The Basics of Making Your Money Work for You

It’s a common misconception that growing your wealth is a function of how hard you work. Your dedication to the grind plays a pivotal role, to be sure, but it is by no means the only driver on your way to a more comfortable financial situation.

If you’re willing to dip your toes into the money management world, you’ll soon realize that there are simple steps you can take to maximize your paycheck beyond the number you see on your bi-weekly stub. Here are three of those steps for you to consider, apply, and improve your quality of life:

In Your Best Interest

It’s quite easy to find a high-interest savings account that will pay you twenty to thirty times more interest than a savings account at a major bank. This is because interest rates in the developed world are currently quite low, allowing certain financial institutions with low overhead costs to pass these savings along to you.

The idea here is to open one of these high-interest accounts and fund it with the money you reserve for basic expenses. That way, whatever is in it will grow at a steady monthly clip as you go about your day-to-day life. If you’ve done business with your current bank for many years, you may find it more convenient to keep two accounts open—one high-interest savings, and one chequing—and transfer spending money from the former to the latter.

Starting a Business

This point is about creating additional income streams for yourself beyond your main source of employment. Consider hobbies you enjoy that you could monetize and eventually build into thriving businesses, or you can be more strategic and identify a field with an unmet need you’re compelled to find a solution for.

You don’t have to be an expert in your business so long as you’re willing to learn, save some start-up capital, and put in the hard work to give yourself a solid foundation. Part of that foundation should include knowing that, even if you take every precaution as an entrepreneur, setbacks will still find a way to show up at inconvenient times.

It’s conceivable that you might need to resort to a payday lender to get yourself out of trouble. But before you do, shake off the stigma of looking for advice on getting a loan and crunch some numbers to make sure it contributes to your overall financial plan.

Investing in Stocks

Long-term investing means buying shares of stock in the world’s leading companies to participate in their growth, usually through index funds or their actively-managed counterparts. Owning these shares represents an essential step toward long-term wealth accumulation. Over the last two or three decades, they’ve returned an average of 7% per year.

You can open a TFSA or RRSP at any major bank and automate investment contributions to coincide with your paycheck. Thanks to the power of compound interest, your money will appreciate in value as the companies you own become more profitable through new products and services.

Why deprive yourself of a more comfortable financial cushion when the means to acquire one are within reach? In addition to working for money, go ahead and shop around for bank accounts, cook up a new venture or two, and invest surplus funds every month to get your money working for you.