First, wondering what to do with your money is technically a good problem to have.
But it’s also a very important question for your financial peace of mind – not just today, but for years to come.
In this article, we will review the different things to do with your money and the sums set aside… but also and above all how to make your hard-earned Dollars grow .
Saving is important… but that’s not all
Technically, there are several things to do with your money: spend it, save it, invest it, give it away…
And if you’re reading this article, you’re probably interested in one of the last three, and what to do with the money you have available.
Putting money aside is an essential step for a healthy and serene financial situation. It is the one that will allow you to have funds to use for the realization of your projects.
The problem is that many people stop at this step, and neglect the next ones: use these sums to make your money grow.
Money is just a tool, the purpose of which is to help you achieve your goals. But to do that, it’s also important to learn how to make your money work for you.
Many of us still too often tend to place all our savings in savings books or in the euro fund of our life insurance policies.
Unfortunately, putting money aside and saving on secure investments will not allow you to grow your capital (even if putting some of your money there is essential to balance the risks of your portfolio).
Placing your money in more dynamic and profitable media is also important. This must of course be done taking into account your saver profile , and the investment horizon of your various projects.
The irony is that if investing in the stock market is not without risk, you do not “risk” losing money by letting it sleep in a current account: you lose it every year for sure.
Why ? Because of inflation (which is the general increase in prices over a period of time).
This was for example 1.1% in 2019, when the remuneration of the Livret A was only 0.50%. So the price in stores continues to rise, and your passbooks can’t even keep up.
Precautionary savings
It is not because the remuneration of your savings accounts does not make it possible to compensate for inflation that they are useless.
Their goal is not to compensate you as much as possible, but to be easily accessible in times of need , especially in times of financial emergency.
Money invested or placed on the stock market is less readily available, whether in terms of withdrawal times, risk of loss (having to withdraw when your shares are at their lowest) or practicality (for example, any withdrawal from a PEA before 5 years leads to the closure of the latter).
Keep between 3 and 6 months of money set aside in a savings account to build your safety cushion.
Make your money work for you
Unless you are heirs to the Hilton family, you will probably have to work to earn money at some point in your life.
But it’s not the only way to grow your income and grow your money.
You can also take control of your finances, improve your financial situation, and then decide to put your money to work by making it work for you.
How? ‘Or’ What ? Mainly by investing.
Investing is about making your money make money. And this in an almost entirely passive way (i.e. without doing anything).
Notably thanks to compound interest , which is one of the best engines of wealth creation.
If you want to know more about this concept, you can browse this article:
Grow your money through investment
If you don’t need your savings for several years, and want to put your money to use for your long-term projects, one of the best ways to make your money work for you is to invest.
I would recommend that you avoid advice at all costs from those who want you to believe it is possible.
This is again a long term strategy – invest early, and grow your money for years.
You should also absolutely seek to invest according to your investor profile and according to your objectives.
Invest in the stock market
It’s a popular way to put your money to work: put it on the stock exchange.
And be careful, here again, we are not talking about trading or inventing yourself as a Sunday trader in the hope of winning big in a few months.
Either way, there are plenty of ways to put your money to work in the stock markets today.
Even more so with the rise of robo-advisors , which help you select investment vehicles and allocate your assets automatically according to your profile and your objective.
Invest in real estate
Unlike the stock market, the entry tickets for investing in real estate can seem much larger.
This is partly because when we think of real estate investing, we often tend to focus only on buy-to-let investment.
But it is not only the rental investment to invest your money in stone , and many solutions allow you to invest in real estate according to your means.
You can also invest in SCPIs , in real estate crowdfunding , etc. which allow you to invest in real estate without having to take care of the management and rental of accommodation yourself.
This allows you to diversify your investments easily.
