For some people, investing is a fun pastime — something that requires focus, savvy and patience. For others, investments are what will create a retirement fund.
It can also be part of a long-term plan for growing your wealth. Unfortunately, there are a lot of people who don’t opt to invest at all, even when it could benefit them in the future. If you don’t think you have enough money to invest with, take a closer look at your budget. By making your budget a little bit tighter, you can carve out some money to invest in your financial future.
Save More Money Than You Do Now
If you don’t have extra money every month to invest, your first step is to start saving. Try putting $10 into a savings account or envelope every week. That may be as simple as rounding up your loose change one week, skipping two cappuccinos the next, cooking dinner at home for an extra night during the third week, and so on. Just $10 a week seems like nothing, but by the end of the year, you’ll have over $500 to invest.
Create a Budget to Normalize Your Savings
Now that you’ve committed to saving money on a regular basis, it may be time to redo your budget. The best budget is split into three categories:
Half of your income (after taxes) goes to your necessities.
Around 30% covers your wants.
The remaining 20% goes toward debt and savings.
You can pull from your “wants” category or your savings to invest — it depends on what your bigger investment goals are and how you think of that money you’re investing.
When budgeting, it’s important to remember that it can change if you need it to. Consider that you may earn a different amount of money in the near future. If, for instance, you are injured on the job, your income may be dependent on a workers’ compensation claim. If that claim is denied, you’ll need an adaptable budget and savings to stay afloat.
You may also realize that something you thought was a necessity really isn’t. For example, you may absolutely need a car, but if you opt for a used one instead of new, you’ll save a lot that can be put into your savings account or used for investments. Or you may decide that you need a new car, but you want to shop around for a better loan offer. The point is that budgets are fluid. Revisit your budget every month or so to see if you can be splitting up your income in a better way.
Check Out Your Employer’s Retirement Plan
Most employers offer a 401(k) retirement plan as well as match your contributions up to a certain point. You can choose how to split up the funds you invest: high-risk, low-risk, or a combination. However, not every retirement plan is the same, and the investment options for yours may not have a great outlook. Additionally, some retirement plans come with hefty fees that can counteract how much you’re actually investing. If that’s the case, you may be better off investing elsewhere or investing less with your employer to have extra money to put somewhere else.
If you check out the 401(k) and you’re happy with what you find, then start contributing. Even if you live paycheck to paycheck, you can probably contribute something. Start with 1% of your income, and then make a point to increase by 1% every year you work there. If you want to stay on top of your investment, you can hire a service to assess and give you optimization options for your 401(k) investment on a monthly basis.
Start With Mutual Funds
Mutual funds are excellent for newbie investors who don’t have a lot of investment know-how or money to spare. A mutual fund is a portfolio of stocks and bonds, and you can invest with one transaction instead of several. While the minimum investment may be $500 or more, some companies will waive that fee if you commit to a lower amount, like $50 or so, paid on a monthly basis. There are a lot of mutual funds out there, so you’ll be able to find one that aligns with your investment and market goals.
Sign Up for a Service That Doesn’t Ask for Much
There’s investment tech out there that makes saving and investing so easy you won’t even notice. For example, every time you make a purchase with your credit or debit card, the Acorns app can round up the difference and invest it. You may not be able to put $50 away every week, but chances are you won’t miss that 75 cents from your last purchase. The point isn’t that you’ll accrue a ton of money to invest this way.
People often think that they need thousands of dollars to invest with, but that’s simply not true. Building wealth is more about creating and sticking to good habits than having a bunch of money upfront to invest. By getting into the habit of saving and investing, you’ll see your efforts grow over time, and you’ll have a strong financial portfolio in your future.