The industrial age brought the notion that hard work always equaled a ticket to the good life. The American Dream meant having an opportunity to work your way up from the bottom no matter your individual goals.
But reality has set in for many people who realize that it takes a lot more than a lifetime of working a full-time job to amass wealth. You have to know how to grow your money in order to find real financial success.
Here are a few financial growth methods to ensure success.
How to Grow Your Money
There’s a saying that compound interest is the 8th wonder of the world. Compound interest happens when the interest you gain on your investments earns interest.
It’s an infinite form of earning money that gets exponentially larger as you continue to contribute money. There are a few investments that pay compound interest.
These are some of the fastest ways to grow your money. Here are a few examples of investments that pay compound interest.
One of the easiest ways to grow your money is an interest-bearing checking or savings account. Money market accounts typically offer a higher yield than traditional checking accounts.
The only downside to money market accounts is the minimum opening balance. Higher interest rates are often available on accounts that require minimum balances that can be upwards of $2,500.
This is a good deal if you’ve already got savings stashed away in another account that’s not earning money. Standard interest-bearing savings account pay a meager return but are an entry-level way to introduce yourself to the concept of compound interest.
Consider a Certificate of Deposit (CD) or Shepherds Finance high yield investments if you’re serious about putting money away and earning a competitive interest rate. With a CD, you can’t withdraw the money until a set period of time.
Usually, the longer you leave your CD unattended, the higher your interest rate will be. Check current rates at brick and mortar and online banks.
You’d be surprised at how competitive online banks are with interest rates. Since they don’t have the same overhead as a traditional bank, they’re able to extend more perks to customers through things like higher interest rates.
Real estate is a gift that keeps on giving. If you’re an investor, there are multiple ways to compound your interest with a real estate investment.
But first, you have to choose a property that’s a good deal. This helps your money grow the fastest.
Look for properties with existing equity and buy them at a discount. Next, put a tenant in the property. The tenant is the key to exponential growth with a real estate deal.
The tenant pays an amount above your mortgage payment to match current market rates. This means you pay down your mortgage earning more equity with someone else’s money.
The profits you earn also help grow your money. Use these profits to improve the property which increases its value further.
The average single-family home increases in value around 3 percent each year in a healthy real estate market. You’ll earn interest on your property each year even if you don’t make any changes to its appearance.
Tenants pay down the mortgage offering you an additional payment that you can squirrel away for future renovations. This compounds the interest you earn each year on the property appreciation.
Keep in mind that, with any investment, you make money when you sell not when you buy. This is especially important in real estate investing.
If the market tanks in your area, you’ll take a major loss if you sell during the downturn. You have to be prepared to hold on to your property for the long haul to ride out local market fluctuations.
It’s the best way to earn a major profit without having to invest a large sum of your own money. With real estate, mortgage loans are the best way to purchase properties.
You are only responsible for a fraction of the cost of the asset making it an inexpensive investing opportunity.
Stocks and Bonds
Another long term compound interest opportunity is stocks and bonds. You’ll have a variety of financial products to invest in once you start exploring the stock market.
Stocks are a popular choice for investors who love the variety and a sense of adventure. Investing in individual stocks can yield a major return if you make good choices.
Your stocks grow and earn interest. The interest you earn is used to buy more stocks. The same can be said with stocks that earn dividends.
Dividends are guaranteed payouts from companies in certain sectors. These companies pay dividends and offer you the option to cash out or reinvest your earnings into more stock shares.
Smart investors reinvest to grow their money faster. Bonds are similar to buying a portion of a loan from a company or organization.
Even the federal government offers bond options that pay a lesser interest rate than the average stock yield. But bonds are a good choice if you want a safe bet.
Bonds are repaid with interest after a fixed period of time. As the investor, you earn your money back and can reinvest in another bond with the earnings.
Waiting Out the Storm
Investing is a highly emotional process. Watching the stock market tank might fuel your urges to pull all your money out at once.
But in order to really produce a profit, you have to wait over long periods of time to see your money flourish. Investing isn’t a get rich quick scheme.
Good products take time to mature, but when they do they’re well worth the wait. For more information and tips, visit our blog for updates.