Learn how to grow your money- 10 Smart Ways

Saving money is the first step towards growing it, and investing it in the right assets is the second. When you buy assets, your money grows. When you spend it on liabilities, it depreciates. It all boils down to your spending habits. We cannot emphasise enough on how important it is to invest and grow your money, especially if you want to retire without any financial obligations.

Selecting the right investment plan is the key to growing your money faster. Compound interest is the secret to building a corpus that can help you reach your mid-term and long-term financial goals. You can even choose to retire early if you have built a corpus large enough to provide you with a stable passive income stream.

Do you want to learn how to grow your money fast but are not sure where to begin? Here are the 10 best ways to grow your money at a faster rate.

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10 Best Ways to Grow Money

1. Set financial goals

It is essential to set financial goals and work towards them to live the life of your dreams. That being said, your goals must be clear and well-defined. Clearly identifying your financial goals will enable you to put in place the tools that will help your money grow.

You can start by listing everything that you wish to accomplish. Identify your short-term, mid-term and long-term financial goals that you wish to save your money for. It can be buying a new house, pursuing your dream start-up venture or your child’s higher education.

2. Set a budget and stick to it

The key to financial growth is knowing how much money you earn and how much you spend. You can achieve this by setting a budget and sticking to it. Budgeting instils discipline in your investment efforts. Ideally, you should put aside a certain amount from your monthly income for investment. This will give you the clarity to prioritise your spending.

3. Start investing early

You should start investing early to give your money the time it needs to generate wealth. When you’re young, even a small amount saved each month can add up to a huge corpus when you retire. The magic of compounding works only if you stay put for a long term (10 to 15 years, at least).

Another advantage of starting early is that you can afford to invest in more risky asset classes that tend to give higher returns in the long run. This is because riskier asset classes like equity or cryptos are quite volatile (go through frequent ups and downs). As a result, short-term investors might end up making losses if they exist at a time when the market is down. However, in the long-term, these asset classes (at least stock investments, if chosen wisely), give you returns that no other asset class offers. This is because if you stay put for a longer time span, more often than not, you make up for the losses incurred in the meantime due to market volatility.

4. Build a diversified portfolio

As the adage goes, “Don’t put all your eggs in one basket.” It perfectly sums up the concept of not risking all your money on one asset class. Investing in a diversified portfolio reduces your overall risk profile. A diversified portfolio can consist of stocks from several different industries and countries, as well as bonds, commodities, and real estate. This is the most effective method to grow your money. It minimises the chances of losing everything if one investment fails.

5. Get out of debt

We live in a debt-driven society. Everything we ever wanted can be obtained with a swipe of a credit card or easy EMI financing. When you take on debt to acquire liabilities, you are borrowing from your future self. Money borrowed to invest in liabilities might not be a wise investment.

The burden of debt not only weighs you down but can also hinder your ability to invest wisely. Having debt may prevent you from finding ways to grow your money. If you have the right strategy in place, you can pay off debt while saving and investing at the same time. Debt repayment does not mean you have to sacrifice your financial growth.

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6. Switch investments as your priorities change

Your priorities should ideally change as you age. To achieve your financial goals, you must align your investments with your changing financial needs. When you are young, you may invest your money for the long term in high-risk investment classes. As you get older, protecting the money that you’ve already earned becomes more important than growing it at a faster pace. Therefore, it might be a better idea to invest in safer instruments like government savings schemes, government securities, secured corporate bonds, fixed deposits, etc.

7. Start a side hustle

A little extra money can go a long way regardless of your financial goals. With a side hustle, you can make extra cash to invest towards wealth creation. You can either work as a freelancer alongside your job or start your own venture that can generate additional wealth. Once your side hustle starts to generate enough income, you may even consider quitting your day job to start working on your dream project.  

8. Invest in tax-saving instruments

Tax planning is one of the key components of financial planning. To save more and maximise returns on investments, you should ideally start your tax planning right from the beginning of the fiscal year. It is critical to choose the right tax-saving schemes and funds so that you can maximise your tax savings. You must be aware of all the exemptions and deductions allowed under the various sections of the Income Tax Act. For example, the income tax department allows deductions for investments in various schemes, such as Senior Citizen Savings Scheme (SCSS), Sukanya Samriddhi Yojana (SSY), PPF, EPF, LIC premiums, infrastructure bonds, and tax-saving fixed deposits under the Section 80(C) of the IT Act.

9. Rent out your spare room on Airbnb

Services like Airbnb allow you to rent out your house or an extra room, creating an avenue for extra income. Describe your house/room’s amenities, put a picture of it, and list your rules and conditions. It’s that simple. Interested clients will find your listing and pay to rent your place for a specific duration. If you have a house in one of the prime tourist locations, you can earn a significant income regularly.

10. Offer consulting in your domain

Do you have an in-depth knowledge of your field or domain? Have you got extra time after work or during weekends? If yes, then this might be the right time to monetise your expertise by offering a consultation. For example, if you are skilled at digital campaigns or strategies, you can offer your consulting services to small business owners who cannot afford big agencies.

Furthermore, you can also set up a YouTube channel or a blog to offer free general consultations and video meetings to paid users. Your YouTube channel and blog may also generate additional income for you through affiliate marketing.

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How to grow money in India by investing

1. Stock market

Investing in stocks means owning a share of a business. Long-term investors can earn high returns on stocks by holding them for a long time. To begin trading in stocks, you will need a Demat account. However, investing in stocks might not be for everyone as it’s a volatile asset and involves risk. That being said, if you’re planning to enter the stock market as a long-term investor and pick your stocks wisely, there’s little chance of losing your capital. More often than not, you’ll get a decent return (upwards of 10% p.a.) on your investments. 

2. Corporate bonds

Corporate bonds are a good investment option for those seeking low-risk fixed returns. A corporate bond is a debt security issued by a private or public corporation. Companies issue bonds as a way to raise capital.

When you buy a corporate bond, you are essentially lending money to the issuing company at a certain rate of interest agreed upon by both parties. Upon maturity of the bond, the company returns the principal invested along with the interest amount. 

3. ULIP

Unit-Linked Insurance Plans (ULIPs) combine insurance coverage with investments in bonds and equities. With a regular premium payment option, a ULIP offers both life coverage and wealth creation. ULIP allows you to take advantage of the stock market without the associated risks and provides a safety net for your family through insurance coverage. However, before you invest in a ULIP, you must carefully evaluate what is the actual return on investment that the plan is offering. Usually, while ULIPs seem to be very attractive on the face of it, the interest rate offered is not sufficient to even beat the inflation. Therefore, unless you are sure of a ULIP, the better advice is to not mix insurance with investments.

4. Mutual funds

In mutual funds, money from multiple investors is pooled together to purchase bonds, stocks, gold, and other investment instruments. Professional money managers operate mutual funds to gain capital for investors by working around specific investment objectives. Individual investors can access professionally managed, diversified portfolios through mutual funds.

5. Tax-saver FDs

Fixed deposits, as you might be aware, are the safest investment option. Even if a bank goes bankrupt, RBI provides the DICGC insurance cover worth up to ₹5 lakhs on all your bank deposits. While the interest earned on fixed deposits is always taxable, if you invest in a tax-saving FD, you can claim a deduction from your net taxable income under Section 80(C) of the Income Tax Act. The only downside of FDs is that the rate of interest offered is very low, just enough to make up for the inflation.

Conclusion

The bottom line is, there are numerous ways to invest, and learning what works for you is key to growing your money over time. Investing in a broad portfolio reduces the risk of volatility. A range of investment options are available to investors, from safer lower-return assets to riskier, higher-return ones. A wise investment strategy can help you build wealth over time. A rule of thumb is to avoid investing in anything you don’t fully understand.

FAQs

1. Why is it important to grow your savings?
   Long-term financial stability leads to peace of mind. But it is not easy to save adequately for all future needs, especially with limited income and resources. It is therefore vital to find optimal ways to grow your savings, so you have enough funds for all your future needs.
   
2. What are the best tax-saving instruments in India?
   Some of the best tax-saving instruments in India are Senior Citizen Savings Scheme (SCSS), Sukanya Samriddhi Yojna (SSY), National Savings Certificates (NSC), National Pension Scheme (NPS), Equity-Linked Savings Scheme (ELSS), and Public Provident Fund (PPF).
3. How does inflation affect savings?
   Inflation decreases the value of your savings over time; you will have to spend more on the same goods or services than before. Simply put, inflation reduces your purchasing power. Therefore, unless you are extremely risk averse, it is always advisable to invest in asset classes that at least outperform the inflation if you wish to grow your money and build wealth in the long term.
   
4. What are the factors to consider before investing in stocks?
   Some of the important factors to consider before investing in stocks are:

• Risk Involved: You must pick your stocks depending on your risk appetite. If you are young and do not have many liabilities, you can probably afford to invest in more volatile stocks like mid-caps and small-caps. On the other hand, for someone who has a family to feed, investing only in blue-chip stocks might be a better option.
• Dividend Yield: When you invest in stocks, there are two ways you can make money. First is your capital appreciation as the share price increases, and second, many companies divide a certain portion of their profits amongst their shareholders. This is known as earning from dividends. The dividend is liquid cash that is credited directly to your bank account. This can be a good way of earning a passive income.
• Duration of Investment: Since equity as an asset class is fairly volatile in nature, you should ideally invest in the stock market if you can afford to stay put for a long time horizon. It is important to understand that investment is different from trading. While stock market investment is a strategy to grow money, trading is a full-time profession and requires a different level of expertise.