The Frugal Investor: How to Invest with Little Money

frugal investor how to invest with little money low budget investing

Everyone gives young adults advice to start saving their money early. Start investing for the future they say. And you think, I don't have any spare money, how am I supposed to do that?

It's not as hard as you might think. There are some clever options available to you that can teach you how to invest with little money.

It still means you have to learn and save, but you can do it without the large sums of cash you might imagine you need to get started. 

Take a look at these ideas to get you started investing in your future. 


Start With The Basics

At my house, we have a jar that we throw loose change we find in the washer. My husband even saves his loose change for a yearly golf trip and very nearly pays for it each year with that change. 

Use this cookie jar approach for investing. Start by saving your loose change in a jar. Save for six months or a year until you have $1,000 to get you started with an investment. 

Many banks also offer this "save the change" option with your debit card. If you enroll in the program, the purchase is rounded up to the nearest dollar. The rounded up amount goes to a savings account. 

In either case, you take the loose change once it becomes an investable amount. Probably much more quickly than you will imagine you use it to get you started. It sounds simple, but it works with a little financial discipline.


Evaluate Your Personal Finances First

You want to invest, but worry you don't have the money to do it. Start with your own finances. 

First, pay off any high-interest credit cards. This does two things for you.

You can take the money you were using for payments and invest it. You also are saving 20% (or more) in interest from that balance. You also then have the money you are saving in interest to invest too. 

Look closely at your personal budget for places to find the money you can invest. Study over a few months how you spend your money. 

If you spend significant money on food out or entertainment, you can trim that back and take the savings and get started investing.


Put Retirement Plans to Work For You

You might think your budget is to tight, you can't get started in the 401K at work. Wrong, you can and it will make a big difference. 

Start with just a 1% deduction to buy into the plan. You really won't miss that small percentage taken before taxes. Over time you can increase it gradually. 

The trick is getting it started. Then if you are lucky enough to have a company that matches your funds, you are making extra money from the company.

Each time you get a raise, consider increasing the percentage you have going into the retirement plan.  


Exchange Traded Funds

Look for exchange-traded funds (ETFs) that are commission free. These are mutual funds that trade on indexes kind of like a stock does on the stock market. 

ETFs have a couple of advantages. It allows you to purchase into a mutual fund that might have investments in a variety of stocks. This gives you some diversification. 

Like mutual funds, there are many options available. So, you can find one that has similar goals that you have for investing. 


Betterment and MI Finance

Betterment and MI Finance are online platforms. They are programs that allow you to get started with very little upfront money.

The programs, both of them, allow you to take the money and invest directly from your checking account. 

An online questionnaire starts you out at Betterment. It gives both you and them a picture of your investing goals. Then using the feedback from the questionnaire, it guides your investing using deposits from your checking account. 

MI Finance is similar to Betterment. You can start with small amounts of money that come as deposits from your checking account. MI Finance has another nice feature. It allows you to purchase a partial share of stock.

One share of Amazon stock is currently trading at $1854, probably out of your price range if you are starting with little capital. However, you can take around $500 and get close to 30% of a share of the stock as a way to get started on M1 Finance. 


Acorn and Stash: Stock Apps

These two apps take on an interesting approach to help you get started investing. They require you to have little experience and not much money to get started. 

The Acorn app links to your debit card. When you use it to make a purchase, any amount is rounded to the nearest dollar (like what your bank might do). That rounded up amount gets deposited into your Acorn account.

The program takes your "loose change" and starts investing for you. The fees are minimal. They change adds up helping you to get started investing in the stock market. 

Also using your "loose change" the Stash app offers some additional features. The app works to teach you about the investing process and guides you through the decision making with your change. 


Consider Portfolio Management Services

Let's say you saved a little to do some investing. Or maybe you got a bonus check you want to use to get started with investing, but the whole thing seems overwhelming.

What do you invest in? Stocks? Mutual funds? How do you know how to diversify?

It might be time to get some advice from the professionals. They can help you decide if you are putting enough into that retirement account. As professionals, they can help you decide where best to get started with investing beyond a savings account.

Portfolio Management Services helps you to decide where to put your money so it gets the most growth. This is a whole investing program that helps facilitate your investing decision making by looking at the big picture of options available to you. 


Strategies For How to Invest With Little Money

Investing can be intimidating. Investing without much money through frugal finance can seem impossible. But that really is not the truth. 

The hardest part of investing with little money might just be the actually committing to start part. But you can do it and with a small amount of money too. 

Learn about more ways you can invest with little money by visiting our blog on money today.

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