Invest|Top 16 ways to earn more money for investing

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When I ask people, what is the #1 challenge that they face when it comes to money, this is one of the most common answers that I get. They don’t have enough funds available to invest. This seems to be a pressing problem for many people. When I started out on my investment journey, I too was faced with this dilemma, how to save enough money for investing? I thought for several days, studied multiple books/blogs/articles/finance sections of newspapers. Finally, I came up with the below list. Since then I have been sincerely following these guidelines. And I must say that I have started reaping the benefits. I am now saving much more than what I used to save 3-4 years earlier when I started out. And that automatically means that I also have a lot of cash at my disposal to invest in assets that can give me inflation-beating returns in the long run. And all this without compromising my usual lifestyle and still enjoying my life. I sincerely hope that the below guidelines will also help you to solve your problem and get you started on your investment journey.

The 5% rule

According to this rule, for every expense that you make, you should put away 5% of the expenditure as savings. Let’s say that you recently purchased a shirt for Rs.1000. 5% of 1000 = Rs. 50, hence immediately after the purchase, put away Rs.50 as savings. You can transfer this money to your piggy bank. Or you can keep a track of all your expenses in an excel sheet or a budgeting app. Later at the end of every month, sum up all those expenses and calculate 5% of the total. Whatever be that amount, use that money to invest into assets. So, at the end of the month say if you had spent a total of Rs. 10,000 then you should invest Rs.500 into assets.

How to earn more in a job?

For this, you need to study the professional field that you are working in and find out which are the most highly paid skills in your line of work. Then you should dedicate some time daily to learn these skills so that you can add them to your resume. Earnings in the job are directly proportional to the value that you bring to the company. And that, in turn, depends on the skillset that you have. The more the number of in-demand skills that you have, the more valuable you will become to your employer. And that, in turn, will translate to higher salaries and better appraisals. Because at the end of the day every employer wants to retain a highly-skilled resource who can help their company grow. So, keep upskilling yourself and your earnings in the job will drastically increase. And the more you earn, the more money you will have to save and invest.

How to earn more by investing in assets?

Assets are a great way to earn money for your future. Every asset available in the market more or less offers interest to the investor. Be it mutual funds, stocks, bitcoins or peer to peer loans you receive interest on top of the principal amount that you had invested. It is this interest which translates to earnings. And the best part, you are earning this money without putting in any effort or dedicating any separate time to it. You are earning money while you are sleeping. That’s why these kinds of investments are called passive investments. Because they don’t require your active involvement to generate returns.

Also, you can invest in real estates such as buy a home, a piece of land or a car. And then you can rent it out for commercial use and earn monthly returns from it. You can these invest these returns into buying more assets like stocks, mutual funds, P2P loans, etc.

Reinvest the earnings from assets

I have often seen people doing this mistake. Whenever they see that they have earned a small profit from their investment, they withdraw the entire amount happily and don’t invest it back. This prevents the investment from earning compound interest and generating even greater returns in the future. Let me explain this with the help of an example:

Say I invest Rs. 1,00,000 into a basket of stocks with a 12% average rate of return. At the end of the first year, I find that I have earned Rs. 12000 on my investment. I feel delighted and I withdraw the entire money. I don’t invest this money back again into stocks or any other asset. So, my net earnings, in this case, is Rs. 12000.

On the other hand, if I had stayed invested for at least 10 years then at the end of the tenth year my net earnings would have been Rs. 2,30,039. That’s a whopping difference of Rs. 2,18,039!! That is the magic of compounding and of reinvesting the earnings back.

Create a budget to save money for investing

Let’s face it, you need to save more if you want to have more money to invest. And for that, you need to keep track of all your expenses. You need to know exactly where you are spending your money, take charge of the situation and cut back on all the unnecessary expenses. I would suggest making use of some good budgeting apps available in the play store. My personal favourite is Bluecoins app. It lets you create your own customized expense categories and allocate monthly spending limits to each of them. In the end, it sums up all the categories and tells you about your monthly spending limit. You can add anything from your credit card bill, electricity bill, household grocery expenses to salary income, bonuses, etc.

After installing the app, you should think of all the different areas that you usually spend your money in a month. Then you should create expense categories for each of them and assign some monthly expense limit to them. In the end, the app will tell you your monthly budget. Make sure that you do not exceed this budget at any cost.

A sample monthly budget can be as follows:

  1. Rent: Rs. 7000
  2. Grocery: Rs. 5000
  3. Office transport: Rs.900
  4. Movies: Rs. 1000
  5. Shopping: Rs.2000
  6. Dining at restaurants: Rs. 1000
  7. Electricity bill: Rs.1000
  8. Mobile bill: Rs.500
  9. Internet bill: Rs.600

Total monthly budget = Rs. 19000

Review your expenses at the end of each month & invest any leftovers

In the above example, I explained how to create the initial budget for your monthly expenses. Now the next step is to review it periodically to know your spending patterns and the areas where you are spending the most amount of money. Are these really required or are they just to fulfill some temporary desires? Based on that you can further divide your expenses into the below categories:

  • Need-based expenses:

This should cover all the expenses that are a must. For example, from the above point rent, grocery, office transport, all utility bills will fall under this category. These are the expenses that are the basic needs. They cannot be done away with.

  • Want based expenses:

All other expenses other than the ones mentioned in (a) will fall under this category. For example, expenses like movies, shopping and dining are not necessarily ones that you always need. Sometimes you can compromise in these areas. Instead of going out for movies every week or other, you can instead purchase a home theatre and have a great movie viewing experience with your family. Also, you can prepare some delicious meals at home rather than going out for dining every time.

At the end of the month, check your expenditure and if it is within the budget that you had set. If you find that there is still money left in the budget that has not been spent then Bravo! You are on the right path. Now instead of spending that money, your duty should be to invest it into buying some assets.

Avoid impulsive buying

It is common to see major e-commerce giants such as Amazon, Flipkart, etc. announce mega sales and people rush in to make use of that opportunity. Keep in mind that these are just baits employed by these companies to take money out of your pocket. More often than not during these sale events, we purchase items that we don’t actually need. But just because everyone else around you is buying and you don’t want to miss out, hence you also join the party. Before purchasing anything, ask yourself again, do you really need it?

Buy online rather than through physical stores

Always buy groceries and other items from online stores rather than buying them from physical stores. Online stores have a wider collection of items. And to top it all they offer more discounts and are lighter on your pocket.

While buying online, look for cashback/discount coupons/promo codes

Another tip while buying online is to be always on the lookout for cashback/discount coupons/promo codes etc. These can seem to be small amounts initially but over a period of time they can add up to a significant amount of savings. So before making the payment, go to the mobile wallets section and check if any of the options are offering a cashback or similar benefit.

Make use of websites like CashKaro to receive a free cashback

Some websites like CashKaro offer rewards/cashback when you shop online through them. You have to only create a free account with them. Next time when you are planning to buy something from Amazon or Flipkart, just go to CashKaro first and login to your account. Next, you search for the vendor (in this case Amazon or Flipkart) in their search bar. From the search results go to the vendor website and complete your purchase. CashKaro will receive a commission from Amazon/Flipkart for referring customers to their site. And in return, they will pay you a certain percentage of that commission as cashback.

Don’t buy a car on loan, instead invest the EMIs into assets

From a purely financial perspective, a car is a liability and not an asset. It does not put money into your pocket but rather takes money out of it. You have to pay yearly maintenance and service charges, petrol charges. On Indian roads, inevitably you will get scratches here and there while driving most of the time. So you will have to spend some money on repairing them.

Some people buy cars on loans. That is even more dangerous. Let’s say that I buy a car worth 10 lakhs by doing 2 lakhs down payment and taking the remaining amount as loan. Let us assume that the loan is for 10 years at a 10% annual rate of interest. So from the loan calculator, I will have to pay a monthly EMI of Rs. 10572. Had I invested the same amount into the mutual fund through monthly SIPs then after 10 years, I would have created a corpus of Rs. 24,56,289. Hence if you have to buy a car then do a full down payment. Do not buy it on loan, save for it first and then buy it.

Don’t buy a home on loan, instead invest the EMIs into assets

The same argument as above also holds true when it comes to buying homes by taking home loans. The impact is much bigger here because of the larger loan amount and the longer repayment period. We don’t realize this but we rob our future selves of money every time we take a loan. If I take a home loan of say Rs. 80,00,000 @10% per annum for 20 years then at the end of this period, I will be paying a total amount of Rs. 1.85 crores approximately to the bank. That’s Rs.1 crore more than what I had borrowed initially.

Take care of your health

Medical expenses and costs for treatment have increased drastically over the past 5-10 years. And it will increase even more in the future. This is one area that can burn a hole in your pocket and wipe out your savings. So it is critical that you take the utmost care of your health. Regular exercise along with a balanced and a nutritious diet will go a long way towards ensuring that you stay fit and healthy.

Stay away from smoking/drinking

Teenagers and most adults are addicted to smoking and drinking. These two are expensive vices that will prevent you from becoming wealthy. Cigarette prices are not constant and rise by at least 15-20% each year. Let’s do a simple back of the hand calculation and find out how much, smoking just 5 cigarettes a day can cost you. Let’s assume that a single cigarette costs Rs 14. If you smoke 5 cigarettes a day, this is Rs 70 a day or Rs 2,100 a month. This is a cool Rs 25,200 a year…All this money going up in smoke….

Let’s take a conservative estimate of just 11% rise in cigarette prices each year. With this estimate, you would have spent more than Rs 50 Lakhs over 30 years on cigarettes. What if the money spent on smoking was invested each month in a financial instrument which gave just 8% a year? Well, this money would grow to more than Rs 1 Crore.

Yes, Smoking just 5 cigarettes a day can cost you a Crore.

Use pool/share rides whenever possible

Whenever you book a cab to the office or any other place, always go for shared rides. Such rides are always 10-20% cheaper than usual rides.

Sell away all unused and unnecessary items on Olx

A good way to earn money from your unused items lying around is to sell them on sites like Olx. There may be another person who needs it and will put it to better use. Plus, you will also earn some cool money which you can then invest in assets.

These are some ideas that I feel can help you to earn more and save more money for investing. They definitely helped me to start on my investing journey. Hope it solves your problem too. If you liked the ideas, please share on Facebook and other social media with your friends who may also be looking for solutions to their investing problems.