Considering investing but can’t spare much? You’re not the only one. The soaring cost of living, rampant family debt, and necessary fixed expenses forces many Americans to tighten their belts, unable to afford even a $1,000 unplanned expense, let alone invest.
However, on a positive note, investing doesn’t necessitate a fortune. It’s more a habitual action, reaping rewards from consistency over the passage of time. Even a small, regular sum squirrelled away can develop into an impressive nest egg. Here are some ways you can venture into investing with a small starting budget.
1. LEVERAGE YOUR 401(K)
If you’re provided with a 401(k) by your employer, you have the advantage. This is a straightforward means of investment where you can direct part of your salary directly into your retirement fund. Being tax-deductible, these contributions are deducted from your pre-tax income, barely affecting your take home. And the cherry on top, some employers even match your contribution to a certain extent. Even a modest contribution of 2% to 3% of your income can compound swiftly over the years.
2. EMBRACE ROBO-ADVISORS
For those just beginning to explore stock and bond investment, robo-advisors are highly advised. These platforms, like Betterment, use innovative technologies to strategize investments fitting your risk tolerance. I’ve personally benefited from using Betterment’s service for my Roth IRA account. Answering questions about your financial objectives and risk tolerance ensures personalized investment plans mainly contributing a minimum of $100 monthly.
3. RECALIBRATE YOUR BUDGET
If investing isn’t part of your budgeting plans, you may struggle to afford it. Recognizing this, adjust your budget and identify potential areas for cost-cutting. In my case, I reduced housing costs and limited dining out, freeing up more for investment. Paying off consumer debt can also be beneficial in the long run, redirecting money otherwise spent on loan repayments to investing.
4. EXPLORE MICRO-INVESTING APPS
Micro-investing apps, like Acorns, are exemplary in illustrating how small contributions compound over time. The app rounds every purchase to the nearest dollar and invests the difference. It also accommodates one-time as well as weekly contributions.
5. AIM TO EARN MORE
A long-term solution to invest more is naturally to earn more. While maintaining a balanced budget, look for ways to supplement revenue. There’s an array of earning opportunities, like babysitting, freelance services, or delivering food via DoorDash. Another strategy could be to enhance your skillset and land a higher-paying career.
In summary, you don’t need to be wealthy to start investing. Focus on forming strong saving habits with whatever you can spare and gradually work on increasing your income and investment contributions over time. Remember, investing a little is always better than not investing at all.
