You likely already put your money in bank accounts and hold various investments, but there’s a possibility you’re not taking full advantage of what they offer. Here are four key ways to help proactively manage your finances for growth. While we strive to offer innovative solutions for you, including some of those mentioned below, other options may be available.
4 Financial Decisions That Can Grow Your Savings
Protecting and growing capital for the future is a high priority for many people. To reach this goal, a key part of the process lies in continually monitoring investment and savings options available to you. This way, you avoid missing out on ways of growing your assets to help you live comfortably in the future.
Even if you are investing in your company’s 401(k) retirement plan, you can still put money away each year in an IRA. The IRS sets rules for the maximum contribution1 a person can make each year, and it’s slightly higher for those aged 50 and older. But Fox Business2 points out that it’s a good idea to open an IRA as soon as you can, to take advantage of compounding interest from there on. Depending on your income and whether you participate in a 401(k) plan, you may be able to deduct your contribution to this retirement account.
In addition, some people under certain income limits can contribute to a Roth IRA, which allows you to make contributions that grow tax-free, since it’s funded with post-tax income, according to Kiplinger3. While IRAs can be beneficial, those with higher incomes may be able to contribute much more through 401(k) plans, so the contribution limit for an IRA may be considered minimal at that earning stage.
2. Mutual Funds
If you want to invest in stocks or bonds while minimizing your risk, Investopedia4 states that mutual funds can diversify your assets. Mutual funds allow you to invest in the stock market and take advantage of stock or bond growth, without choosing individual equity securities or bonds. You can invest in various asset classes. For instance, you can invest by sector, like real estate or healthcare, or by region, whether you choose the United States, Europe or emerging market countries. You can even invest in blue chip companies or small cap companies. The number of fund options is as varied as the companies themselves.
Investopedia4 also says there is a potential for growth with mutual funds, as they’re made of stocks and bonds. Therefore, the earlier a person invests in them, the greater the potential for sustained growth. Of course, there’s also the risk for loss – mutual fund investments aren’t guaranteed. CNN Money5 states that your asset allocation in mutual funds or could decrease as you get closer to retirement, due to the fact that you may need to ensure access to a reliable income stream. They advise that investing in mutual funds is something people should consider after maxing out their contributions to their retirement accounts, in order to continue investing for the future. Make sure to read the prospectus carefully for any mutual fund you are interested in prior to purchase. The prospectus contains the investment objectives, risks, and charges and expenses associated with it.
3. Certificates of Deposit
A certificate of deposit, or CD, is an investment vehicle that gives you a specific interest rate for a period of time. Investopedia4 says that the longer the time frame and higher the amount, the better the interest rate. When interest rates are low, CD rates are as well. On the flip side, the interest is guaranteed, and may be FDIC insured for up to $250,000 per depositor, per insured bank, for each account ownership category. One investment strategy, according to Investopedia, is to make a CD ladder, investing the same amount of money in CDs of different maturity lengths, from short term to long term, using the proceeds from the early maturing CDs to reinvest in longer term ones when they come due.
Given recent interest rates6, this isn’t a get-rich-quick scheme, but the CDs will likely earn more than money market accounts. This strategy is attractive for those who may need some of the funds in a few years, but want to earn interest in the meantime. It also may be advantageous if one needs to balance out the risk of stock or mutual fund investments.
4. Life insurance
Life insurance is intended to support the family’s living expenses and other essential costs after the policyholder passes away, says U.S. News7. Those with high incomes don’t always maintain life insurance, as there are other savings and investment funds available to them that can offer financial security to heirs. According to Investopedia8, some find that cash-value life insurance is a good investment for saving money in a tax-advantaged way. The cash-value portion of the policy can be used as income, or as a loan source or to pay for future premiums. The death benefit is tax-free, which may be a helpful way to pass along cash to beneficiaries or to pay for any estate taxes that may be owed.
These are just a few of the investment and growth strategies which may help increase your assets over time. Be sure to speak to a financial expert who can help you learn what’s available to you and how to maximize your money.
This article was helpful.