Simple Ways to Start Investing With A Small Amount of Money
A lot of people think about investing. They talk about it, plan for it, sometimes even take steps to do it. Here’s the crazy part, though: A lot of those people really do not know why they should start investing or what investing really is. Before we get into simple ways to start investing, let’s go over a few other things.
Investing on a Tight Budget - It Is Possible
First of all, investing is a way of making your money work for you instead of you always working for your money. Basically, you are loaning your money to whatever you are investing in. If everything goes well, you will make your money back plus some interest. There is the chance, though, that you can lose some money, but you can stick with much safer investments. No matter what investments you choose, the goal is for those investments to grow your money.
Now, why should you invest?
The same reason you should save- you will need money in the future. Of course, you can simply put your money into a savings account and earn some interest, but investments tend to earn a lot more. There are no guarantees in life, but investments can earn you millions while a savings account might earn you thousands.
If you do, however, choose to open a savings account first and try building your wealth that way, we suggest taking a look at some of our favorite savings account options. It is not hard to save, it is hard to make yourself start saving.
Investing your money can give you, your kids, and even many more generations down the line a financially secure life. It can make a huge difference in your quality of life and well-being.
The poor and the middle-class work for money. The rich have money work for them.
Says Robert Kiyosaki.
This is absolutely true. If you take a look at the wealthy, you will see that they did not get to where they are by living paycheck to paycheck. They got there by investing. For those of us who are broke or on a really tight budget, it is easy to think, “Yeah, that sounds great, but how did they get started investing if they weren’t rich or wealthy in the first place?”
I know how impossible it can seem because I have been there myself. I know the moves I need to make, such as that I need to save and I need to invest. The problem is always getting started. And getting started can be very difficult when you live paycheck to paycheck. So what is the solution? I am going to tell you and you may want to roll your eyes, but hang with me until the end. I am going to tell you what to do and ways to do it. Are you ready?
Just Start
Seriously, you have to just begin where you are with what you have. If you do not, you will never have more. An elaborate plan is not going to work in the beginning when you are struggling financially. Start small- baby steps.
There is no magical formula and it is not about luck. Yes, some people may have had a better financial start than we did, but that does not mean we cannot have a better middle part and end to our story. Now that I have blown your mind with my infinite wisdom- or not- let’s get into how you can start when you are broke or on a really tight budget.
How Much Money Do I Need?
There was a time when you needed a lump sum of money to invest. It was not cheap. Even today, some investments require very large amounts of money- money that most of us do not have just lying around. Fortunately, there are many other options now.
Want to know how much you need to invest? Here it is: You can begin investing with less than $10. Are you surprised? I was when I found out. For the first time ever, investing is within reach for most- if not all- people.
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How to Find the Money to Invest
I will be honest- there have been plenty of times that I did not have a few bucks leftover. During those times, it really would not have mattered how little it took to start investing- I still could not have done it. I know quite a few other people that have experienced this as well. So what do you do when you do not have a few bucks to start investing?
Like I said before, start where you are at. Here are just a few tips to come up with $10 to get started, but you can get more creative:
Collect Your Loose Change
Funny story: My father is a musician. When I was a kid, we would go over to one of his band member’s house for jam sessions. This particular band member was also a family member. He always carried change in his pockets, and when he came home from work, he would throw his jeans- change and all- to the side.
The first time I saw the change lying around, I collected it and took it to him. He said, “I tell you what, any change you find on the floor when you come over here is yours.” To a five/six year old, this was a big deal. So every time we would go over, I would walk around and pick up his loose change, take it home, and put it in my bank- otherwise known as a butter bowl.
At the time, I really did not care how much was in there. It was just fun to feel it get heavier. One day, though, I decided to count it. It was mostly pennies so it took a while, but I ended up with more than $30- huge to a kid in the 80s and early 90s. Not only was I surprised but so was the family member. He had no idea that there was that much change on his floor.
The moral of the story is this: Change adds up. It does not matter if it is pennies or quarters, it all makes dollars. Check your car, the bottom of your purse, your laundry room, your couch- even your yard. Keep an eye out in parking lots. With some diligence, you can easily have $10 to invest in no time.
Round-Ups
Every time you buy something, round your purchase up to the next dollar. Say, for instance, you make a purchase for $6.78, round up to $7 and put the $0.22 away. There are some bank accounts and apps that will do this for you.
Sell Something
I can almost guarantee you that you have something in your home that you no longer want or use. You can sell it for a few bucks. Or, hey, remember that sweater your grandmother gave you that you really do not want to wear but neither did you want to hurt her feelings and get rid of it? Return it to the store.
I know that might be hard because it is an emotional thing. I am willing to bet, though, that your grandmother would much rather you have a secure future than a sweater you will never wear.
Work An Extra Shift
No one wants to be at work any more than they have to, but sacrifice just one shift so you can start investing. And, just think, as your investment grows, extra shifts can be a thing of the past.
Simple Ways to Start Investing
Not only does it cost less to start investing, but you no longer need to be a financial expert to do it. There are really simple ways to start investing.
Investing Apps
One of my favorite simple ways to start investing is to use investing apps. You might have heard of Stash and Acorns. I have some personal experience with both of them and like how they work. They are both incredibly easy for beginners to use.
Acorns is one of those apps that will do round-ups for you. They round up your purchases and put that amount to the side for you. Then, you go into the app and invest your round-ups. There are some issues concerning which banks they mesh with when it comes to withdrawing your money. So, like everything else, be sure to read the fine print and ask questions before signing on.
I liked Stash a bit more as the bank accounts did not seem to be a problem at all. Personally, I recommend Stash as possibly the best personal finance app for beginning investors. There are a ton of them out there, though, so take a look around and compare before deciding.
Mutual Funds
There are also mutual funds that you can sink your cash into. They are less risky than many other investments and, now, they do not require much to begin investing in them. In fact, I have recently opened one through Fidelity that costs a little less than $5. I cannot give a full personal review yet but all of my research said that this company is a pretty good one. However, like the apps, it is not the only one, so shop around.
Automatic Deductions
Another of the really simple ways to start investing is to do so through automatic deductions. Automatic deductions are great because the money goes out before you even touch it. This is much better than saying, “Well, I will invest after I pay my bills and go grocery shopping.” There tends to be nothing left after that.
Warren Buffett says:
Do not save what is left after spending but spend what is left after saving.
Considering Mr. Buffett is heavily involved in investing, it is safe to assume he gives this advice for investing as well. Having the money go out before you even know it is there is a way to be sure you invest regularly.
Automatic deductions are most often done when one chooses to invest in a 401K through their employer, but there are other accounts you can do this with. Just speak with your employer’s finance department, or someone in management, to determine how to get money from your check deducted and sent to an external account.
Bank Transfers
Another of the incredibly simple ways to invest is through bank transfers. If your employer does not work with external accounts, you are self-employed, or you just want to do it without a middle man, set up automatic bank transfers for certain dates. You can do this on your paydays so the money is still out of sight, out of mind before you know it is there.
In the same sense, as I mentioned beforehand, some bank accounts do round-ups. If your bank does this, have them round up your purchases and put the round-ups in a separate account. You can then set that account up to make automatic transfers to your investment account on certain days of the month.
Progressive Investing
We have talked about simple ways to start investing, but there is something you need to know. Investing $5 here and there is a great start, but you are not likely to make a ton of money from doing so. You need a progressive plan. You should make your own with personal pieces of the puzzle, but here are some basic steps to follow:
Eventually, most people’s goal is to invest in real estate. Why? Well, almost every well known wealthy person advises that real estate is the only real way to become wealthy.
Ninety percent of millionaires become so through owning real estate.
- Andrew Carnegie
Buying real estate is not only the best way, the quickest way, the safest way, but the only way to become wealthy.
claims Marshall Field.
I personally cannot say if it is the only way, but these wealthy people certainly know how to make profit, so it is worth a listen, don’t you think?
Diversify Your Portfolio
In layman’s terms, don’t put all your eggs in one basket. In the beginning, you may only have the money to invest in one thing. That is okay. It will not stay that way if you keep working. You being with simple ways to start investing, and then move onto more complex portfolios. After a while- after you make enough money to reinvest- you need to start looking at multiple streams of investment income.
For instance, you might invest in some safe things, such as savings bonds, some risky stock, real estate, and mutual funds. You might also invest in multiple investments in each category.
1. Start Investing
Start with one or more of these simple ways to start investing that we have gone over.
2. Look into Higher Interest-Earning Investment Options
It will take a while for you to have enough to invest thousands into anything, but the aforementioned simple ways to start investing can earn you enough over time to move up.
For instance, there are savings bonds that you can invest in for as little as $100. Start with low cost, simple ways to start investing. When you reach $100 or more in earnings, withdraw that money and move it over to a savings bond.
3. Get to Higher-Earning Investments
When you cash out the savings bond, move your earnings into a higher interest-earning investment. It is like climbing a ladder. Every time you earn enough to do more, move your earnings to something that will make you more.
Consider Hiring a Financial Advisor
As you begin to expand your portfolio, you may want to consider hiring a personal financial advisor. They can help you guide your money in the right direction to meet your goals. It is not necessary to have an advisor, though- not at all.
If you have the time and energy to put into learning everything you can about investing and keeping up with the stock market, you can do it on your own. Warren Buffett actually said that if you passed fifth-grade math, the stock market is no problem. Basically, hiring a financial advisor comes down to how much effort you want to personally put into your investments. You can be hands-on or you can spend your time doing other things you enjoy.
It is really a personal preference, but I will share the conclusion I have come to lately: I would personally rather hire someone to do things that I am not really passionate about so I can spend my time on what I am passionate about. Obviously, I cannot afford this all of the time, but it is definitely something I consider when I can afford it.
Conclusion
As you can see, investing does not have to be complicated- it can be a very simple process. Try out the simple ways to start investing mentioned here and get started. There is no time like the present.