I remember sitting in the car with my rather wealthy friend last year, overhearing her phone call with her financial adviser. I only got bits and pieces of it, but what I gathered was that she’d be putting about 100K into a stock, and would be receiving interest of about $600 a month. Just like that: she’d just be receiving $600 a month in her sleep. I had to work long hard hours to make that kind of money, and she would just see it deposited into her checking account every month, because she was able to invest so much. In that moment, I felt, “Well, investment-related income is only for the wealthy.” But you know what? It isn’t. In fact, my friend only had that money to invest because she started growing the very little she had about ten years prior. She told me a bit about that, and I spoke to my own financial adviser about small ways to grow money when you don’t have much of it.
Invest more in your 401K
The nice thing about this is that your job will do this for you. You can just ask them to put a higher percentage of your paycheck into your 401K each month, and you won’t even feel the burn. You don’t need to make the decision every month to do so. It will be automatic. Plus, some companies match what you contribute, which can really make a difference.
Ask for a raise
Is it perhaps time to ask for a raise? We don’t just get that automatic three percent increase a year to keep up with the increasing cost of living the way our parents and their parents did. You have to ask for it. Maybe you’re at a place where it’s time, and you deserve it. Just make sure you do it correctly.
Once you get that raise, don’t change your spending habits at all (except perhaps to spend less, which we’ll get to later). But do not increase spending when your income increases. That defeats the purpose.
You really can’t start growing money until your debt is paid off—sorry. You’re losing money while paying those interest rates, which is a terrible hit to your finances. There are several ways you can start working towards a debt-free existence. If you have debt, this should be your top priority.
Invest in a Roth IRA
In addition to investing in your company’s retirement plan, invest in your own through a Roth IRA. You can currently contribute up to $6,000 a year to a Roth IRA. But if you don’t have that, put in whatever you can. The power of compounding interest is astounding. Remember that every year your contributions earn interest, the balance increases, and so the interest you’re accruing grows, too. To give an example, if you start contributing $3,000 a year at age 30, you can retire by age 67 with 615K. But if you contribute $5,000 a year starting at age 30, you can retire at age 67 with 880K. That’s just the power of compounding interest. It’s just two grand more a year, but it results in 265 grand more at the end.
Get a great points card and pay it off
If you can be responsible with a credit card, search around for one that gives you points on regular purchases like gas and groceries. You’re going to buy those things anyways, so why not earn a buck or two for every $100 you spend? It can easily result in a free $500 or $600 at the end of the year. Just make sure to pay the card in full each month.
In fact, play the credit card game well
If you can be very responsible with credit cards and qualify for some good ones, you can make money off of them. Again, you must always pay them in full each month, or else you start paying them interest, rather than reaping rewards. But you can have one cashback card for regular purchases like groceries, one travel card that gives you twice the points on airline tickets and hotels, and perhaps another that offers zero APR for the first few years. With that last one, you can hold onto the money you owe them until that interest rate kicks in, and in the meantime, you can use it to invest elsewhere and make money on it. Just make sure you’ll get it back before that APR kicks in.
Set up an auto transfer to a savings account
We often look at our checking account, and based on that amount, figure out what our budget is for the month. So, if that amount were automatically a little lower, we’d adjust our budget. That can be the case if you set up an automatic transfer from your checking into a savings account each month. Again, you won’t feel the pain of that. It will just happen. Then you’ll adjust your budget to what’s in your checking account.
Critically assess your spending
Have you sat down and looked at your spending? I mean really looked at it? You probably spend a couple hundred more than you thought on things like dining, entertaining, and Lyft/Uber rides. Just being conscious of those figures, and setting new budget goals in your head, will have you think twice before ordering delivery when you have food in your fridge or taking an Uber when it’s just a 15-minute walk.
Get alerts when you’re approaching a limit
Now that you know what your spending goals are in certain areas, get an app that will track it and notify you when you’re reaching those limits. If you get a little ding on your phone that says you’ve already spent the $300 this month allotted to entertainment, tell your friends sorry, but you can’t join them for that concert. These decisions, every month, add up.
Look into target-date funds
Talk to a financial adviser about target-date funds—also known as lifecycle or age-based funds. You’ll set a year when you’d like to retire. You can usually start with just a couple grand in these mutual funds. Your funds will be automatically reallocated each year, starting in more aggressive, higher-risk but higher-return funds, and transitioning into more conservative ones as that retirement year approaches.
Don’t ignore every financial offer
Don’t throw out every financial offer that comes in the mail. If you are a financially responsible individual, you can benefit from some of these. They’re only “scams” for those who can’t pay their bills on time. But, if a bank offers you $500 free just for opening an account with a minimum balance of, say, $5,000, and you have that just sitting in another account doing nothing for you, go for it. That’s a ten percent return, instantly. Just make sure you can maintain that $5,000 balance in the new account or you may be subject to fees.
Look into LendingClub
LendingClub is a peer-to-peer lending company where borrowers seek loans from people like you, and usually turn them around with paid interest rather quickly. Here you can sometimes lend as little as a hundred dollars. Of course, always assess the loan, check out the borrower’s credit history, figure out what they’re using for, and use your own deductive reasoning to decide if it’s a safe loan.
Invest with friends
If you don’t have enough to make the minimum contribution to a fund, you can always see if a few friends want to go in on it with you. Then you get to grow your money together—which is kind of fun.
Start a side hustle
If you have the time, start a little side hustle. Maybe it’s driving Lyft. Maybe it’s teaching lessons in a subject matter on which you’re an expert. Even if it’s just for a couple hours a week, if you strictly put away that income, then you’ll have more to invest eventually.
