How to Grow Your Money Wisely

Saving is one of the most important aspects of growing money and having a secure future. Along with many proven benefits, saving money is the best financial habit you can learn. It gives you a way out from financial uncertainties and lets you enjoy a quality life. In order to grow your money, you’ll need an effective investing plan.

In order to grow your money, it is important to learn the art of spending it. Without the proper knowledge, you won’t be able to create a secure future for yourself and your family. Leaving your money into a savings account could be the worst financial decision you can make. You’ve to educate yourself about various investment options available in the market. It doesn’t matter if you start investing now or have been investing for a while. You can grow your money with simple strategies and habits.

So now let’s discuss some of the best investment strategies that can help you grow your money

Define your money savings goal

As you go through life, your saving goals may change both personally and financially. Whether you’re looking to buy a house, a car, or just want to save up for emergencies, setting up saving goals can help you grow your money faster. No matter what stage of your life you’re in, it’s never too late to start saving money. 

Setting short, medium, and long-term saving goals is a crucial step to grow your money. If you’re not defining your saving goals, you’re most likely to spend more than you should. 

Here are a few steps you can follow:

  • Specify a goal and start working for it (Ex: Buying a house, a car, or paying off debt)
  • Figure out how long will it take to accomplish it and write down the steps you need to follow
  • Start implementing your plan
  • Keep an eye on your progress
  • Reward yourself

Calculate your retirement needs with

Retirement is a period that everyone dreams of living peacefully. Retirement planning becomes essential as soon as you start working. The hardest part of a retirement plan is to calculate how much money you should save before you retire. Well it depends on a few factors like:

  • How much you will spend after your retirement
  • Determine how much you’re going to earn from your investments
  • Calculate how much you’re willing to withdraw from your savings each year
  • Your lifespan

Consider using the 4% rule of thumb. By using it you’ll be able to withdraw 4% from your savings each year. If you retire with $1 million in your portfolio, you’ll be able to withdraw $40k each year. 

Assess your investment risk using Grow Your Money

Individual investments have an expected amount of risk just like institutional investments. It’s especially true when it comes to investments like stocks, bonds, mutual funds, etc. 

In most investments, the higher the volatility, the higher the risk. If an investment behaves as planned and produces an expected return, then it’s a low-risk investment. Yet, a stock’s past volatility doesn’t determine future returns. And the same thing goes for low-volatility investments. 

Here are few steps to avoid investment risks:

  • Monitor your investments in a regularly
  • Diversify your investments
  • Maintain sufficient liquidity
  • Invest in small amounts

Start saving early

It’s obvious that if you start saving in your 20’s rather than 40’s, you’ll have a lot more money once you retire. When you’re young, it’s hard to appreciate the value of money. Once you spend 2-3 decades on earth, you’ll begin to notice how hard it is to make money. You’ll also learn the uncertainties of human lives. Job losses, health issues, economic downturns, and many more. It’s difficult to live a comfortable life without savings. Those who start saving at an early age put themselves in a better place as life goes on. 

Reasons to Save Money Early:

  • Gives you financial freedom
  • Prepares you for emergencies
  • Improves risk-taking ability
  • Secured future

Pay Yourself First

Pay yourself first is one of the most commonly used phrases in personal finance. If you pay yourself first it helps you to save money for the future. You’re basically paying your future self by saving money for your long-term needs. When you pay yourself first you’re prioritizing your long-term financial well-being. You don’t concentrate on your immediate needs like bills or entertainment. Instead, you save for your future before you spend on anything else. 

Advantages of  “paying yourself first”:

  • Saves you money for your future self
  • Saves money for your retirement
  • Adds more money to your investments
  • Helps you deal with emergencies

Take advantage of employer savings plans

An employer-sponsored savings plan is a plan offered to employees at a relatively low cost. These plans, like 401(k), cover multiple services like retirement savings and healthcare. Employees who participate in these programs get benefits from discounted services. It offers employees an automatic way to save for their retirement and benefits them from tax breaks at the same time. Employees also receive free money when employers offer a matching contribution. 

Maximize 401k contribution

If you’re financially stable, maximizing your 401(k) can be a good idea. Maximizing your contribution will help you grow more funds for your retirement. In 2020-2021, you can contribute to the 401(k) up to $19,500 if you’re under 50 years old. And you can contribute up to $26,000 if you are above the age of 50. 

Here are some of the benefits of maximizing your 401(k) contribution:

  • You’ll be able to save more money for your retirement
  • You can grow money on a tax-advantaged basis
  • Reduces taxable earnings to save on taxes

Build your emergency savings

Emergency funds help you tackle the uncertain emergencies that might show up at any time. It’s a fund that you can use in times of crisis, unplanned and unexpected situations. The purpose of creating an emergency fund is to improve your financial security. It creates a safety net that you can use in emergency expenses like debt, medical bills, etc.

Saving for emergencies depends on your income and profession. But, you should save up for at least 4-6 months of expenses like food, medicines, groceries, etc.   

Expand your retirement portfolio

Creating a comfortable retirement plan is the biggest financial challenge you might face. Ideally, your retirement portfolio grows with you. It provides you the funds you might need for a comfortable retirement. So expanding your portfolio will benefit your retirement plans. The best way to expand your portfolio is by diversifying it. There are many options available in the market for you to explore:

  • Employer-sponsored plans like 401(k)
  • IRAs
  • Robbo-Advisors
  • Taxable Brokerage account

The key to growing your money is to start saving and investing as soon as your start earning a paycheck. There is no shame in starting with small amounts. Even starting with $20 is better than doing nothing. Better a poor horse than no horse at all. If you’re starting late, there is nothing to stress about. Just stay motivated and help yourself and others grow.