking to a monthly expense plan is key to making your money grow. It not only helps to determine where you are spending your income but also helps you to change the way you manage your money. The ultimate goal is to spend less than you earn and keep track of where unnecessary expenditure is being made.

Budgeting isn’t a one-time action; it is a continuous process of engaging with your expenditure habits every day. It involves:

• Cutting out bad financial habits
• Keeping a track of miscellaneous expenses
• Drawing up monthly limits for different categories of spending

The idea is to keep a track of where your money goes in order to control it sensibly. If done right, budgeting is the real first step towards financial stability.

Get Rid of Debt

Debts can trap and halt your financial growth in a negative way, which is why getting rid of debt or reducing it to the bare minimum is crucial. When a person is in debt, they end up paying more than the cost of the original purchase price. There is also the burden of interest payments that can eat into one’s income.

Debt curtails the choices one can make towards savings and investment and it is therefore best to eliminate it all together. Having debt means to be stuck in a vicious cycle of earning and losing money even before you have had a chance to enjoy it.

This is easier said than done, for those who are feeling stuck and unable to achieve this, the trick is:

• To start by paying off the smaller debts
• put away the leftover money into savings.
• Do not take on any new debt
• Eventually, there will be enough saved to pay off even the larger debts.

Invest, Invest, and Invest!

Investing money is akin to making it, it is a long-term strategy for building actual tangible wealth that can be utilised as income later on. There are several options to grow money through investments:

Stocks

• The stock market can be a daunting place for novice investors, but with a little amount of effort, the risks are worth the reward.
• Stocks essentially represent legal ownership in a company, when you invest in a stock, you automatically become a part-owner of the company.
• Investing in stocks can be an efficient way to build wealth gradually over the years.
• One of the easier ways to make a foray into the stock market is by investing in mutual funds or index funds. These investments are like a group of diverse stocks and other holdings that appreciate over time.
• Mutual funds are the better options for first-time investors to generate income as they require very little effort and planning to get started.
• The most important thing to remember while investing in stocks is that it is a long-term process. Don’t be jolted by short term volatile events like this pandemic and withdraw your money because markets are resilient and your patience will pay off in the long run.

High-Yielding Savings Account

• For those who are wary of the stock market’s uncertainty, savings accounts are an equally good option.
• Online banks, also known as virtual banks because they don’t have any physical branches and exist solely online, are a better option here.
• This is because they have very few overhead costs to meet and are therefore able to consistently offer higher interest rates that are above the national average.

Real Estate

• This is a popular investment class. A lot of people prefer it because unlike stocks and bonds, it is a tangible asset.
• Real estate gives people the sense of ownership and its value appreciates over time.
• However, the only major hurdle with real estate investments is the cost of maintaining it.

Develop Sources of Passive Income

With the advent of social media, there are more ways than one to achieve financial stability and security. Online content creation, voice-over work, freelance writing gigs, part-time marketing, are just some of the options that people can explore to generate some additional income. This money can be a surplus to your staple monthly income and can thus be solely directed towards savings and investments.

Claim Your Tax Credits

If you are charged more tax than you are actually liable to pay then the excess amount is made available as a tax credit. This credit can later on be adjusted against any future tax liabilities, i.e. the credit is entirely deductible from the amount of tax you have to pay, and this is regardless of the tax bracket you fall into. So make sure to claim your tax credits.

Credit Card Rewards

Although this might sound slightly trivial, earning cash just by spending the money you normally would is always a bonus. Rewards cards work best when you pay off your balance each month. But remember to avoid making extra purchases just to get rewards points because that defeats the purpose of curtailing unnecessary spending.

Bottom Line

Being financially disciplined is a long-term exercise and every small prudent decision can help go a long way. Take for example the simple act of paying credit card bills. People often either pay it in advance or after the deadline, neither is advisable. Paying large credit card bills late obviously incurs a fine, but paying it too early also means that you are losing the interest that this money could have made in the bank. Hence, small actions like paying bills on the exact due date so that your money can yield the maximum amount of interest in the bank go a long way in making you financially secure.

Keep liquidity very tight. Obviously, it is important to account for emergencies such as hospitalization etc. but otherwise, keeping excess money in the bank means there is always a chance of you spending it. It is ideal to never spend on unnecessary items, especially if they will not appreciate in value over time.

Milan Ganatra is the founder and CEO of 1Silverbullet. He started his journey towards building technology-led solutions for the financial services sector in 1999 with Miles Software and is actively involved in investing in finance companies.

Aashika is the India Editor for Forbes Advisor. Her 15-year business and finance journalism stint has led her to report, write, edit and lead teams covering public investing, private investing and personal investing both in India and overseas. She has previously worked at CNBC-TV18, Thomson Reuters, The Economic Times and Entrepreneur.