A common
misconception about becoming financially prosperous is that you need to work
harder than everyone else, build a vast corporate empire or have a natural gift
for trading. The truth is that you need to make your money work hard for you,
not necessarily yourself.
This speaks to
simple math. If you were to invest a modest portion of your income (whatever
that might be) into assets that generated a decent return (5-10%), then over
the length of your working life, this can easily compound into a serious amount
of money.
Making your
money work harder for you requires more than simply leaving it in your current
account or spending it on liabilities like a new car or clothes. It needs to
compound - to create more money by itself, by being invested in an asset class
that reliably creates greater and greater returns.
It doesn’t
require any special edge to make your money go further, but it does necessitate
an understanding of finance and the practicing of sound monetary habits.
Here is some advice that should set you on your way:
Cut down on your monthly costs
The first step
to making your money work harder for you is to reallocate your monthly
spending. There is no necessary avoiding payments like rent, food, taxes, and
utility bills, but you can reduce them.
Living below
your means sounds like a prison sentence, but it doesn’t have to be extreme.
Simply being able to have some money left over to invest in assets is enough.
Once vital
payment is insurance, which can quickly mount up if you haven’t negotiated a
fair deal with your provider, if you are unsure how to do this, contact an insurance broker who can help you find the best deal.
Acquire a range of assets
Another great
way to ensure your money is working harder for you is to invest it in a range
of safe assets which can generate meaningful returns.
Storing your
spare money in a conventional bank account sounds sensible, but the reality is
that inflation eats away at it year on year. It is like a melting ice cube,
dripping away at an increasingly alarming rate.
Instead, you
need to ‘beat’ inflation by investing it in an asset class - such as property,
stocks, bonds, or any other manner of asset class. You should do your due
diligence before actioning this, but by being clever with your money, you can
generate far more than you might imagine.
Pay off debt and start practicing better financial habits
Making your
money work harder for you is about more than clever investments and being
shrewd with your monthly spending. You must eliminate any prior financial
issues and prevent yourself from falling into bad habits.
These include
falling into debt, overspending on luxuries like cars, nights out, clothes, and other
similar liabilities, and entering into investments or trades you know nothing
about.
Steering clear
of debt, overexposure, tax issues, and credit problems will put you far further
ahead on your financial journey.
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