Most adults spend 40+ hours a week working to pay the bills. The average income has been ranging between $50,000 and $60,000 per person while some people make a lot more but many also make less. Most people would be happy with a raise. While you won’t always get a raise from your boss there are ways you can make the money you have already grow, which equates to a raise!
There are at least 2 ways you can do this.
The first is to analyze the money you currently have invested and fees you are paying. If you minimize the fees of investing you are going to have more of your money left in your accounts, basically giving yourself a raise.
There are 2 types of fees, loads and expense ratios.
Are you paying any loads on the money you are investing? Meaning, are you being charged 5.75% or more each time you make a contribution to your account? If so that’s a 5.75% return you are missing out on! You should never pay a load to invest your money.
The second way that you are losing money via fees on mutual funds is via high expense ratios. An expense ratio is a percent of your invested money taken each year by the custodian (company holding the money) as a fee. There are very high expense ratios 2% or more and there are very low expense ratios as low as 0.01% or even 0%! By minimizing the fees you are paying you will increase your money and income!
The second way to increase your income is to look for any uninvested or poorly invested money you might have. Two places I see that are often overlooked, CD’s and Health Savings Accounts.
CD’s are often invested at very low rates and the money is very illiquid. Often money is invested in CD’s because that is what people understand an it appears easily available. If you have time to review with a financial advisor you can learn about other simple accounts to invest in that will have as good or better returns and improve liquidity. It is also good to review what your goals are for the uninvested money. If it is planned to be used for some specific event or purchase or just for emergencies there are ways it could be invested more effectively than a CD. Two good options are a money market fund or an intermediate bond fund.
Another place to find money that is not being effectively invested is a Health Savings Account (HSA). HSA money can be invested and for many people it is a very good option! If you are a healthy person or family with $10,000 or even $20,000 in a HSA sitting in cash and no immediately foreseeable need, investing that money is a very good option. In slow years you could see an $400 return (4%) on $10,000 while in good years you could see as much as a $2,000 return on $10,000 or even more. While these are great returns, as always with investing, discussing what your goals and future expectations are for needing the money with a financial advisor are good to do before haphazardly investing your HSA. As with all investing, a good plan is very beneficial for your financial future.
Do you have a HSA or CD’s or other money “sitting” that you’d like to discuss how you can more effectively use to increase your passive income? Email Axel Hoogland at HooglandAxel@Highland-WealthManagement.com or call me at 715-820-0377 to discuss how financial advising could help secure your financial future.