The 3 simple rules to make more money
Making money is easy, really.
It doesn’t take rocket science or neuron-wrecking number crunching just to have more money. You just have to look at the right places, be creative, and be smart about it, that’s all.
It may sound too good to be true, but to make more money, just take to heart these 3 simple rules:
- Save more
- Invest better, and
- Earn more
Save more. This is the first hurdle for a lot of people in making money. People do make money – with their salary, commissions, or business. It’s what they spend with their money that actually affects their finances.
Different people have different behaviors in handling money: some spend to impress or to compensate, but some do not spend at all. Different cultural, family, and psychological backgrounds have lasting and profound effects in a person’s spending habit and ultimately, financial life – but this is another topic altogether.
But going back to saving more. When people save more, it instantly creates more money. Rummage through your expenses and compute how much you are spending on your wants – the lattes, the eating-outs, the fancy bag or dress or shoes that you do not really need. Cut those and you instantly have more cash.
With these surplus money, now you can re-allocate to other financial instruments to build and secure your future. Of course, it goes without saying that without any surplus money, it is not altogether possible to save and invest for the future.
Invest better. Now that you have more cash, it is now possible to go into investing, a.k.a. putting your money to work.
Let’s face it: bank deposits simply do not cut it in beating inflation. If you want to win it out in the battle against inflation, you really have got to invest. What if the capital gets eaten? What if my money loses? These only happens if you do not have the right strategy and proper mindset when investing.
When investing, match the investment instrument with the goals that you have. Money set aside for goals for the long-term should be put in long-term financial instruments, such as the stock market. Similarly, money that will be needed for the short-term should be set aside in a short-term instrument, usually bank products or money market funds.
As the stock market is inherently a risky asset, there must be a degree of safety in managing the capital and the returns. For instance, you may build up a college educational fund for your newborn baby for the next 15 or 16 years or so through the stock market, taking profit two or 3 years prior to the college and shifting to a more conservative fund to preserve the gains that you already have made. A recession may hit your educational fund should you stick it out to the stock market until the day before tuition fee payment.
So, shift from the aggressive investment to a more conservative investment as the goal gets nearer, until you shift it entirely out of investments into a savings account.
Capital preservation is also important. There are two kinds of capital preservation: capital preservation for the short-term and capital preservation for the long-term. Preserving money for the short-term means stashing it in savings accounts, time deposits, etc. But leave it there for years and decades, then it erodes as inflation eats it. Thus, you really have to invest in order to beat inflation and preserve the value of your money earmarked for the long-term.
Also, investing better means the use of different financial instruments to achieve your goal. Suffice to say that investment should be properly diversified, as well as relevant to one’s needs and goals.
It also means investing in oneself – constantly upgrading and updating your skills and knowledge – as you are your greatest capital and source of income.
Earn more. When saving and investing combined is not enough, then it’s time to be more creative and seek other sources of income. Or it can be done side-by-side with your present work. It can be a passion, a hobby, or some skill that you are very good at.
Earning more through sidelines can develop not only your entrepreneurial skills but also your entrepreneurship potentials. Who knows, it might develop into a full-blown business?
So that’s the 3 simple rules to have more money and thus, secure your future: save more, invest better, and earn more. - Rappler.com
Rienzie is also an accredited investment fiduciary of Pennsylvania-based fi360 and an international member of the Financial Planning Association, the largest association of financial planners in the US. You may reach Rienzie at email@example.com, his Facebook account or Twitter @rbiolena.