Is Your Money Pulling Its Weight? 5 Ways to Whip It Into Shape!
We can’t all be Robert Kiyosaki (“your strategy is all wrong; buy my book”) but nothing can stop you from using the money you have to its fullest potential. I’d do what my favorite advisor, Tim Gunn, always says: “Make it work!”
Opt for investments that provide fair returns
Nothing is worse than having another person profit from money you gave them to invest. Sadly, that’s precisely what’s happening if your money is languishing in CDs (certificates of deposit), savings accounts or money market funds!
These financial institutions are effectively borrowing from you, loaning/investing it elsewhere, and waxing fat on the difference. If you want your money to earn its keep, so to speak, conservative dividend stocks are a viable alternative; there are a number of companies that pay out annual yields of up to 9 per cent. You could say their tag-line, if they had one, would read “no flash, all cash”. Or something like that.
Tax shelters can be your best friend
Obviously, taxes can make a major dent in your earnings and nest egg, and all omens point to a very high likelihood of higher taxes for investors in 2011. You could always plant your own vegetables and rear your own chickens to keep more money in the bank. A bit drastic, but always good for the locavore movement.
However, if you want to reduce your taxable income, thus keeping more green for yourself, you might also want to take as much advantage of tax shelters as possible. Your 401(k) is the most common shelter, but there are also other means of tax avoidance, including individual retirement accounts (IRA), 529 plans, which work if you really are saving for future college costs, as well as the home you own.
Remember though, the IRS takes a dim view of tax shelter abuse, which constitutes tax evasion. If a shelter asks you to keep transactions quiet, or is located offshore; don’t walk; run away.
Aim for cash backs
Credit cards are a necessary evil for most of us, so why not take full advantage of them? Cash backs are one of the best rewards a card can provide, although points-based reward systems can also be worth your while if they match your requirements specifically. This only works if you spend within your budget and diligently pay the full balance each month.
You don’t have to run the entire gauntlet of credit card application procedures either, thanks to the credit card bill, which has made it more challenging for consumers to get a credit. You only need one card; two at most, and you’re sure to find one that doesn’t charge an annual fee (or tack on various “charges”) soon enough.
Watch as money DRIPS in
Otherwise known as dividend reinvestment plans, this option can be rewarding especially if you’re new to investing. DRIPS are for the long-term (they’re marathons compared to the sprint event of active trading), so forget getting current income. The compounding interest that develops from having dividends automatically reinvested directly into the underlying equity/stock also make it easy to perpetuate the myth of the lazy, yet successful investor.
Caveat: availability may be limited; trading through a stock broker may be a more accessible/convenient option. Kind of defeats the purpose of investing directly in a company though. Also, you face a higher risk as you’re only investing in one company, as opposed to making contributions to a 401(k) that enjoys diverse investments.
Make time for a debt review
Debt is virtually synonymous with modern living. I have a student loan and car payments to contend with. There are some outstanding amounts on my credit card, but nothing over which I’m going to lose sleep.
I’m not gloating though, because all debts are subject to interest; the difference being how much is added where. I’d rather have that money go toward my retirement, which is why concentrating on the largest amount owed or APR is a good place to start. It will take time, naturally, but you can be sure I’ll turn all my attention to Debt #2 as soon as I’ve dealt with Debt #1.
If you want to ensure your money only goes where you tell it, it’s also a good idea to review the number of credit cards you have and need. A friend did exactly that, and discovered she only needed two of the six she held. Who needs six credit cards, or even uses them anyway (don’t answer that if you’re the Girl in the Green Scarf)?
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