How to Invest With Little Money: The Ultimate Guide
Are you waiting to start investing because you only have a little money? Delaying your investments because you only have a little money can hurt your money’s long-term growth.
Compound interest will allow you to earn more money over time, even if you are putting in less money when you invest. Learning how to invest with little money can set your financial future off on the right track, so continue reading this article to get started.
Get Your Budget Under Control
Before you can invest, you need to have more money than month. Most people have more month left at the end of their money, which means most people are carrying credit card debt.
If you’re using credit cards to pay bills, buy food, or take care of anything else, you should pay off your credit cards as soon as possible. Most cards charge you upwards of 20% interest, which will eat up all your profit from investments.
Even learning how to save $10, $20 or $30 a month to put toward your investment can help you get in the habit of saving to invest. When you’re investing in high interest rate investments, you can get some very nice returns with even a few hundred or a few thousand dollars.
Have an Emergency Savings Account
Before investing, you need to have at least one to two thousand dollars in an emergency savings account. If anything comes up that needs immediate attention — this is where you should get your money from. You should not, however, get your emergency money from credit cards.
Look Into Robo-Advisors
If you’re using a robo-advisor, you usually don’t have to have much money at all to get started. If you’re a complete beginner at investing, a robo-advisor can help you start your investment journey in the most simple way possible.
Their automated intelligence tracks your investments and uses complex calculations to buy the right investments for you. It’s pretty easy to set up as well, so you don’t have to worry about being a financial genius to get going.
Some of the robo-advisors you can check out are:
- Wealthfront
- Betterment
- Stash
- Acorns
There are always more coming out, so keep your eyes open and see if you find something that works better for you.
Try Your Hand at Real Estate Investing
You might be a little intimidated by real estate investing. Isn’t that for rich people? Not anymore.
Now there are ways to do real estate crowdfunding. Use sites like Fundrise to get into real estate without having to put down a huge amount of cash.
Another way to get into real estate investing is to use sweat equity. If you don’t have a lot of money, but you do have skills, you can partner up. Many people have money, but they don’t have the time or skills to work on fix and flip homes.
Network with people in the local real estate market and see who would be open to this type of relationship. Make sure you sign a contract and make the relationships very clear.
Use Your Employer’s Retirement Plan
If you’re an employee, many employers have retirement plans. Most of these plans give you some type of match when you invest. If you’re afraid of investing and aren’t sure you can survive on less, try investing just 1% of your income and raise it as you can.
If you get a pay increase, instead of spending this increase, put it toward your investment savings.
Consider Treasury Securities
When you’re not familiar with investing, you might be worried you’re going to lose it all. While it can be scary when you’re getting started, you can play it very safe by investing in treasury securities.
You’re not going to get rich here, and you’re not going to see much growth, but you can park your money here without much concern. When you’re ready to move it to something that offers a better return, you can always do that.
Know Your Tolerance for Risk
Now that you have a lot of ideas on how to begin investing with a little money, there’s one more thing to consider. That one thing is your risk tolerance. While you want to invest in things that are going to bring you a good return, you also need to be able to sleep at night.
If you invest in something with a good rate of return, but you’re worried you’re going to lose your money — it might not be worth it. Opt for something a little bit safer that isn’t going to cause your stomach to turn.
Depending on your age and where you are in life, you might have a very different goal in mind. The more years you have before you need to start withdrawing money, the riskier you can be.
Choosing the wrong level of risk for your goals can cause your strategy to fall apart, so take time to choose wisely. A well laid out strategy that you follow for a long time period is worth more than extra thousands of dollars in investment in a short time period.
How to Invest With Little Money – Now You Know
Now you know how to invest with little money. It can be difficult to get going if you overthink how much money you’ll need to have to retire, but now you have the information you need. Keep reading this blog when you need more information on investing and personal finance.
