How to Make the Most of Your Money

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By HS Schulte
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Money Tree

There are some basic principles of managing your finances that will help you make the most of your money. These are practical steps. They are not get rich quick schemes.

Difficulty: Moderate

Instructions

Step 1

Get Out of Debt

Get out of debt and stay out. If you are in debt, you are paying interest each month. Your first step to making the most of your money is to pay off that debt. Before you invest, before you spend like a star, pay off your debt! You have heard the saying, “if you don’t have the money to pay cash, don’t buy it.” Those are sound words of advice. There are certain circumstances where borrowing money is practical, for example, financing a home rather than paying rent is usually a good investment. Regardless, don’t borrow more money than you absolutely have to and pay off the debt as quickly as possible.
Step 2

Invest Your Money

Once you have your debt paid off, look into investing through your job. If your company has a matching program, or tax free investment options, those are the best choices. Anytime the company you work for is willing to match your investment, take them up on it to the maximum amount possible. They are donating free money! If there are tax-free investments, such as medical or daycare flexible spending accounts, only contribute what you know you will use. These accounts are a way of minimizing taxes on the money you earn. But, some flexible spending accounts only allow you to withdraw your money if you have expense receipts, so only invest what you will use. Monthly daycare costs, or orthodontist payments are stable expenses that work well for flexible spending accounts. Check with your personnel office to find other options available from your employer.
Step 3

Personal Investing

Investing money on your own, only after you’ve paid off all your debt and you’ve maximized any investment benefits available through your employer. How you invest is a personal choice and requires some thought about your needs. People who aren’t risk takers will feel comfortable putting their money in low-risk investments such interest bearing checking, certificates of deposit, or savings bonds. However, low risk often means lower return. Younger investors often benefit from riskier investments that offer a higher yield. Someone retiring in a year certainly wouldn’t want to put their money into a risky stock, but a younger person with a little more time before retirement would want to consider this type of investment. There are plenty of websites that allow people to handle their own investments. However, unless you are financially savvy I wouldn’t recommend this. Many employers have options that allow you to invest through a financial adviser at little or no cost to you. Financial advisers often provide great returns on your investment.
Step 4

Financial Freedom

Enjoy your financial success and the peace of mind that comes from knowing you are making wise financial decisions with your money!