Having looked at the reasons why investing your money should be a priority, it is essential to take some time to understand how you get the money for investments. Investment presupposes saving and saving presuppose that your expenses are lower than your income. The question then is, how do you get to that point where you have excess cash to invest? The question is essential because no matter how much knowledge you have regarding investments, you will not make much progress if your expenses are always outstripping your income.no matter how much knowledge you have regarding investments, you will not make much progress if your expenses are always outstripping your income. Click To Tweet
Here are three ways to help you save more money for investments.
Managing your expenses
There are two broad ways to ensure you increase your savings. You can do this by increasing your income and keep your expenses static or keeping your expenses below your income. There is a sense in which you are not so much in control of the former (generally speaking). You have better control of the former – keeping your expenses below your income.
When your expenses are below your income, you are in a better position to save money and invest in profitable investments. How do you achieve this?When your expenses are below your income, you are in a better position to save money and invest in profitable investments. Click To Tweet
Draw up a budget
Every progress in personal finance and money management begins with the art of budgeting. A budget is a document that outlines your expected income and expected expenses for a particular financial period. Depending on your source of income, a budget can be weekly, monthly, quarterly, or yearly. In some cases, it can even be appropriate to have it all.Every progress in personal finance and money management begins with the art of budgeting. Click To Tweet
When you draw up a budget, it helps you to identify all the places where your money is going. You have a clear picture of every expense category and item, helping you to understand how you spend the money you earn. Without a comprehensive budget that delineates your income and expenses, it is hard to make much progress.
If you do not have a budget, it is time to start preparing one. Here is a comprehensive step-by-step guide that helps you develop a realistic budget.
Pay attention to your expenses
When you identify all your expenses, it is time to do some trimming. Most of us spend more than we need. Also, we spend more than we actually need to spend on the items we need. Take time to go through your expense items to identify those expenses that are overboard in terms of their importance and the money you spend on them. Identify the things you can do without and those you can acquire for lower prices with no dip in value. When you learn the art of shopping around, you will discover how to get items for lower prices with value for money.Most of us spend more than we need. Also, we spend more than we actually need to spend on the items we need. Take time to go through your expense items to identify those expenses that are overboard in terms of their importance and the… Click To Tweet
Trimming down your expenses does not mean living a miserable life; instead, it asks us to rethink our definition of comfort, and how much we for them.
In this article, you will learn practical ways to cut down your expenses without living an “uncomfortable” life.Trimming down your expenses does not mean living a miserable life; instead, it asks us to rethink our definition of comfort, and how much we for them Click To Tweet
The goal here is to make your expenses below your income and maximize your savings, so you can get more money to invest.
Commit to your budget
It is easier to set a budget; it is more difficult to follow it. The primary cause of such difficulty is lack of discipline. Discipline is not easy, and it is particularly hard for those of us living in the “instant everything” world. However, this is where you must keep the previous article in mind. Unless you have thoroughly understood the importance of investments, it will be hard to exercise discipline when the time comes to live out your budget. It is the sense that what you are disciplining yourself towards is worth the efforts that will help you take the demanding ride. This is where you want to fill your thoughts and imaginations with the reward of early retirement, financial independence, money working for you rather the other way around, multiplying your money, etc.Unless you have thoroughly understood the importance of investments, it will be hard to exercise discipline when the time comes to live out your budget. It is the sense that what you are disciplining yourself towards is worth the… Click To Tweet
Another difficulty when it comes to staying true to a budget comes from the nature of some people’s income. This applies to businesspersons and freelancers who may not make a fixed amount every financial period. There are two possible scenarios here: one is where you make less than your budgeted income but more than your expenses and where you make less than your budgeted expenses. In the former situation, what changes is your saving (unless you are willing to reduce your expenses to maintain a consistent saving). In the latter case, it won’t be very easy to save. You may need to lower your expenses or tap into your emergency funds and replenish it when you exceed your budgeted income.
The goal here is to ensure you commit to your budget so you can maintain a consistent saving.
Increasing your income
Generally, increasing your income is not as easy as reducing your expenses. Nevertheless, it is still an achievable feat. Here are some options to consider:
Improving your skills for a pay rise
The decision to increase your pay is not in your hands. However, depending on the job, you can precipitate that decision by investing in your career. You can take some certificate courses, acquire some new skills, gain expertise in new areas of interest in your industry, and put yourself above the curve. When you do these, it becomes much easier (depending on your job) to get a pay rise or a better paying job in another organization.The decision to increase your pay is not in your hands. However, depending on the job, you can precipitate that decision by investing in your career. You can take some certificate courses, acquire some new skills, gain expertise in… Click To Tweet
Expanding your business for higher income
For business owners, it means expanding your business for more profitability. You can do this by entering new markets, exploring new products, or targeting new audiences. Look for opportunities to get more value for your business and increase your earnings potential.
There are many ways to earn some income on the side without investing much time and effort. Freelancing, online tutoring, blogging, affiliate marketing are some common ways to earn passive income. Here is a list of thirty passive income ideas you can explore.
Reinvesting your returns
A third way to get more money for investments is to reinvest your returns from current investments. For example, if you own a stock that pays a dividend, rather than spending the dividend, you can reinvest it in more shares. If you own a real estate property that pays rent every month, instead of spending the rent, you can put in mutual funds. The idea is to multiply your money further, increase your wealth, and achieve your financial goals faster.
Every talk on investment must begin with getting the money to invest. As a result, you need to spend time budgeting, trimming down your expenses, staying faithful to your budget, exploring means to increase your income, and reinvesting your returns. With these, you will have money set aside for investments. In this way, you will be ready to think through various investment options and make smart decisions.