Sometimes I like to sit on my couch and watch shows about drug lords or money launderers loaded with cash. It always makes me wonder how I could get that much money legally without all the violence. Obviously, I don’t want to be a drug lord. But I can take my extra money and turn it into more money. Below I’ll share some surprisingly simple (and legal) ways to do this.
Bear with me. Even if these financial planning terms sound intimidating, they are relatively simple. It is simple enough for anyone with a little bit of extra cash and the drive to turn it into more.
What does it mean to turn money into more money?
Turning money into more money simply means investing successfully. When we use the word investing in everyday speech, we often use it to refer exclusively to investments in the stock market. But investing is actually a much broader term. It means putting money into something with the expectation of achieving a profit.
This could mean putting money into a retirement account, or it could mean putting money into a business venture, cryptocurrencies, a property, someone else’s business venture—or even eliminating your debts or other ongoing costs.
Ways to grow your money
There are many ways to take your money and make it grow by itself. The one common factor of all these tactics is they require an initial investment; you need something to put into them. This is usually money, but it can also include time and effort.
Reduce or eliminate debt
Debt can be a by-product of an investment (e.g., a home mortgage). There are two primary types of debt: secured and unsecured. Secured debt includes mortgages and business debts—debts that have collateral backing them, in other words, something that can be sold to pay for the debt. These can be solid investments.
Unsecured debts do not have collateral backing them, including student loans, medical loans, credit cards, or personal loans. These are the crucial kinds of debts to eliminate to turn your money into more money. The reason is that these debts are doing the opposite—they are turning your money into less money through
compound interest. This interest is compounding against you.
Passive income
The simplest method of turning your money into more money is by using
compound interest in your favor. This is done through passive income, and it can come from many sources.
The most common method of earning passive income is through the stock market. Long-term investments such as mutual funds, a Roth IRA, an index fund, or ETFs can offer easy, low-risk forms of passive income. Don’t expect the money to come immediately, though. These investment accounts don’t work like the lottery. You must have patience to make money, even if they don’t require you to work.
Another form of passive income is . If you have extra money in your checking account and would like steady growth on that money, this could be for you. This method will require a little more risk tolerance than a brokerage account, but it will give you a more consistent cash flow.
Real estate
Real estate investing is a reliable way to grow your money if you have some free time (and maybe experience with home maintenance). This can be a short-term and a long-term investment strategy if you purchase a rental property.
Your monthly rental income from the property can be a way to pad your savings account or money to re-invest. And property interest rates have been about 3-4% per year. If held long enough (and sold at the right time), the property can turn into a valuable payoff when it is sold.
Side hustle
Free time and financial goals often equal a
side hustle, which can be a fun way to increase the amount of money in your bank account. While it is generally not a passive form of growing your money, it can eventually become more than a side hustle.
If you dream of opening a business, starting it on the side is one of the best ways to test your dream. Find out how committed you are, how much fun it really is, how much work it is, and, most importantly, how much other people believe in your business.
Starting a side business isn’t the only way to a side hustle. Affiliate marketing is a way that sometimes requires little to no work on your part. Affiliate marketing means earning a commission for advertising someone else’s company or product. This could include wrapping your car in an advertisement, posting about products on your social media or online platform, or setting up an Amazon affiliate site.
Companies that can help you grow your money
Vanguard
Known for creating the index fund,
Vanguard is still one of the top long-term investment options. Their array of mutual funds will give you plenty of options to set up a strong investment strategy and make your money grow independently.
It is simple to create an account on Vanguard, and they have funds with no investment minimums. But the best funds require an investment minimum of either $1,000 or $3,000.
LendingClub
LendingClub has made peer-to-peer lending simple and easy. Past personal finance mistakes can often preclude a potential borrower from applying for a bank loan. Peer-to-peer lending has made it more possible for those with low credit ratings or who need a loan quickly to receive one. And they have made it possible for an everyday person such as yourself—who happens to have some extra money—to benefit from the loan instead of the bank earning all the interest.
Amazon Affiliate Program
The Amazon affiliate program is free and easy to join. The
Amazon Associates page gives a quick overview of how to join. Once you have joined, you will need to link to products, share on social media, and earn income. There are more steps involved, but it can be an effective way of starting up a side hustle.
Costs
Investments come with costs, and not all of these are financial. Passive income typically requires only financial costs. For example, Vanguard and other investment companies will typically charge a minimal fee for holding your investments. Vanguard charges a $20 yearly account service fee, in addition to a management fee for each investment that averages 0.09%, which is the lowest in the industry.
LendingClub says they charge lenders a fee of “1% of the amount of any borrower payment received by the payment due date or during applicable grace periods”. This should be factored into the interest rate when setting up a loan with a borrower.
The Amazon affiliate program does not have any cost for applying, and there is no minimum or quota to reach before earning referral fees from their program. That makes this program a good side hustle because you will not feel pressured to keep up with costs when you are busy in other parts of your life. The main cost of this program is your time. You will have to put in some time and create effective referrals to earn money.
Pros/Cons
Potential growth of your money through compound and diversified interest.
Increased education through new business outlets.
Ability to help others through methods such as peer-to-peer lending
Possibility of losing your investment (e.g., stock market volatility).
Tying your money up in investment means it’s harder to get in an emergency.
You don’t always know how much money you’ll get back from your investment.
The bottom line
There are legal ways to turn your money into more money. You just have to decide which ones work for you—which ones excite you, which ones you are comfortable with, and which ones fit your life right now.
If you have some extra time and are looking to use your money to pad your bank account or pay off a loan, a side hustle may work. Real estate investment may work if you want to have a stable monthly payout while holding a long-term investment. If you want something that you don’t need to think about but still gives you stability and a kickback, then a mutual fund investment may work for you.
No matter what you choose, eventually, you could feel as rich as the drug lord you watch on your TV.
