One of the biggest issues that surround peoples thoughts is how to make money. Whether you are poor, middle class, or wealthy the idea of increasing your wealth is something that every individual is interested in. Making money is not exclusively within the realm of your income; however, the more income your family has the more opportunity you have to increase your wealth. However, any financial adviser will tell you that the salary from your job should not be considered your income. Your salary from your job should be a tool in making your income.
Eliminating Unnecessary Debt
The first step in how to make money is to eliminate your unnecessary debt. This includes credit cards, unnecessary luxury items, and any other debts that you can live without. Paying off your credit cards should be your first step in how to make money. If you have a balance on your credit card of $3,500 you can expect a monthly interest fee of between $50 – $75. If you have any hopes of increasing your wealth it is imperative that you eliminate this debt. The interest rates that you are charged on a credit card are higher than any other interest rate that you will be subjected to and finding an asset that will counteract that interest is slim.
When first learning how to make money it should be your number one job to eliminate this expense. Every month you get a statement you should make it your job to pay the monthly interest rate and, in addition, pay down your debt in a way that is reasonable for you and will allow you to pay down your debt within a reasonable period of time.
In addition, you will want to eliminate any unnecessary luxury items. Most millionaires did not become that way by driving the newest model car. Millionaires mad their wealth by driving used Toyota Camry’s and using the money they saved from the difference to invest in interest bearing, lucrative investments. If you are leasing an expensive automobile; unless you need it for your job, such as sales, then you should consider ending your lease at the nearest opportunity and opting for a moderately priced, reliable, vehicle.
It is the elimination of these unnecessary debts that will allow you to garner the extra savings that you need in order to make money. The old adage stands true, “it takes money to make money.” If you are constantly making payments on credit card interest and paying monthly bills for unnecessary, and unaffordable, luxury items then you will not have that opportunity.
When you eliminate these expenses you should consider them, not to be extra money, but rather pretend like the debt was never eliminated. If you take the money that you would have spent on theses unnecessary expenses, put it in a savings account and forget about it then you will be surprised how quickly that money will accumulate. Within a short period, around a year or so, you should have the capital to start investing properly and begin your journey to prosperity.
At the same time that you are eliminating your unnecessary debt you should also be building your credit. Whether you have good credit or not it is an important step how to make money that you have the highest credit score you can maintain.
There are numerous advantages to having a good credit score. They include: getting lower interest rates on your credit cards; cash or travel rewards on credit cards; high credit limits; and maybe the most important aspect of having good credit is that it will give you the ability to qualify for, and pay lower interest rates, for home, car, and personal loans as well as lower insurance rates.
Lending institutions look at your credit score in analyzing the risk involved in lending you money. The higher your credit score the lower the risk that the lending institution will feel in lending you money. When a lending institution is comfortable with the idea that you are a low risk lendee it will reward you by requiring you to pay a lower interest rate on a loan.
When learning how to make money you will want to learn how to build good credit. There are a few easy ways to do this. First, you want to pay your bills on time. Any history of late payments, actions taken by collection agencies, and especially bankruptcy will be a “black mark” on your credit report and make a lending institution wary as to whether you are a risk. Don’t use too many, or too few, credit cards. Most experts point out that you should have between 2 to 4 credit cards that you should use. You are in the best position to show your lending institution that you have good credit by having a history of paying your bills on time. If you have more than one credit card it will increase the amount of positive history that will show up on your credit history. You should also periodically review your credit history. This can be done by going to a credit reporting agency. Be sure that you view credit reports from all three credit reporting agencies; Experion, TransUnion, and Equifax. This information should be checked at least once a year and any discrepencies should be reported to the credit agency and maybe even further. Having an unauthorized charge, or charges, can be a sign of identity theft; which can be devastating to your credit.
How To Use Credit Cards
It may sound contradictory to what was mentioned in the first part of this article on how to make money but you will need to maintain the use of your credit card. The only way for credit reporting agencies and and lending institutions to analyze whether you are a risk or not is to follow your spending and whether or not you meet your payment obligations. If you never use your credit card you will not be inputting positive information into your credit history. Although you will want to eliminate your unnecessary debt and interest rates initially you will want to maintain the use of your credit card as a tool to build your credit. There are some tips to follow when using your credit card to build credit.
First, credit reporting agencies and lending institutions will not only be able to see what your balance is and whether or not you are making your payments but they will also be able have information on what kind of items you are using your credit, and debit card, for. Many can think that this is an unscrupulous behavior on the part of the lending institutions but it is a viable way of analyzing what kind of individual the lending institution is dealing with. For that reason you should use your credit card for expenses such as groceries, car payments, utilities, book stores, and other “positive” expenses. In contrast, you should avoid using your credit, or debit card for “negative” expenses such as alcohol, cigarettes, or any other expense that may be deemed a “bad trait.” If you need to purchase “negative” items you should use cash so that there is no tracking of what your “negative” expenses.
Secondly, when using your credit card you want to use the card as much as possible to build your credit while still maintaining low, to zero, interest payments. How is this done? The best way to accomplish this is by looking at your credit card, not as a tool for when you don’t have cash in your bank account, but as a tool in the alternative. If it is possible to do so you, should only maintain a balance on your credit card that you will be able to pay off at the end of the month through your checking account. By doing this you will be showing the credit reporting agencies, and lending institutions, that you make your payments on time yet, at the same time, not incurring many, if any, interest charges.
Investing Your Money
After you have eliminated your debt, built your credit score, and accumulated enough savings it is time to start putting your money to work for you. There are many ways to make money and how to make money can take many different forms. You have the option of stocks, bonds, real estate, business opportunities, mutual funds, etc. This is where all that work you spent paying down your debt and building your savings and credit will come in handy.
The safest bet for investing, especially when investing for beginners, is to look into bonds. Bonds are certificates that are issued by corporations and government entities that signify a debt that the issuer owes the investor. These investments are often considered the safest, especially when you are investing in U.S. Savings bonds. Savings bonds operate in a reverse creditor situation where you are the creditor and the issuer of the bond is the debtor. In exchange for your investment the issuer will promise to pay you back, with fixed interest, over a period of time that can range from months to 20 years, depending on your bond agreement. The great thing about bonds is that they are consistent. When you invest $10,000 in a bond with a fixed interest of 5% and a maturity date of 2 years you know that in 2 years you will have re-couped your investment as well as $500 in interest. The disadvantage is that normally the amount of money that you can gain through investing in bonds is a low rate of return and unless you have the ability to invest exhorbitant amounts of money you will not receive a quick, and lucrative return on your investment.
In addition to bonds investing for beginners, and those that are looking to build capital through long term investments, mutual funds are a great way to make money. Mutual funds are investments where an investor will contribute a certain amount of money into an investment pool. The money collected from numerous individual investors will be used by a fund manager to invest in certain stocks and commodities. When investing in mutual funds the investor will have the option of choosing mutual funds that deal with energy stocks, commodities, entertainment stocks, etc. One of the great advantages of investing in mutual funds is that you can trust your money to an experienced and successful fund manager. The disadvantage of entering into mutual funds is that you have little to no input into what specific stocks and commodities your money will be invested in. You are putting your money in the hands of an expert and you will not be able to go at it on your own.
Yet another way to make money is to invest in real estate. How to make money in real estate requires, not only extensive research, but a lot of capital. Putting money into real estate is a great way on how to make money. When doing this you should do your homework. Find out what neighborhoods are up and coming, if the property values are lower than should be expected, possible business developments that may come into the neighborhood, among others. One of the best forms of real estate investment is through auctions. Especially in the current real estate environment where mortgage rates can be as low as 4% and housing prices are the lowest in 31 years. Here is where all the work in building your credit comes in handy. In order to take advantage of the extremely low mortgage rates your lending institution, especially in the wake of the housing crisis, will severely scrutinize your credit. If you have bad credit you may have to pay high interest, or even worse, be denied a mortgage all together. Buy homes and real property that need a little work. The best way to make money in real estate is to turn a “fixer upper” into a valuable piece of property that will attract high income home buyers. When you do this be wary about the surrounding neighborhood. If you spend a good amount of money investing in property and even more turning the property into an even more valuable asset it could still be useless if the surrounding neighborhood is in shambles. Another great way to make money in real estate is to pool your money with others. If you have 10 people who are willing to invest $20,000 a piece a mortgage may not be necessary and a joint tenancy or tenancy in common can be created. Real estate has been traditionally a very lucrative and stable way to make money. In light of the housing crisis peoples opinions have changed but it should still be deemed a consistent profitable way to make money.