How to Double Your Money With Good Financial Management
One of the things that makes rich people different from poor people is that they have learned how to make their money work for them by using good management.
They view money as a tool, rather than as a toy.
When you see them driving around in luxury vehicles or traveling first class, you can bet that they are not footing the bills for those things.
Either their businesses are paying for them or they are "gifts" from individuals wishing to win their favor.
Some of these people were born rich, but not all of them.
Many started out as average people, but ended up as people who found the secret to using the money they had to its best advantage.
They learned early on that they had to
- work hard,
- improve their marketability,
- live beneath their means and
- cut every possible financial corner to build a stash of cash that would serve as the basis for their empire building.
There are no guarantees that doing these things will make people rich, but there is a definite guarantee that not doing them will leave people wondering why they have huge amounts of debt and are always struggling to keep up financially.
Step 1: Work Smart
Most people have to work, but few understand that it is the kind of work you do and how you do it that makes the difference in how much you earn.
- The kind of work you do is based on the quality of the skills you have or the type of talent you possess.
- How you do your work is based on your ability to "work smart" as well as your desire to work hard.
The key that opens the door to earning well is education. This does not mean that you have to go to college, but rather that you have to increase your knowledge base.
Many plumbers and carpenters earn much more than most college grads because they have learned skills that provide services that people need and are willing to pay for. Those who are especially good at what they do, earn even more!
I know a man whose formal education ended with a high school diploma but who was a very talented carpenter. He was diligent in the work he did and created beautiful pieces. A customer who was an executive with a big airline noticed this, employed him and got him the training he needed to have. Eventually, the former carpenter became a vice president in the company!
This is a perfect example of what someone without much formal education can accomplish if he hones his talents and does good work.
Working smart is another way to improve earnings.
My husband and I used to own a small trucking company. We noticed that other truckers had the attitude that "the more you drive, the more you earn", but we quickly realized this couldn't be true because so many of them never had any money!
So, we analyzed our situation, and changed the way we did things. We found the 20 most profitable states to work in, and stuck to them. The next year we drove15,000 miles less and earned $8,000 more!
There are good lessons in these two stories that you can apply to just about any type of work you do.
Step 2: Become Marketable
If you want to earn more money, you need to have a skill or talent that people will find worth paying for.
As stated above, the best way to achieve this goal is to increase your knowledge base or hone the talents you already have.
If you want people to pay for your services, you have to make doing so worth their while.
Nobody is going to pay a cleaning lady $500 per hour, but everybody will pay that much to see a heart or cancer specialist!
It's nice to want to earn more money, but before you seek it out, ask yourself what you bring to the table that will make someone want to give it to you!
If you can't think of anything, then it's time to make yourself into a product that people want to buy!
Step 3: Scrimp and Save
It is not how much you earn that matters, but how much of it you are able to keep that counts.
The best way to keep your money is to live beneath your means, which means finding ways to spend less than what you earn, staying out of debt or eliminating the debt you already have, paying cash for everything and doing things such as
- eating all meals at home or packing your lunches,
- buying your clothes in thrift shops,
- driving an older, less expensive car,
- living in less expensive housing or sharing costs with roommates,
- never buying magazine or newspaper subscriptions,
- never keeping a pet,
- giving up expensive habits such as smoking and drinking alcohol and
- learning to cut your own hair and manicure your own nails.
These and similar behaviors are not fun to do, but they are only temporary. Doing them will provide you a stash of cash that you can use to build wealth.
This won't happen overnight, but if you keep at it, one day you'll be the man or woman flying first class!
Making Your Money Work for You
Not everybody who does well financially has to do all of the things mentioned above, but unless you come from money, are highly skilled or have invented something wonderful, it is likely that you'll have to do some of them.
The bottom line here is to be able to get your hands on a pile of cash that you can put to work for you so that you income will start to grow.
There are many ways to do this, but the long term goal is to eventually have your money work for you instead of you working for it! When you reach this plateau, you will then have the option of retiring if you choose to do so!
Below are some of the things you can do to make this happen.
Most people start small when it comes to investing because they only have small amounts of excess cash, want to be able to access it easily and do not want to lose any of it.
Most do this by opening savings accounts and depositing excess cash into them regularly.
The bank pays a certain amount of interest on the cash, which increases the amount of money in the account. However, since savings accounts are so secure, the interest is usually the lowest of any type of investment vehicle.
However, different banks pay at different levels, so people should always be on the lookout for higher interest rates because the higher the rate, the greater the income.
What makes savings accounts and certain other investments work is something called compounding. Here's a simple example that shows how it works:
- A man puts $10 per month into a savings account that is earning 5% annually.
- At the end of the first year, he has saved $120 dollars, and his principal investment (the $10 per month) has earned $6 in interest. He now has $126.
- Using the same strategy the second year, he will have $258.30 because he has doubled his investment and added the interest on it for the two years.
- If he continues doing this for ten years, he will have saved $1585, $385 dollars of which will be from interest.
The chart below shows the details, but the point is that for only saving $10 per month over ten years, a person can earn $385! (This amount does not account for any taxes that will have to be paid on the profit.)
This is money that was earned from an investment, not sweat. It may not seem like much, but if you do the math, you'll see how investing more money can bring much larger returns.
Money Market Accounts
The next step up is something called a money market account.
These work in much the same way as savings accounts, but generally pay higher rates. However, you usually have to invest a little more to get those higher rates.
You can buy into them through banks, credit unions and investment companies, but your smartest move is to get them through a bank or credit union because accessing the money will be much easier and there will not be any additional fees charged for having the account.
The more you put into the account, the higher the interest rate will be, so a smart investor checks rates and requirements and invests appropriately.
Certificates of Deposit
A Certificate of Deposit (CD) is an investment vehicle that is a step up from simple saving and money market accounts because it pays more but is just as secure.
However, once you invest your money, it must stay in the CD for a specified period of time or you can be penalized financially. Sometimes the penalties can be significant.
The longer you keep your money in a CD and the larger your investment, the more you earn. You choose the parameters, but you should always do so with the understanding that interest rates can change.
- If they go up while your money is locked in, you can't access the higher rates.
- On the other hand, if they go down, your investment is secure.
When the term of the CD ends, your entire investment plus interest is returned to you. At this time you can decide whether you want to invest in another CD or search for something more profitable.
This is the point at which you might want to get help from a financial counselor.
Choose a Well-Credentialed Financial Adviser
Should you decide to seek financial guidance, you should be aware of the credentialing requirements that go along with the huge variety of impressive sounding titles you'll encounter.
You should seek help from the most qualified and experienced people if you want to get the kind of advice that will help you to grow your money.
Furthermore, you should never choose a financial adviser who works on commission. It is smarter to pay a flat fee because this insures that you are not being guided into investments that may be more to his interests than yours!
Here is a summary of titles and required credentials starting from the lowest level.
Certified senior adviser
Requires either attendance at a 3.5-day course or independent study. No high school or college education is required.
Certified retirement financial adviser
Requires four days in a classroom or independent study. No college degree required.
Registered financial gerontologist
Requires attendance at a 3.5-day course and applicants must hold a financial degree or have five years of experience as a financial adviser.
Certified retirement counselor
Requires independent study and two years of experience as a financial adviser.
Certified financial planner
Completion of a two- to three-year training program and passing a 10-hour exam. Also requires a college degree and a minimum of three years of experience as a financial adviser.
Chartered financial analyst
Requires graduation from a four year training program, passing three 6 hour exams, a college degree and at least four years of work experience as a financial adviser. .
Investing Your Profits
You can continue to save and use compounding to increase wealth, but at some point you should want to start investing those profits because by doing so, you will earn more and create better opportunities for putting your money to work for you.
Because there are so many investment options from which to choose, you really should seek professional help as noted above. However, here is a list of investments you might want to investigate before you call him.
- equities (the stock market)
- real estate,
- a business,
- antiques and collectibles and
- precious metals
Some of these investments are much safer to buy than others due to risk factors, but the lower the risk, the less the gain.
On the other hand, high risk investments can sometimes make you rich!
I met a woman who was the caretaker for an elderly gentlemen. He knew he was going to die soon, and to thank her for all of her kindnesses, he told her to pick something from the house she'd like to have.
She chose a very plain picture in an ugly frame because there was something about it she liked.
The gentleman passed away before long, and the painting was given to the woman who took it to Antiques Road Show on a whim.
She sold it for $250,000!
Her investment in this scenario was her kindness and compassion, but they paid off big time!
Reducing Your Tax Hit
Because taxes take away some of people's financial gains, the savvy ones use investment vehicles that will allow them to defer or even avoid paying them completely.
Doing this allows their money to grow tax free for many years.
Examples are investments such as
- Certificates of Deposit,
- Fixed Income Annuities and
- Tax Free Bonds.
Investments such as these are considered to be low risk because they grow wealth while at the same time protecting a person's initial investment.
They don't earn large amounts, but over time, the profits from them can really add up.
Think Rich, Become Rich
One of the best financial guides I have ever read is called "". What I like about it is that it shows you how changing your attitudes towards money can make a huge financial difference in your life. Rich Man Poor Man
In short, if you think like a rich person you are more likely to find ways to increase your wealth.
There is no question that with good financial management you can eventually double or triple your money and create a situation where your investments, rather than your labor, support you.
You don't have to become filthy rich in order to live a financially stable life, but you do have to work hard and invest well to be able to have one.
Do you think that doing the things mentioned in this article will help you to improve your financial status?
Questions & Answers
© 2016 Sondra Rochelle