The post How to Double Your Money appeared first on Millennial Money.
The problem with money is that when you start making it, you tend to want more. Once you get a taste of the good life, you’re going to want to keep compounding your nest egg.
Nothing wrong with that. And the good news is that with a bit of time, planning, and patience, you can double (or more) the amount of money you have.
Top ways to double your money
Of course, it depends on your starting point — if your bank account is running on empty, you can double your money by checking the couch cushions. If you’re starting from a significantly higher starting point, it could take a number of years.
But it’s definitely possible to double your money, and there are many ways you can reach that goal that don’t put your financial future at risk (ie, no trips to the casino!). Up next, we’ll explore some of them.
- Bring in more income
- Get serious about saving
- Invest in the stock market
- Invest in real estate
- Pay down debt
1. Bring in more income
Boring but true, working more and earning a higher salary is the surest way to bring in more money. That could be picking up more shifts, asking for a raise, or finding a more lucrative job. But increased income is your best bet.
For example, suppose you’re earning $3,000 to $5,000 per month after taxes. Unless you have a significant source of passive income or a lot of money in the market already, there’s basically no way to generate a similar level of consistent cash flow through interest or investments.
With this in mind, if you want to double your money, you may want to find a way to double your income. Aside from the employment ideas above, you could start a side hustle painting houses, selling items on eBay, or freelancing in your spare time — and put all of your earnings into savings and investments. You can also decide to host a garage sale or sell your unwanted devices online.
The possibilities are endless. With the right approach, you’ll be amazed at how quickly the earnings pile up.
Learn more:
2. Get serious about saving
As the great American actor Will Rogers once said, the fastest way to double your money is to fold it up and put it in your pocket.
If you want to double your money, start looking for ways to maximize your savings. Stop spending on things you don’t need. Put your money into high interest-bearing bank accounts to earn some extra cash. It’s much better than buying frivolous things on Amazon.
Even if you’re not gaining all that much in interest, simply not touching your money and letting it accumulate is key for growth. Otherwise, you’ll just be spinning your tires and your net worth without seeing any growth. At the same time, you’ll have cash on hand to take advantage of short-term opportunities that may arise.
3. Invest in the stock market
At this point, you should have extra income rolling in and a serious savings strategy underway. The next step is to hit the gas pedal and start investing with a brokerage to supplement your savings strategy by buying stocks and other equities.
Before you do that, you’ll need to determine how aggressively you want to move forward with investing. You can either choose the slow and steady method and double your money safely over time or you can take riskier methods to try and expedite the process.
Learn more:
- Investing for Beginners
- How To Start Investing With Little Money
- Should I Buy Stocks Now?
- How to Get Into Stocks
Day trading and penny stocks
Day trading and penny stocks are two investing approaches that tend to separate people from their money, especially if they are new to it and don’t know what they’re doing.
Too often, unscrupulous players take advantage of people’s fear of missing out, running what are known as pump-and-dump schemes, where they hype a stock and then sell their shares of it as the unsuspecting individual investors pile in. In the end, lots of less sophisticated investors end up holding lots of shares that turn out to be worthless.
There’s always a chance that a tiny company you’ve never heard of and don’t even know what they do could skyrocket … but it’s far more likely that you’re flushing your money away. If that risk-reward balance doesn’t entice you, you’ll be better served looking for low-risk investment options.
Contrarian investing
Contrarian investing is a strategy that involves going against what the majority of other investors are doing. For example, a contrarian investor may buy distressed stocks and hold onto them until a company recovers and then sell them for a profit. But make sure you have a reason for thinking a company can turn around.
Contrarian investing works a bit like value investing. In both cases, the investor looks for undervalued stocks to buy and sell for profit.
Slow and steady investing
The best approach is to play the long game and invest conservatively. This method involves building a non-speculative portfolio that’s diversified with a mix of stocks, as well as index funds, mutual funds, exchange-traded funds (ETFs), and bonds.
By taking this approach, you can protect yourself from market volatility and get rich slowly over time through capital appreciation and dividends.
You can use the rule of 72 to determine how long it will take for your investment to double. To calculate the rule of 72, simply divide 72 by the expected annual return rate.
Keep in mind that you don’t have to pick stocks out of a hat on your own. By reading financial publications like Forbes and The Motley Fool, you can get great ideas about stocks that might be a match for your investor profile while also learning how to avoid scams.
In short, you want to find great companies that you believe in and watch as they gain in value over time. Maybe it’s a business you use or a company that you think will benefit from an emerging trend.
How retirement accounts can help
If you’re focused on the long term and don’t anticipate touching your money, you should look into setting up a tax-friendly retirement plan.
Some employers offer a 401(k), which you can use to put aside up to $19,500 per year for tax-deferred growth. Some companies also supplement savings by offering employer matches.
You can also achieve further growth through traditional individual retirement accounts (IRAs) and Roth IRAs. Ultimately, putting your money into retirement savings is a sound strategy that can allow you to generate a hefty growth rate on your initial investment over time.
Learn more:
- How to Open an IRA
- Roth vs. Traditional IRAs
- How Does a Roth IRA Work?
- How Much Should I Have in My 401K
4. Invest in real estate
Another way to potentially double your money is with a real estate investment.
Investing in real estate can be expensive — especially if you are applying for a mortgage. However, if you buy a property that you can easily rent or flip, you could generate either a steady cash flow or a large net gain.
Real estate investments can also come with great tax advantages. For example, some investors choose to do a 1031 exchange, swapping a property for another of equal or greater value to enjoy tax benefits. With a 1031 exchange, you can defer capital gains taxes on the transfer of a property and possibly never have to pay it.
You can also make money through real estate investment trusts (REITs), which can enable you to invest in real estate without having to buy any property outright. By investing in REITs, you can avoid costly down payments and upkeep and you don’t have to deal with property management companies or tenants.
Learn more:
5. Pay down debt
If you’re in debt and paying interest rates that hover near 20% each month, then you’re going to wipe out any gains that you make through savings or investing.
Instead of continuing this cycle, pay off your debt as quickly as possible. You will produce a solid return on your investment — even if it costs you money upfront. This will result in cash going back into your pocket each month, allowing your money to grow and eventually double.
If you have the money on hand, consider the avalanche method of paying down debt, which involves making large lump sum payments. If you pay down debt slowly over time, you will wind up paying more over a longer period.
Get out of debt as quickly as possible and you will be much better off. Once you’re out of the hole, take active measures to prevent yourself from falling into debt again. Form a budget and stick to it.
Tips for doubling your money
Avoid gambling
There’s a difference between gambling for fun once in a while and treating it like a job. Attempting to double your money by buying lottery tickets, playing cards, or gambling on sports will cause you to lose more often than not.
Gambling is also addictive, and it’s an easy way to burn through your money very quickly. If you think you may have a gambling addiction, consider seeking help before it’s too late.
Embrace the stock market
The stock market can be intimidating if you’re just starting out as an investor. After all, it’s highly volatile and investors are sometimes spooked by poor economic conditions.
The truth is you shouldn’t fear the market or even downturns. Long-term investors stay in the market no matter what happens and expect — and even anticipate — downturns because they present great buying opportunities.
Instead of avoiding the stock market out of fear, form an investing strategy to protect your investments, ride out downturns, capitalize on low prices, and enjoy the gains during the good times.
Frequently asked questions
What should I invest in?
Beginners often don’t know what to invest in, and that’s perfectly fine. Lots of new investors start with index funds and ETFs, which gives them broad diversification right off the bat. A fund can provide instant access to a broad range of companies, eliminating the need to manually select each one. Index funds and ETFs are usually more affordable than mutual funds.
If you’re keen on technology, you can also use a robo-advisor for hands-free investing. A robo-advisor uses an algorithm to pick stocks and manage your account on your behalf. Companies like Betterment and Wealthfront offer robo-advisors.
What are penny stocks?
Penny stocks are investments that trade for less than $5 per share. The majority of penny stocks are traded over the counter as opposed to through the major stock exchanges.
Penny stocks can make you rich if you buy enough shares at a very cheap price and they appreciate in value. Sounds easy, but beware. The people who most frequently make money with penny stocks tend to be the ones running a pump-and-dump scheme.
I generally recommend avoiding penny stocks because they offer more risk than reward. It’s rare for a penny stock to explode in value. Of course, it happens from time to time. But it’s very difficult to pick a winning penny stock. And like gambling, penny stocks can be addictive.
Can I make money with cryptocurrency?
Cryptocurrency is quickly becoming one of the most popular forms of alternative assets for investors and something that all investors should have on their radar. The most famous example of a cryptocurrency is bitcoin.
Just like penny stocks, the majority of cryptocurrencies are unregulated. As a result, they are extremely risky and highly volatile. However, they can produce significant gains. For example, bitcoin recently had a bull run that saw its value climb from roughly $4,000 to $40,000 in less than a year. If you rode that wave to the top, you could have realized 10x returns. But watch out for swings in the other direction.
Should I put my money in savings accounts?
Savings accounts may not seem very lucrative when considering that interest rates are generally pretty low and have been for quite some time. However, they can offer protection against market volatility, allowing your money to grow without risk.
If you’re putting money into savings, consider using a high-yield savings account (HYSA) from an online bank. This type of account typically provides an interest rate that’s significantly higher than you’d find at a traditional brick-and-mortar bank. Just keep in mind that an HYSA usually doesn’t come with a debit card and some companies have limited customer service.
The Bottom Line
Doubling your money is all about two things: discipline and making the right financial choices. It’s not rocket science; just about anyone can do it.
Use the above-mentioned strategies to grow your money, taking care to do it as safely and strategically as possible. And remember that it’s generally better to get rich slowly by making sound investments in companies that you know and respect.
Stay calm and be determined, and your patience will eventually pay off. You might even be able to double your money before you know it, making a major leap forward in your personal finance journey. Good luck!
The post How to Double Your Money appeared first on Millennial Money.
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April 29, 2021 at 02:44AM
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