How can I start making my money work for me instead of spending it?

July 20, 2009 4:49 AM

How can I start making my money work for me instead of spending it? - put my creativity, time and energy in to make money.

I don't want to give the impression that I'm a crazy spendthrift cause I'm quite good at saving money on everyday things and not spending more than I need to. However, I've never really made my money work for me. Whenever I've had savings from a job or windfalls, I've always seemed to gradually spend it on projects that cost a little more than my means etc and not done anything to turn it into more money.

I think I may have a mental block in this direction for some reason that's hard to put my finger on.

Obviously one side of this is keeping track of what I spend and being strict about budgeting, which I think I have a handle on improving.

However, the other side is ways to be productive with money which is what I'm really asking about. Not so much savings although some backup is important.

I saw a program some time ago where a financial guy helped a couple to pay their mortage off quickly - they came up with several small businesses using their skills and other little ways of making cash.

I'm quite creative, hardworking and can put a lot of energy into things, but haven't found a way to make things click in this direction.

So, looking for 1)practical ideas and places to get more ideas

2) How can I start thinking in the right way?

3) Is there some sort of professional that I can hire to help me like the guy on the programme?

posted by Not Supplied to work & money (11 comments total)

Well for starters I think #3 on your list my directly conflict with your goal (to stop spending money on things with little return). That field is littered with Get Rich QuickTM schemes and it can be very difficult to find valuable help. Here are some ideas which might be somewhat obvious but who knows, might be helpful:

1. RE: paying down a mortgage. There are calculators available that will show you the benefits of taking your extra money and paying towards the principal of the loan. Any little bit helps and you are truly taking a $100 here and there and saving thousands. The sooner you are free of a mortgage payment the more money you would have to put towards other things and invariably make even more money "work for you".

2. Do you have any other debt that you're paying interest on? Bills of that nature are prime examples of places where you can stop wasting money. Get all your debt paid off and stop borrowing to spend. Again, it may seem obvious but you cannot make your money work for you if you are having to pay high interest rates on everything you buy.

3. Start reading tons of material on the subject. You don't have to pay for much of this either. Here are some starting point blogs that I find really helpful. I Will Teach You To Be Rich, The Motley Fool, and Get Rich Slowly.

4. Start thinking about where your financial waste is. A gym membership you don't use? A netflix account that's laying dormant 75% of the time? Maybe you're spending too much on food and could benefit from growing a garden. You can go as extreme on this as you are willing to but you absolutely need to not only budget for your expenses but look at ways you can make the most of your money. If you're paying full price for items you're paying too much in almost every instance. Start looking into coupons (I found this blog incredibly helpful when starting that) and reevaluate any monthly expenditures that you don't need or use often.

I realize much of my answer focuses on the saving and not the magical dust you're looking for but here's the problem: People go bankrupt every day pouring money into small businesses and ideas that they think will make them rich and take them from middle class "just getting by" to grand new heights. You need to stop thinking like that. Repeat this line to yourself - "I am going to live like no one else right now, so that in 20 years I can live like no one else.". Anybody who is good with money will tell you that long term investments and savings is how you make dividends. Not creative sideprojects that magically pay your mortgage overnight. The only person making money off that scheme is the guy selling you something in item #3 on your list.
posted by genial at 5:46 AM on July 20 [11 favorites]

What types of resources and skills do you have? Do you have investment capital? Land? What is your profession?

One idea, if you are at all interested in gardening, is 'microfarming.' With a decent enough plot of land you could grow all of your own vegetables and produce your own eggs, which would save you money in the long run (after initial start up costs), and even make you money if you start to sell your produce to neighbors and friends. There are books on the subject.
posted by farishta at 5:50 AM on July 20

Automatic payroll deduction into an S&P500 fund or some other investment vehicle. If you don't trust yourself, don't set up any computer access and make it difficult to get the money out by having to actually call a broker. People tend to spend their paycheck so the easiest way to invest is to make the paycheck smaller through investing.
posted by caddis at 6:44 AM on July 20

Mutant does this. You could start by reading his profile and the links he provides for more information.
posted by Houstonian at 7:18 AM on July 20 [1 favorite]

A lot of what you described sounds like you're looking for a Get Rich Quick scheme, as genial mentioned. Unfortunately, there is not some secret way to make your money "work for you", in the sense that you can reliably turn $100 into anything more than $110 after a year of letting it sit in an investment. You mentioned starting a small business, but those are risky (you could turn $100 to much more than $110, but you could also turn it into $0 or worse) and they take a lot of work.

Whenever I've had savings from a job or windfalls, I've always seemed to gradually spend it on projects that cost a little more than my means etc and not done anything to turn it into more money.

From this description it seems like you need to do a better job of locking your money into an investment so that you can't spend it. The biggest danger of leaving money in your savings account versus other investment options is not that you don't earn much interest every year, but rather that it's so easy to spend that money on buying expensive things or paying for expensive events like vacations or weddings. If you put your money in a retirement account, or pay extra principal on your mortgage, and don't touch that money no matter what happens, you'll end up with more money in the long run than if you invest it for a while and then cash out and spend it.
posted by burnmp3s at 7:42 AM on July 20

Hi. Thanks for the ideas so far. To clarify, I'm not looking for 'magical dust' dunno where you got that idea.

On the programme I'm talking about, they ebayed, one of them became a childrens entertainer, they both had a business helping people clear their houses and lots of other little things that turned the tide in favour of making money.

So I'm looking for ways to turn my creativity and energy into money, information on how to think about how I can do this etc.
posted by Not Supplied at 11:29 AM on July 20

I don't have any debts...will consider the investment idea for some of it, but keen to use it in conjunction with my work to get a better return.
posted by Not Supplied at 11:31 AM on July 20

Find a local CPA you can trust, and work with, whose practice is based on small business accounting and private clients. Ask for referrals from friends, business associates, and local business people you like who seem to be doing well. You may need to interview several, to find one that you feel most comfortable in talking with, and it is important that you do, because you'll be asking this person for their advice and opinion of your financial health, regularly, for quite a while.

You'll initially become his/her client by having them do your taxes as a first matter, but you should make it clear when interviewing that you are interested in them helping you invest, and make personal and business decisions and local contacts, including even initial help in establishing and maintaining a personal budget, to help you amass personal wealth. You'll pay this person by the hour, and initially, they may recommend that you see, and pay for, some 3rd party consultations from a Certified Financial Planner, an insurance specialist/agent, and perhaps, even an attorney (for setting up a will, a durable health directive, etc.). Expect to be paying these 3rd parties hourly fees for their services, too, as they get your financial and legal framework established, your risks analyzed and appropriately insured, and your taxes organized. It's possible you could spend $1500 to $2000 in the first year on such services, but it may not be that much if your affairs are very simple.

With a general financial plan and monthly budget in hand, you'll know whether paying down a mortgage, or maximizng your 401K or Roth contributions is your best financial bet, and how much of your paychecks to put toward each of your expenses and savings goals. You'll be on a schedule of meeting with your accountant quarterly, to review your investment performance, and your spending and savings goals, in light of any changes in your life, and the requirement to spend an hour every three months explaining your recent performance to a third party who knows your situation, will be powerfully motivating. Furthermore, as you do have ideas, or hear about opportunities, you'll have someone you can trust to help you analyze and research such situations, so that you aren't carried away by your enthusiasm, into losses you can't recover.

Then, as you build some savings, you can start asking your CPA to keep you in mind, for local business and civic investment opportunities. Many small businesses and government entities in your area are nearly always looking to raise capital for expansion, or new equipment, and, especially in these tight credit markets, are providing new opportunities for private finance, that used to be covered by local bank lending or low cost municipal bond issue markets. Your accountant should know your appetite for risk, and your ability to handle such investments, and through their contacts, you may be offered opportunities to become one of 15 or 20 private investors in a sub-chapter "S" business in your area, or have a chance to make a relatively safe, short term loan to an established business for 3% more interest than your money could make in a bank savings account or CD. You may find that buying a tax-exempt bond from your local government is a good deal for you financially, and a way to see your money improving your local economy, too.

In the next few years, as our economy slowly recovers, I think such small scale private capital placements will be more important for individual investors, and for local businesses, than stock markets, bond markets, or other traditional investments. And if you have a little long term capital to invest in such ventures, you may find that they out perform Wall Street in absolute terms, while providing local jobs and the knowledge that you as investor, are making a visible difference in your own community.
posted by paulsc at 11:47 AM on July 20

On the programme I'm talking about, they ebayed, one of them became a childrens entertainer, they both had a business helping people clear their houses and lots of other little things that turned the tide in favour of making money.

So I'm looking for ways to turn my creativity and energy into money, information on how to think about how I can do this etc.

Honestly, if you're looking for more income your best bet might be to just get a second job. Starting your own business does work for some people, but it also takes a significant of time and (usually) a significant amount of money to get one going. A lot of small businesses fail within the first few years, and many of the successful ones take a long time to become profitable. Also, many of the resources that advertise that they can help you to make money at home doing little or no work are actually scams of some sort.
posted by burnmp3s at 11:51 AM on July 20

On lack of preview:

A CPA can also help you write a business plan for any venture you do want to start, and perhaps help you find local resources to help you quantify, fund and manage a small startup. You shouldn't start any business venture without making a sound, written business plan, that covers your funding, sales, cost, advertising, market and risk projections, for at least the first 2 years. You can get free small business advice from retired business executives, familiar with your community, including help with producing a workable business plan, through SCORE. You may also want to start attending your local Chamber of Commerce meetings, as a means of learning about local opportunities and funding sources, such as sales tax abatements, real estate tax holidays, and other incentives local business get for starting and expanding new businesses. You should also contact your state government, for resources it provides to small business.

A key thing to remember is that, in most small businesses, you are employing capital and labor to make a product or service, at a rate that must be more profitable than putting your money in a AAA rated bond (because otherwise, you'd be a fool to risk your time and money with such a venture). As you've learned, even small expenses or losses quickly drain the real performance of most self-ventures, which is why I suggested that you first work to amass savings as capital, and begin to think of yourself as a professional small business investor. By sticking to putting your money only into going concerns looking to expand or improve their processes, you vastly reduce your risks of loss, by "employing" the most powerfully motivated kind of management you can hire to run your money: proven successful small business entrepreneurs.
posted by paulsc at 12:20 PM on July 20

1) Hunt for free/cheap books/textbooks on craigslist/garage sales and sell them for low but decent price on amazon/ebay etc. It is not simple as it looks. Free/cheap books are gone just like that, you need to keep watch, and move quickly to acquire the books. Selling them profitably is another story.
2) Create some crafts/jewellery/show pieces and sell them on websites like etsy.com
3) Be a fitness/dance/swimming/aerobics/kung-fu/karate/painting/XYZ instructor. This can evolve into opening your own shcool/fitness center/training academy one day, if you do it long enough and be really really good at it over the time. This involves learning whatever you want to teach first.
4) Write about 'whatever field your job is' (law, insurance, interior design, photography, etc) on hubpages.com, ezine.com, about.com etc. Writing is more of a skill and less of a talent (refer on writing well ), you may be able to write very well if you practice enough and keep at it. If you already don't know anything about any field deep enough to be able to write articles on hubpages then pick a field which interests you and learn more about it and then start a blog.
5) If you are into computers, start tinkering your computer, start reading about hardware stuff, build your own computer. Eventually you can help people their computer hardware problems, sell them custom assembled computers.
6) If you are familiar with programming, you can do part-time programming gigs/freelancing using elance.com, codeguru.com etc.

Am I on the right track, in answering your question? Your question is - "What are the practical ideas and places to get more ideas about creating alternative streams of money using your creativity, hard work and little bit existing money capital as investments?" Am I reading it wrong? Because many answers above are not quite in line with this question.
posted by tvjoshi at 5:16 PM on July 20