“grayscale photo of 1-21 Wall street signage” by Chris Li on Unsplash

How to make an extra $650,000 in your lifetime.

It all started when I was 16 years old and I got my first credit card with a $1,000 limit. My mom co-signed for me because I didn’t have a credit history at the time. I was pretty irresponsible at that age and well, I maxed out that card within the first week. I bought my first iPhone and a few other things. I was happy to be able to have that stuff and have some of my High school friends feel envious of my purchases. That credit card company saw me coming from a mile away because my APR was 23.46%, which comes out to 1.955% a month. Only problem was I had a $1000 balance. I made the minimum payment of $25, but $19.55 went to interest alone. My new balance was $994.45

I was so confused about this at the time. I had a talk with my mom who explained the situation to me. I only somewhat understood. She was frustrated that I used up my limit within a week. She knew I couldn’t afford that debt at the time, so she paid off the card for me and monitored my spending for an entire year.

After all of this, I became interested in how money works. I wanted to be an expert when it came to managing money. I wanted to learn how to make my money work for me through investments. For my 17th birthday, I asked for a subscription to the Wall Street Journal. I started reading up on finance only to find out how deeply complex it actually is. Finance is far more than managing money or learning how the stock market works. Just to name a few on what seems like a never-ending list, finance is:

–How assets move through the financial system from one party to another

–All the different investment vehicles

–How companies are able to raise money and finance their operations through capital markets

–How to obtain information from a balance sheet, income statement, and a cash flow statement

–How to apply math and statistics to improve forecasting accuracy

I was a double major in college and received my degrees in Finance and Math. I have always liked math and having already gained a lot of knowledge in the finance field I figured I could accelerate the process. I have been studying finance for 10 years now and while I am edging on the side of calling myself an expert, I do have a great grasp on how it all works together and how I can take advantage of all the opportunity that is available.

I own stocks and bonds. Shares of mutual funds. I have an IRA. 401(k) through my work and I am well diversified. However, I am not going to talk about all of that. I am going to tell you how to make free money.

Part 1: Research banks in your area and find a promotional offer where you can get $300 for opening a savings account and $200 for opening a checking account. Banks require you to stay for six months before you can leave and once you leave you can’t return for two years. This is how it is in my area. I cannot speak for all banks though. If you rotate between four banks, staying six months each, you can go back to your original bank after the two years. Doing this twice a year will get you an extra $1,000 a year.

Part 2: Once you switch banks find out the minimum you need to keep in a savings account. For example, let's say the minimum is $500. Use the rest of the money and invest in a six-month certificate of deposit (CD). Since you’re only staying at the bank for six months you don’t want anything longer than that. Let's play this out. Example: let's just say you have $10,500. You keep $500 in the savings account because that is the minimum and you invest the $10,000 in a six month CD. Some CD’s have better rates than others, so do your research. CD’s are a very safe investment. The larger the amount, the better the rate usually. Let's say your $10,000 CD for a six-month term will get you 1%. At the end of the six months, you will get back your $10,000 and an additional $100, which is 1% of $10,000. The $100 is basically a Thank You from the bank for letting them borrow the money. This beats any interest a savings account will get you by just letting the money sit there. If you do this twice a year when switching banks then you’re getting an additional $200. Total so far is $1,200 a year.

Part 3: Get a credit card that accumulates reward miles. Pay all your bills on that card every month. A week later, pay off that card with the money you were originally going to pay the bills with. Most cards give you 1.25x miles for every $1. Example: Say you pay $900 a month for bills. 900 x 1.25 = 1,125 miles a month or 13,500 miles a year. That is a $135 credit or money saved on vacation expenses. Total now is $1,335 a year.

Just saving that money will gain you an extra $53,400 over 40 years. But that isn’t the smart way. Invest that money every year.

If you invest that $1,335 every year in a mutual fund like Fidelity Contrafund (a personal favorite) and get an average return of 10% a year, then you’re looking at $649,947 in 40 years time. That is the power of compound interest. That is beating inflation’s ass. That is all from extra money that you’re not even working for. Plus, whatever else you have in a 401(k), IRA, stocks and bonds, savings, checking, etc. You’ll easily be a millionaire.

I have been doing this process for five years now and it works really well. However, this is all unsolicited advice and at the end of the day do whatever you want with your money.