Many people put off investing because they believe that it requires lots of money – in the thousands of dollars region! However, did you know that you could even start investing as soon as today with as little as $50 a month? That is right; one of the keys to building wealth is developing good habits like putting some money away on a regular basis.
Once you make investing a habit, you will find yourself in a better financial position some time down the road. If you do not believe this, here are three ways you can start investing with little money.
The first thing you need to know is that there is a link between saving money and investing it. Before investing, the first step should be saving some money. Doing this will take a lot less time than you think, especially if you start small.
If you have never been much of a saver, consider putting away some $10 each week. While the amount does not seem much, in the course of the year it will be a little over $500.
The simplest first step is putting $10 into a shoebox, envelope, small safe, or cookie jar. The electronic equivalent is an online savings account that is separate from your checking account and debit card.
If you have trouble saving, you can make use of free apps on the market that analyze your checking account and make small contributions to a savings account for you, for example Digit, Qapital and Shift. While it’s not fancy, it is a start all the same, and getting started is the key thing here.
Enroll in an Employer’s Retirement Plan
If you are working with a tight budget, enrolling in a 401(k) or any other employer retirement plan might seem beyond your reach. Nevertheless, you can start with small amounts that you even won’t notice and start investing in an employer-sponsored plan. For instance, start investing just one percent of your salary.
While the contribution seems negligible, it brings you a tax deduction that will make your overall contribution even smaller. Start with a 1 percent contribution and increase it gradually every year. If your employer provides a matching contribution, the arrangement can only get better.
Put Money in Minimum Initial Investment Mutual Funds
Mutual funds are essentially investment securities, which allow you to put money into a portfolio of bonds and stocks through a single transaction – the perfect vehicle for new investors. However, many mutual funds have a minimum investment requirement of between $500 and $5,000. Some companies waive account minimums as long as you agree to automatic monthly investments ranging from $50 to $100.
ETF IRA accounts and mutual fund have this automatic investment feature. While such transactions are not common with taxable accounts, it would not hurt to ask if it is available.
Automatic investments are particularly convenient if you have payroll savings. Typically, you can make an automatic deposit arrangement through your payroll in just the same way as you do with your employer-sponsored retirement plan. However, make sure you ask the human resources department if the facility is available.
As you can see there are plenty of ways to start investing with little cash using the methods above and the help of online and app-based platforms – all you have to do is start today. However, make sure you talk with financial experts and law professionals like North Bay Wildfire attorneys. Once you do all that, it will get easier as time goes by, and your future self will certainly appreciate the efforts you put in today.