To kick-start your investment plans, you need cash reserves. The best opportunities come and go quickly, and if you don’t have cash on hand to strike a deal, your investment career may possibly stall before it even had a chance to really start. Solid budgeting and a savings plan are the most straightforward ways to build your investment fund. However, if you want to accelerate things, look at your current resources—and expenses—for ways to free up and create more investing cash. Chances are that you have more funds (or access to more funds) than you even realize. This post is provided by Oliver Greer, a stock market and real estate investor who writes for Money Crashers.
Tips to Create More Cash
1. Downsize Your Living Space
Downsizing can be an extreme method—but it can be very effective too. Depending on your circumstances, implementing one of these tips could save you hundreds of dollars or more each month:
- Sell Your House. If the seller’s market is strong in your area, consider selling and moving to a smaller house or less expensive community. Crunch your numbers first though—the cost of buying and moving into a new house can be higher than expected, and a longer work commute can eat into any savings on mortgage payments.
- Find a Cheaper Rental. If your lease expires in the next few months, start looking for something less expensive. Alternatively, you can talk to your landlord and see if he or she is willing to renegotiate your lease for a lower amount or whether he or she owns other properties that rent for less.
- Get a Roommate. If your house has extra space, consider renting out a room to share expenses. Just be sure to have your roommate sign a rental agreement if you own your house. If you are a renter, check your lease, as your landlord may require you to get his or her permission before allowing someone else to live in your place.
2. Give Up Your Car
Aside from your housing payment, your next largest expense is likely your car. While this is not an option for everyone—particularly if you live in an area with no public transit or if you have a disability—going without a car can save you thousands of dollars each year in payments, insurance, maintenance, parking, and gas (and possibly tickets).
In fact, you may be able to save even more money if you take advantage of tax breaks designed for people who use public transportation. Flexible spending accounts allow you to designate pretax dollars for the purchase of public transit passes. Other benefits may be available if you commute to work as part of a “vanpool,” in a vehicle that has the capacity for at least six passengers, or if you ride your bicycle to work. If you aren’t already familiar with your company’s flex benefits program, talk to the office benefits manager for details.
3. Pay Off High-Interest Debt
Debt payments and interest are eating into the funds you have available for investing. Take a look at all of your accounts and organize them according to your interest rate. By paying off accounts with the highest interest (a “debt avalanche“), you’ll more quickly whittle your debt to zero, freeing up more cash each month that you can then use for investing.
Another possibility is negotiating lower interest rates with your current creditors. The strategy generally works best if you have good credit and a strong payment history. Call up your credit card company and explain that you are a responsible, valuable customer and would appreciate a reduction in your interest rate. If you have received offers for a lower rate from other companies, keep those offers on hand during a phone conversation. If you can provide specifics on the credit card companies that are making the offers, as well as their terms, you may be in a better position to negotiate your desired rate.
4. Embark on a Cash Fast
If your funds are low simply because you’re overspending, rein in your spending by paying for everything in cash for a set amount of time. Whenever possible, avoid using credit cards, debit cards, or paper checks for purchases. Pay bills such as mortgages, utilities, and credit card payments directly from your checking account through your bank’s online payment service. Then, withdraw the cash you need to make necessary purchases or payments on a weekly or daily basis. Once you start counting bills and paying for things with cold, hard cash, you’ll probably find that you become more aware of your spending and will automatically curb unnecessary purchases.
5. Pick Up a Side Gig
If your current income isn’t quite enough to help you build the kind of investment cash that you need, consider getting a second job or picking up some freelance work. Contact retailers in your area to see if they’re looking for part-time help. If you have a car, consider driving for a ridesharing service such as Uber or Lyft. If you have skills that are in demand such as copywriting, coding, or graphic design, look into freelancing.
While it is true that working one or more side gigs can keep you busier than you’d like, it’s also important to remember that your new job doesn’t have to be permanent. A few months’ worth of extra work can earn you a nice nest egg that you can later invest.
6. Make Sure You Have the Right Bank Accounts
Have you checked out your savings and checking accounts lately? When you initiated these accounts, your financial situation may have been significantly different than it is now. As a result, you could be paying monthly fees that are levied on some accounts. For example, you may have an account that charges a flat fee each month if your balance is below a specified amount. While your balance might remain beneath that threshold, you may qualify for a different type of account that waives fees if you use your debit card for credit/signature transactions a certain amount of times per month.
In addition, you may be able to switch your account over to one that can earn you more interest. After all, you have to keep your investment funds somewhere, and it’s a good deal if they are making you money as you grow your account.
If you aren’t sure of the exact terms of your bank account (or various bank accounts), head over to your local branch and ask to speak to a personal banker. Generally, bankers are happy to look over your accounts and make recommendations based on your current balances and patterns of withdrawals and deposits.
If your current accounts are suited to your needs, the banker may be able to recommend ways of minimizing fees. For example, some accounts waive monthly maintenance fees if you receive your paychecks via direct deposit.
A lack of cash shouldn’t keep you from real estate investing. The trick is to find the areas where you are spending more than you need to as well as figuring out how to tap into your own talents to raise additional funds.
Over time, you’ll become far more aware of your finances than you have been. This awareness will not only help you increase your investments but will have an overall positive effect on every aspect of your financial health.
What additional ideas can you suggest to create more investing cash?