For many young people, the thought of investing can be intimidating. Mainly because historically, investing has always been left up to the big guys on Wall Street. But this isn’t necessarily the case today. Investing is available to everyone with any size bank account. Whether you’re a suit in the financial district or a millennial with crippling student debt, sparing a few dollars each month to invest will allow your money to grow with compound interest.
But regardless of how far along you are in your financial journey, there are some general details concerning budgeting, saving, and low-cost investing that may help you ensure that you’re reaching your financial goals. And with the right strategy, you’ll be able to grow your money in no time. So, without further ado here are 3 tips for investing on a budget!
The cookie jar approach
Being able to save money and investing it are closely related. The truth is, in order to be able to invest money, you have to be able to save some first. This can be done in very small steps, and believe it or not you can still achieve your financial goals by saving small amounts. Ever heard the saying “a little goes a long way?” Start by putting aside $10 a week in an envelope, pouch, safe, or you guessed it…a cookie jar. While $10 may not seem like much, over the course of a year it comes out just shy of $500. Start with small amounts of money and increase the amount as you become comfortable with the process. Though this approach may seem ingenuous, it’s often a necessary first step in getting yourself into the habit of living on a little less than you earn.
Cut costs where it counts
For most young people, there are three expenses that make up the majority of their spending: food, transportation and housing costs. The benefits of focusing on making smart financial decisions within these three areas will give you plenty of leeway for the rest of your budgeting and low-cost investing plans. While we recognize that everyone’s situation is different, little things such as cooking more meals at home, taking public transportation, or sharing a living arrangement with a friend or roommate can help to deliver major cost savings.
Low-initial-investment mutual funds
Mutual funds are investments in stocks, bonds or other investments selected by a professional fund manager. They are often a great way to begin your investment journey. Many financial institutions require an initial minimum investment of between $500 to $5,000. But if you’re a first-time investor, and looking to invest on a budget, these minimums are out of reach. Look for institutions who’ll waive the minimum investment and agree to automatic monthly investments between $50 to $100. Speak to a financial advisor at your bank to learn about more options regarding low-initial-investment mutual funds.
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