10 keys to earn money with your savings

10 keys to earn money with your savings

Countless books, seminars, and courses can guide you on how to earn money. The problem with any of these methods is that you can very easily run into what is known as “analysis paralysis.” This is because there is so much information and there is so much fear of making a mistake when it comes to our finances that we get stuck analyzing everything a thousand times and never act.

Regardless of the alternative you choose to earn money with your savings, there are some basic concepts (and keys) about money that I would like to tell you so that they always accompany you. There are just many of these concepts that wealthy families teach their children from a very young age, and for the rest of us, it takes extra effort to find them.

Let’s level the balance a bit… What do you think?

1. Spend what is left after saving, instead of saving what is left after spending.

  • This tongue twister hides two key concepts to earn money and achieve financial independence: the habit of saving and the intelligent management of your capital.

To earn money from your savings, you first need to generate them. The concept of saving is so important that if you could take just one thing from this article, I would love it to be learning how to save.

The correct way to save, as the title suggests, is to set aside a percentage of your income for this purpose and only think about spending it with what is available to you. The most important thing is to generate the habit of saving a part of your income every month (try to define what % will be in your case and try to respect it) because even if it is little, it will accumulate over time.

So, when the next salary or payment for your work arrives, the first thing you have to do is automatically separate the percentage destined for savings. It’s often a good idea to use a separate bank account for your savings, or you could keep cash at home in a stable currency like the dollar (that is, buy dollars with the money you’ve set aside to save and keep).

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2. The trick is not to earn a lot of money

It does not matter at all how much money you generate, because if your expenses are high, your ability to save will be seriously compromised. Many people who want to get rich focus purely and exclusively on generating the most income possible, when in reality there is a better strategy. While the above is important, we also have to constantly try to optimize the relationship between income and expenses. The better we are at increasing the difference between the money that comes in and the money that goes out (in the form of expenses), the greater our assets will be and the savings that we can later invest.

3. Invest in yourself

There is no better investment in the medium and long term than investing in yourself. All the life decisions we make, both financial and of any kind, are strongly related to this concept. Regarding financial issues like the ones we are discussing here, you will hardly find a better way to use your money than constantly training yourself via seminars, books, webinars, conferences, etc. I assure you that the more you understand what you are doing on these issues, the more return you will get from every dollar invested.

4. Is it always bad to get into debt?


There are many situations in which borrowing money can be an excellent alternative. The way to know if credit is good or bad for you will depend on what you are going to do later with that money and what the conditions of the loan are. In general, you have to make sure you fully understand 3 aspects of credit:

  • Repayment term (how long do I have to return the money)
  • Interest rate (TNA, or Annual Nominal Rate ). Interestingly, the person who lent me the money for the service charged me. When I finish repaying everything, I will have repaid the capital that they lent me plus a % of that amount as interest.
  • Other costs. When evaluating a loan, always look at the CFT and consider that as your interest rate. the CFT (total financial cost) is made up of the TNA of the credit plus all other “hidden” expenses.

If you are requesting a loan to invest that money in something else, another important calculation that you will have to do is related to how much return you are expecting to obtain from that money. If the return exceeds the costs of credit, not only will the loan be “free” for you, but you are also making money by borrowing. An easy example of the above would be taking a personal loan at a bank at 45% CFT, and then lending that money to someone else charging an interest rate higher than that (say, for example, 60%).

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5. Types of investments

Many types of investments are possible, from lending a friend money to start their web design business to investing in US stocks like Apple or Facebook. However, the most common is usually the following:

  • Real Estate: it is the star type of investment in Latin America, especially in countries like Argentina. Income can be generated by buying a property and then renting it out, or by buying low and selling high. Many people also look for dilapidated properties, recycle them for relatively little money, and then sell them for significantly more. Great knowledge is not required for this type of investment, but it does require time and dedication in many cases (with maintenance costs that can be high).
  • Stock market: It requires certain minimum knowledge of the operation of Bonds and Shares, and the risk is a little higher but so is the potential benefit.
  • Mutual investment funds: Similar to the previous one, but with a little less risk because the constitution of the bond and stock portfolio is delegated to a professional. By sacrificing some of the benefits of investing in bonds and stocks, we are paying a group of specialists who choose for us the best mix of bonds and stocks for our portfolio.
  • Deposits: If you decide to save your savings in the bank, it will pay you a % interest for it. Generally, the ones that bring the greatest return are fixed-term deposits, where you agree not to withdraw the money from the bank for some time and it pays you a % of that amount as interest for it.

6. The magic of compound interest

One of the most important concepts in finance (especially ours) is compound interest. When you invest money, you receive interest in return at the end of the investment period. If you re-invest that money (the initial capital + interest), you will be increasing your savings exponentially over time.

As an example, if you invest $10,000 at an annual rate of 10%, after the first year you will have $11,000 (initial $10,000 plus $1,000 in interest). If we reinvest the interest over and over again, at the end of each year we would be increasing our capital as follows:

  • Year 1: $10,000 principal + $1,000 interest = $11,000
  • Year 2: $11,000 principal + $1,100 interest = $12,200
  • Year 3: $12,200 principal + $1,220 interest = $13,420
  • Year 4: $13,420 principal + $1,342 interest = $14,762
  • Year 5: $14,762 principal + $1,476.2 interest = $16,239
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All this assumes that in the meantime we do not reinforce our capital and inject more money, with which we would further accelerate earnings. The secret of compound interest is to start as soon as possible so that time plays in our favor, and we earn money consistently and faster Kaizen!

7. Multiple streams of money.

  1. The ideal situation in a person’s finances is achieved when we manage to have multiple sources of income, not just our salary or the profits of our business. The more sources of money we generate, the less risk we will have of committing our capital if one does not work. Likewise, it will allow us to take more risk in one of them knowing that we are covered if it does not work, with which the potential profit increases.

Put your savings to work for you, don’t let them grow old and bored under the mattress!

8. Never put all your eggs in one basket

There are two maxims that you have to remember:

  1. Every investment involves risk
  2. The higher the risk, the higher the potential reward

It is for this reason that I recommend that you never invest all your money in one place. First, because if it doesn’t work, you can lose everything (or a large part). And second, by diversifying your investment portfolio you are spreading the risk, which allows you, as I mentioned before, to take more risk in some and less in others. In the best scenario, you can earn more money than if you had invested it in one place, and in the worst, you would be even or lose relatively little.

9. You need a plan

Whether your goal is to buy a house, open a restaurant, or travel the world, you need a plan.

Returning to the Kaizen approach, set clear goals and design a progressive plan to achieve them. For example, if your goal is to get the money to buy a 2-room apartment in 5 years, do the math to analyze how much money you would need to generate annually and with that data, you can study the different investment alternatives that would help you achieve it. From then on, the choice of which path to take will depend on your resistance to risk.

10. Enjoy the money

Finally, never lose sight of the fact that money is a means to an end and not the end itself.

Enjoy it, invest in experiences, treat yourself, and reward your discipline periodically. This is not wasting money, but investing in a breath of fresh air to continue executing your plan methodically and without interruption.


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