(ThyBlackMan.com) Successful people who always have money in the bank know a few secrets about financial management. You might notice elaborate homes or vehicles under their name, but these individuals usually work hard for their money. In fact, they probably understand that their money needs to work for them as well. In the African American community, these types of luxuries are prevalent but don’t happen as often as it should and there are numerous financial opportunities that you we should take advantage of. This, is true especially when you have an extra $100. Let’s take a look at how you can make your money work for you as you build wealth over time.
Secure a Rewards Credit Card
A simple way to make your money work harder every day is by applying for and using a rewards credit card. Select from cashback, travel or other card perks that are offered by dozens of different credit providers. The key to rewards, credit-card use is simply money management. Charge all of your purchases onto the card so that your rewards are as high as possible. However, don’t carry a balance from month to month. You’ll end up losing money on the rewards if you pay the high interest. With responsible spending on a credit card, you’re receiving rewards that you would otherwise miss out on. Entire vacations can be financed through frequent-flier miles and travel reimbursements alone. As African Americans, it’s important we secure these perks to boost our credit. Credit cards can carry a stigma, but that’s if it isn’t utilized right.
Use Short-Term Loans Appropriately
Everyone has a financial emergency at times. Short-te
rm loans through cash-advance companies are your solution to these difficult situations. Borrow several thousand dollars one month, and pay the facility back next month. You might pay an interest charge for one month, but you’re able to cover your financial emergency with ease. In fact, your good credit might reward you with a low-interest rate or an introductory rate of nearly 0 percent. You can always shop around for short-term loans before settling on a company. However, don’t borrow too much money where you’re forced to pay interest for 6 months or longer. Your money can’t work for you if it’s being siphoned off by interest charges.
Diversify Your Stocks and Bonds
For African Americans, this is essential. Making your money work for you also means that investing is part of your financial strategy. Ideally, you want to have a mixture of different investments. Mix up your interests between stocks and bonds. When you’re a young adult, it’s safe to have more stocks than bonds because you have enough time to recover from any dramatic losses if a crash occurs. However, slowly alter your investment strategy as you grow older. As you approach retirement, you’ll want more bonds than stocks because your account can’t recover quickly from major losses. Diversifying your investment portfolio allows you to survive through the ups and downs associated with every financial move.
Add to Your Retirement Funds
Retirement funds are important to invest in. We always have the option to create these accounts but we don’t take advantage of it. As African Americans, we must change this. Our employer might offer you a 401(k) as a salary incentive. Invest as much of your paycheck as possible into this account because you’ll see a strong return when you retire. In fact, your employer may even match your contribution up to a certain percentage. Alternatively, open an individual retirement account or IRA. Contributing to either a 401(k) or IRA allows you to easily save for retirement while reducing your income amount. When income tax day arrives, your salary amount appears lower than its face value. As a result, you’ll pay less taxes because of these retirement contributions. You’re making your money work for you on several levels with smart investment strategies.
Save 10 Percent
Save, save, save. Yes it’s cool to buy the latest outfits and shoes, but save your money strategically as well. Although savings accounts don’t offer large interest rates, they’re still a smart tool to use alongside your checking account. When your paycheck deposits into your bank account, automatically allocate 10 percent into your savings. Over time, you won’t notice the missing 10 percent from your paycheck because you’re used to a lower amount for everyday expenses. If you consistently add 10 percent to your savings twice a month, your interest will add up over time. When you encounter a major purchase, such as a failed car transmission, your savings can help you pay for that situation. A low interest rate can reap big rewards when your account is constantly growing in size with that automatic 10-percent deposit.
Avoid Personal Lending
Your money might be divided between retirement, savings, stocks and bonds, but you do have some extra cash for life’s fun distractions. Family and friends might see this fact as an opportunity to borrow money from you, however. Although you want to support your loved ones, lending money is one of the worst ways to use your funds. Borrowed money doesn’t have an interest rate attached to it. In fact, you may not be able to recoup your money in some cases. Ideally, it’s best to decline any money-lending requests. Those extras funds at month-end can be placed in a certificate of deposit or other investment to further work in your favor.
Business people who run financial companies, such as Don Gayhardt, understand how money flows through the system. If you want to understand economics at an even deeper level, take a basic finance class. With some education and extra cash, you can invest your earnings and see a dramatic return in almost no time.
Music Editor; Brad Washington
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