Investing on a Shoestring

The number one reason I hear from people for not investing is "But I just can't afford it."

Despite what many people think, it is possible to invest for the future effectively while still living on a low income. There are a few strategies that can help you to invest consistently and responsibly and build your future.

 Make it automatic

The easiest way to get over the investing mental hurdle is to make your investments automatic. But wait! Your income is low enough as it is, right? How can you lower your income and still live?

The answer is that if you never see the money you will never miss it. When you get a raise, your spending habits increase to meet the new income. It works the same way in reverse. If your paycheck is smaller, you find a way to live on it.

Obviously, if you are having severe money problems and can't support yourself on your income at all it is time to get financial help. Investing is not appropriate for you at this time. Contact a financial councilor.

But otherwise, having a small amount of money come out of your paycheck automatically so you never see it is the best way to build up your investing money. Having this money go directly into an investment is ideal.

Retirement savings

The first place that investments should be made is into retirement plans like a 401(k). With employer sponsored plans they can take this right out of your pay and make this very easy. What's even better is that with many plans your contribution is tax deductible. This means that while you may be investing $100 a paycheck into your retirement fund, your paycheck is only $70, or so, less than it was.
With a 401(k) there is also frequently an employer match. This should be understood for what it is, free money.

Investing in this way will allow you to put money away, automatically, and potentially make you a profit, even on a low income.

Dollar cost averaging

Dollar coast averaging is the strategy of investing a specific amount of money into a specific security or fund over a specific time period. This is a great way to invest on a low income because you can put any amount into this strategy, as long as you do so consistently. So you could, for example, invest ten dollars a paycheck.

The strategy with this is to be consistent. As the price of the security or fund changes you will acquire a different number of shares each time you invest, but over time you will be building your portfolio and investing for your future.

Investing is important to securing your financial future. No matter what your level of income, it is possible to invest. Look into these investment strategies and begin saving for your financial goals and dreams.