How to make your money work for you

When you put it to work for you, money can be a steppingstone to a brighter future. However, a new LendingClub study revealed 61% of working Americans in all income brackets and age groups are living paycheck to paycheck and anxious about covering basic emergency expenses. Exacerbated by pandemic economic pressures, many people are struggling to make it to the next payday, let alone plan for the future.

Prioritizing and gaining control over your financial well-being is more important now than ever. No matter where you are today, here's how to start making your money work for you.

What does making your money work for you mean?

Stripped down to the core, money is what we trade for goods and services. You go to work and exchange your time for money which you can then use to pay your rent and put food on the table. We all know money is about so much more than that. Money can help you pay off debts, save up for emergencies, build a comfortable retirement, or even take that dream worldwide cruise. To move beyond simply exchanging your time for paying bills, you have to put your money to work by saving and planning ahead.

It doesn’t have to be complicated or time-consuming, either. Even easy, practically automatic steps can help you build wealth over time.

8 ways to make your money work for you

1. Create a budget

Knowing where your money is going is one of the best ways to make your money work for you. Many people put off budgeting because it can feel restrictive or complicated—but it doesn’t have to be. Get started by jotting down your income and expenses to see where you stand. Once you have the framework in place, you can create budget categories, drill down into how you spend in specific areas, or keep it simple.

Laying it all out on paper can help you see where you can make cuts without making major sacrifices, freeing up money to pay down debt or boost your savings. Once you’ve got a plan in place, several free apps are available to help you keep on top of your spending and saving goals automatically.

2. Open interest-bearing accounts

You have to stash your cash somewhere, so you might as well be earning interest. Most savings accounts offer a small amount of interest, letting you rack up earnings on your emergency fund over time. You can also opt for an interest-bearing checking account. And if you tend to keep a higher revolving balance in your checking account, you may earn a higher interest rate by switching to a money market account.

If it has been a while since you looked at your bank, consider comparing rates for the types of accounts you need to see if you can score a better deal.

3. Maximize credit and banking rewards

To really make your money work for you, it’s never a good idea to take on more debt just to earn rewards. On the flip side, taking advantage of rewards for everyday needs and items you’re already spending money on makes a lot of sense.

For example, many credit cards offer a higher cash back percentage on a category like groceries or gas purchases. If you use your credit card to make those purchases and then pay the balance in full, you’ll rack up rewards without added interest. Also, many banks now offer rewards for debit card spending. Consider checking in with all your financial products to see what rewards are available that you might be missing out on.

4. Save money shopping with online tools

There are loads of opportunities to save money when you shop online, but if we’re being honest, most of us don’t take advantage of these because it feels like a hassle. Keeping up with sales emails and tracking down valid promo codes is time-consuming and often frustrating.

Thankfully, you don't have to leave money on the table when you shop online. Instead, try installing a browser extension that will pop up automatically when you visit your favorite online retailers. These extensions find sale and promo coupons (that actually work) and even offer cash back—all at the click of a button.

5. Build an emergency fund

Having an emergency fund in place can shelter you financially from life’s inevitable emergencies. When something does crop up, if you have the cash on hand to cover it, you won’t rack up debt and can quickly move on with your life.

Many experts recommend having at least six months of expenses saved in an emergency fund, but you don’t have to get there overnight. Start as small as you want and build yours up over time. And don’t forget to stash those savings in an interest-bearing account so you can start earning more through the miracle of compound interest.

6. Pay off high-interest debt

High-interest debt often compounds month-over-month. If you’re carrying credit card debt and only making the minimum payment, it could take many months—or even years—to pay off your original balance. Making a plan to pay off your debt now will free up your funds for a brighter future.

If you’re tackling multiple debts or saddled with high-interest credit cards, you may want to consider a debt consolidation loan. These loans combine all your debts into one monthly fixed payment—often with a lower interest rate—so you can get out of debt faster and spend less on interest overall.

7. Grow your retirement account

Setting your future self up for a comfy retirement is one of the best ways to make your money work for you. If your employer offers a 401(k), you can contribute automatically with each paycheck—before tax. And don’t forget to check with your human resources department about any company matches. Many companies offer to match your contributions up to a certain percentage.

Beyond your 401(k), you can also take advantage of other investment vehicles. Individual retirement accounts like a traditional IRA or Roth IRA often come with tax benefits. However, before you sign up, talk to a certified financial planner to review your financial plan and get some guidance on the right moves to make.

8. Consider investing

Beyond your retirement accounts, you can also invest individually. When investments go up, you’ll receive dividends which you can reinvest to grow your personal wealth over time. However, investments also carry some risks. Much like your retirement accounts, it’s best to meet with a CFP to help you lay out a long-term financial plan and monitor your progress.

The bottom line

Creating real financial growth in your life can sometimes feel impossible, but it doesn’t have to be. By making small moves now, you can start to turn your money from something you earn and spend, to something that supports your financial future.