The more I live the more I realize that building wealth comes from owning shit not so much from working harder or longer. Sure making more money is great, but with that comes more taxes and a lot less write-offs and benefits. Whether it’s owning real estate, stocks, mutual funds, start-up companies or having equity in anything else that has long-lasting value, making money work for us is key. Well that sounds easy, right?
We just need a bunch of cash, no big deal. After all money does make money. What if you don’t have a lot of extra cash? Perhaps you have student loans, medical bills, young kids or other responsibilities. It’s actually not a deal breaker. Yes it’s true that certain type of investments require a lot of capital. However, time is extremely important when it comes to investing in the stock market. The sooner we start the better. All of this is due to the magic of compound interest. But don’t just take my word for it. See proof here. And it’s possible to start with a lot less capital than we might think. Here are some ways to start investing with very little capital:
Maximize your 401K
The best way to start investing is to take advantage of what’s already out there from your employer. Unless your employer is a super small company, or you’re self-employed (read here if you are) then you can start investing by taking advantage of employer’s matching program which is essentially free money.
Track your spending for a month to find “spending leaks” and stop wasting money
If you do this, just like me, you’ll be shocked at how much we spend on stupid stuff that could be invested otherwise. Next time you think about spending $5-$10 on a coffee or a drink as yourself: ” Is this worth the amount I have to pay that I could otherwise make money from?” When I did this I quickly realized that I can forego lattes, weekly manicure, fast food lunches and find $50 a week to start investing. If you need help finding ways to save read this. This $50/week can turn into $35,000 if investing continued for 10 years. Check out this investment calculator. I used 7% as an average rate of return.
Open an account with someone like Vanguard
Most platforms require at least $1,000 to open an investment account. If you’re not there yet, read my next section. I like Vanguard because their expense ratios are much lower than industry averages, and the company is perfect for someone like me who doesn’t actively trade . I just want to keep investing regularly and not have to worry about it more than once or twice a year. They also have really good educational tools to take advantage of.
Download an investing an app like Acorns
This app helps you invest without even thinking about it. It works like the round-up saving options that some bank accounts offer. Every purchase you make is rounded up and that money is then invested in a portfolio of your choice. Keep in mind that to minimize the fees Acorn charges it’s best to invest at least a $100/month. Read more about this here. Although you definitely won’t make a million dollars using this app, its good way to start investing until you get to the $1,000 minimum that some larger firms require to start. You’ll also be surprised at how quickly a few dollars add up.
Whatever you do, don’t let a lack of large capital stop you from starting investing. Passive income is a great way to start building wealth. The earlier we start the more time works for us. Saving more and spending less is the best way to find money to start investing and a few dollars really do add up over time. As always I hope you find this helpful and I’d love to hear your thoughts and suggestions.