Most of us probably like the idea of getting something for free. And most of us like the idea of having money, too. Therefore, the prospect of receiving free money should be especially enticing.
It's not a pipe dream, either, as there are many ways you might collect free money. Here are eight good ones, with a few bonus possibilities thrown in. Note that while some free dollars come directly, others are more indirect, and while some ideas here require close to no effort on your part, others might require a bit of time -- but nothing like putting in hours at a job every day.
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1. Matching 401(k) funds
Let's start with one of the easiest ways to get free money -- from your employer. Many companies these days offer 401(k) plans to help their workers save for retirement. Many also offer 401(k) matching funds. They typically won't match every dollar you contribute, but a common formula might have them chipping in 50% of whatever you contribute to your account, up to 6% of your salary.
So if you earn, say, $100,000, and you contribute $6,000 to your 401(k), your employer would kick in an additional $3,000 -- of free money. It's usually smart to at least max out any matching funds available.
2. Dividends
Next are dividends, which also require close to no work. You just have to invest in dividend-paying stocks, as you would any other stocks, and you'll receive regular payments -- typically every quarter. If you don't want to pick individual stocks, you can just invest in a low-fee index fund, which will sport a dividend yield.
Imagine that you have a $400,000 portfolio of stocks with an overall average dividend yield of 3%. That will kick out $12,000 in dividend income per year -- about $1,000 a month, on average -- without the need to sell any shares. You can use that money to buy more stock, too. And even better, healthy and growing dividend payers tend to increase their payouts over time, helping shareholders keep up with inflation.
3. Stock appreciation
Meanwhile, even if your stocks are not dividend payers, they will ideally appreciate in value over time. Amazon, for example, is not a dividend-paying stock at this point, but it has made a lot of shareholders a lot of money. You do need to sell shares to realize your gains, but as long as you're holding stock in great and growing companies, they should be increasing your worth over years -- with little effort required from you.
4. Credit card cash back and rewards
Then there are credit cards. If you take a little time to find the card(s) that will serve you best, you can rack up a lot of cash-back dollars or valuable rewards just with your everyday charging. Some good credit cards, for example, will pay you 2% on everything you charge. Charge $1,000 in a month and you'll get $20 back. Other cards offer 5% or more on certain categories. If you spend $1,000 on groceries, you might get $50 back. Various credit card rewards can give you money-saving discounts on products or services. (A dollar saved is a lot like a free dollar.)
5. Coupons and rebates
Beyond credit cards, you'll find the world full of coupons and rebates and special offers. Don't spend extra just to grab all that you see -- but do make an effort to see whether you can make use of a coupon or discount whenever you're buying something you really do want or need.
6. Interest
This free-money strategy was close to useless for much of the recent past, when interest rates were so low. But they're higher now, and you may be able to earn 5% interest with a good money market account or 5.5% on some certificates of deposit (CDs). Plunk $5,000 in such an account and you're looking at $250 or more in interest annually. Bonds are another way to earn interest.
7. Tax credits and deductions
Many people underappreciate the power of tax deductions and tax credits, so let's run through some examples of how they deliver value. Let's say that you're in the 24% tax bracket and you're able to deduct $2,500 from your taxable income due to having paid a lot of student loan interest. You would have been paying 24% ($600) on that $2,500, but by deducting the $2,500 from your taxable income, you keep that $600 in your pocket.
Tax credits are even better. If you can claim a $2,000 American opportunity tax credit because you spent $2,000 on tuition, books, equipment and/or school fees, it's worth the full $2,000 to you -- not 24% of $2,000. You get to deduct $2,000 from the tax you owe that year. Better still, some tax credits are "refundable," meaning that if your total tax due is $1,500 and you have a $2,000 tax credit, you get the $500 difference as a tax refund. Be sure to explore which deductions or credits you can claim each year.
8. Scholarships and grants
If you're a student, a little time spent searching online for scholarships and grants can turn up a lot of free money for you. Not all scholarships are for geniuses or athletes. Some are just for music majors or certain minorities or folks who submit a great essay. There are many that go unclaimed each year, so see what a search can turn up for you.
Non-students may also find scholarships or grants available, such as those meant to help with child care expenses.
More possibilities
Those are eight promising possibilities, but there are many more. For example, you can collect some free money just by switching banks, too. Don't do so unless it makes sense, but know that some solid banks are offering $300 or more.
If you spend an hour or two on the phone shopping around for a better insurance deal, you might be able to spend several hundred dollars less each year. If your garage, basement, or attic is full of things you don't need, you may be able to turn them into cash via an online marketplace or a yard sale. Check out the MissingMoney.com national database of lost assets, too -- you might find an abandoned bank account of yours with money in it.
The more exploring you do, the more free money you might find.
