Many people believe that in order to invest, you must be wealthy. But what if you could learn to invest on a shoestring budget? Yes, it is doable! Some approaches can be started with as little as $50. Additionally, the sooner you begin investing, the faster your funds will grow.
In this article, we'll take a step outside the box and explore how simple it is to invest with a limited budget. You'll learn everything you need to know about the tactics where you can invest with little money so you can get started right away!
Automate your savings
Consider the last time you made a financial sacrifice. Did you set aside a portion of your salary the day you were paid, or did you save after you had spent all of your money for the month?
We've all done it: we save after we've spent. What happens, though, when there is nothing left to save?
Instead, seize the bull by the horns and pay yourself first before you spend. Make a budget and figure out how much money you can set aside each month, then make it a line item in your budget. Treat it as if it were a bill, but automate it.
Most employers offer direct deposits. Instead of putting your entire check into your checking account, have some diverted to your savings account.
Pay-off high interest debts
Paying off debt probably doesn’t feel like saving money but think of it this way. If you’re paying the average 20-25 % interest on your credit card debt, you’re losing 20% every time you don’t pay the balance in full.
When you pay the debt off, you have that much more money to invest. If you have a lot of consumer debt, you’re better off paying off the debt before investing, or you won’t realize the full potential of investing because you’re throwing the money at high-interest credit card debt.
Optimise your taxes
Work with your tax advisor to lower your tax liabilities. Find ways to save on your taxes by taking the right deductions or using the right tax strategies. Talk with your tax advisor about ways to use losses on certain investments or businesses to offset capital gains and income in other areas.
What should you invest your money in?
Here's the tough question, and unfortunately there isn't a perfect answer. The best type of investment depends on your investment goals. But based on the guidelines discussed above, you should be in a far better position to decide what you should invest in.
For example, if you have a relatively high risk tolerance, as well as the time and desire to research individual stocks (and to learn how to do it right), that could be the best way to go. If you have a low risk tolerance but want higher returns than you'd get from a savings account, bond investments (or bond funds) might be more appropriate.
Investing money may seem intimidating, especially if you’ve never done it before. However, if you figure out 1. how you want to invest, 2. how much money you should invest, and 3. your risk tolerance, you'll be well positioned to make smart decisions with your money that will serve you well for decades to come.