Want more money? Try these four things.
We could all use a little extra cash in our lives, especially at this time of year. Slaving away at your 9-to-5 is one way to do it, but it's not the only way. While the following four strategies won't make you rich overnight, when used consistently over time, they can help you double your money.
Investing is one of the best ways to grow your wealth because there's a good chance your annual rate of return will outpace inflation, gradually increasing your net worth. Plus, it doesn't require much work from you -- apart from choosing the right investments. That's not always the easiest thing to do, but there are plenty of tools out there to help new investors get started.
It is worth taking a look at index funds because they offer low fees, instant diversification, and historically strong growth. These are mutual funds that passively track a market index, like the S&P 500. You could also try a robo-advisor if you want help picking investments. They tell you how to invest your money based on your answers to a few questions, although the advice isn't as tailored as some might like.
However you decide to invest and whatever you decide to invest in, stay mindful of fees because they can eat into your profits. Check your prospectus and your broker's fee schedule to learn what fees you're paying. You also need to make sure you diversify your investments across many assets and sectors to reduce your risk of loss.
2. Use a high-yield savings account
If you have money that you don't expect to use in the next few years, investing is your best bet. But if you want to sock away some cash for your emergency fund or a large purchase, a high-yield savings account is probably a better choice. These operate just like traditional savings accounts, but offer much better interest rates. The average savings account APY is 0.09%, but some high-yield savings accounts have APYs of more than 2%.
To give you a sense of the difference that could make, consider a five-year investment of $10,000. With the average 0.09% APY, it would only be worth about $10,045 after five years. But if that same sum had a 2% APY, it would be worth nearly $11,041 after five years. That's nearly a $1,000 difference, all from switching up the type of savings account. It may still take a while to double your money in an account like this, but it'll get you there much faster than a typical savings account.
3. Start a side hustle
If you're looking to make a little extra cash in the short term, there are often seasonal jobs available during the holidays and summer months. But it's also very possible to start a side hustle and generate extra cash year-round. There are a lot of options these days. You could drive for a ridesharing company, sell things online, walk your neighbor's dogs, or teach classes in your area of expertise. Think about what you're good at and how you could best monetize it. Then, advertise your business to your family and friends to help generate customers.
Keep in mind that you don't get to keep all of your side hustle income. You owe a portion to the government. If you also had the side hustle the year before, last year's tax return should tell you how much you must pay quarterly. Otherwise, you can estimate your taxes using this worksheet.
4. Spend less to double your savings
Doubling the money in your bank account won’t necessarily require any extra work if you're willing to cut back on your spending. Comb through your budget and look for areas where you're spending more than you need to or more than is wise. Dining out, clothing, and entertainment purchases are a good place to start.
You should also look through your subscriptions for any you're not using anymore. Check your bank and credit card statements for the past year to make sure you don't overlook the ones that renew annually or every few months. Put the money you're saving into your high-yield savings account or your brokerage account to help it grow more quickly.
Try one or a combination of the strategies above. If you stick with them, in time you can grow and maybe even double your money.