There are lots of ways to invest your money. The hard part about investing is finding the extra money to invest. As you go through your weekly routine of living, you find that there is never any extra money left over. In fact most people find it hard to just meet their financial commitments each week, or each month. So how do you get that extra money to invest?
Let me outline one way that a person can start to find extra money. This strategy has worked for many people and it may work for you too, if you can apply the discipline needed.
Look at your expenses on a monthly basis. You will have fixed costs and variable costs. Fixed costs are those bills that come around every month and are a part of living. You really cannot get away from them or alter them to any degree. These are your electricity bill, or your gas bill or even your grocery bills. Most people cannot do without these and they are a pretty constant cost associated with your living.
The variable costs are costs associated with spending money where you may not know the exact amount on a monthly basis. Let’s say your entertainment expenses, your Xmas expenses, and even your clothing expenses. They can vary and are mostly under your control. You choose whether to spend or not to spend.
Now here is a radical thought! How would you like never to have to pay for your electricity bill ever again? What if it was paid automatically for you? You wouldn’t have to reach into your weekly pay check to find the money to pay it!
Most people try to save money for a goal by skimping on their variable expense. They may want a holiday or a new car or furniture. These short term goals are great and often enough to motivate most people into saving.
What if you saved enough money from your variable expenses to invest in a term deposit account and then used the interest earned from that account to pay your electricity bill? How much extra money would you have each month to apply the same principle over and over to all your fixed costs?
Say your electricity bill is $300 a quarter. How much money do you need in a term deposit account that will pay you $300 a quarter? To calculate roughly, you will need to make $1200 a year from your term deposit. So if you can save $12,000 and get 10% interest you will never have to pay another electricity bill for the rest of your life! Ok, so the maths is a little rough, and you will have to do your own, but the principle is still the same. Invest your money from skimping on variable costs to go to investments that pay for your fixed costs.
The whole theory behind this is that you are compounding your wealth. The money you now have from not having to pay an electricity bill can be put towards saving for your next term deposit. That can pay a monthly fixed monthly cost like heating, or telephone costs or internet cost or rates costs on your dwelling.
Start small, if you think this is a big ask to save this much. How about your car registration? How much do you need invested to earn interest that will pay for this for the rest of your life? I would think as little as $4000 should do it.
Keep up this strategy and before long, you will have more than enough money to invest