If you’re going to invest successfully, one of the best benefits is having your money work for you, instead of the other way around.
A common piece of advice from advisors about investing in the stock market is to only put in as much money as you can afford to lose. It should be “play money,” in a sense, that wouldn’t affect your lifestyle.
Investing for retirement, however, falls out of this category — mainly because the investing horizon is so long that the return should average out over 30 years or so.
Invest in many goals
But for investors with short-term goals for their stocks, investing some extra money in the stock market can allow their money to work for them. To be safe, they should already be contributing to a retirement fund, have an emergency fund, not have any debt on credit cards, and have a saving plan for all of their expenses.
How do you come up with that extra money to begin with, so you can invest it and hopefully make some money off your investment? Here are five things to do if you’re not already wealthy so you can have some extra cash to invest:
Start a business
Many rich people own their own business, which allows them to make money even when they’re not working.
Thanks to the Internet, starting an online business is easy and can be done in minutes for almost nothing. You just need to get past the difficult, first step: Figuring out what you’re going to sell.
Join the gig economy
From being a Lyft driver to dogsitting and wrapping your car in advertising, there are all kinds of ways to earn extra money in your spare time in what’s called the gig or sharing economy. Some work is so passive that you don’t have to do much after the initial setup.
Whatever extra work you decide to take on, put that money in a separate account from your bank account for daily living expenses, and invest it when you’re ready.
Make saving a habit
As we stressed earlier, saving should be a big part of your daily life before investing in the stock market. There are many things to save for before you start to invest in stocks: retirement, health care expenses, emergencies, home maintenance, vacations, college and other priorities you may have.
Savings can be automated by having money moved from your checking account to a savings account or elsewhere so that the money goes where it should before you see it.
Compound interest from such savings can make you a millionaire before you know it, and can provide an area to pull money from for investments.
Follow a budget
If you don’t have a budget, then it’s going to be difficult to stay within one and live within your means.
Whether you set up a household budget with the help of an accountant or financial advisor, or use a software program or website to help you, having the discipline to set and follow a budget is a good way to know if you’ll have money left over at the end of the month.
Know why you spend
A budget can help you see where you’re money is going. With that knowledge, you might also see spending habits that you didn’t realize you had.
Do you eat out at restaurants a lot? If so, is it because you don’t make the time to plan meals for the week and don’t have enough food in your refrigerator to cook balanced meals? Being disorganized can cause you to spend more money on going out to dinner, for example.
Are you in impulse shopper? Does your credit card statement show wild spending on weekends on things you don’t really need, but want? Then maybe it’s time to get rid of your credit cards and find something else to do on weekends.
That extra money could be saved for something else — though investing in the stock market probably shouldn’t be the first place you turn to if you don’t already have some savings accounts set up for other purposes.