One of the most common concerns for those who wish to invest is how to find the money to get started. It can feel like a daunting task to find extra money in your budget to get started as an investor.
The good news is that you might be surprised at how easy it can be to begin investing — and do so with the extra money you find in your budget. Here’s how to find the money to start investing.
First, Understand You Don’t Need a Lot of Money to Get Started
The idea that you need a lot of money to start investing is a persistent myth. The reality is that there’s a good chance you can start investing even if you think you’re broke.
In recent years, a number of websites and apps have made it easier than ever to begin investing without a large chunk of cash. For example, Acorns, Stash, Stockpile, and Betterment all allow you to open an account with no minimum balance. Additionally, it’s possible to invest small amounts of money at a time. Both Acorns and Stash even allow you to use round-ups to invest your pocket change.
Thanks to dollar-cost averaging and the use of fractional shares, you can set aside as little as $5 a week with some websites and begin investing immediately. However, if you still want to free up even more money to invest, there are some things you can do to put more into your future.
3 Steps to Find the Money to Start Investing
If you’re hoping to find the money to start investing, there are three steps you can follow to free up cash so that you begin building wealth.
1. Look at your expenses
Start by looking at your expenses. Review whether your expenditures are needs or wants. Some experts estimate that the average household wastes up to 10% to 15% of their monthly income. Figure out which items are both wants and items that aren’t high on your priority list.
Some of the things you might cut out can include subscription services you don’t use very much, frivolous spending on items that you forget about after the first use, and entertainment expenses. This doesn’t mean that you stop having fun. Instead, perhaps you only eat out once a week instead of twice a week.
You can also look for ways to save money on your needed expenses. Consider how to reduce your grocery bill. Shop around for a better auto insurance quote.
Once you have an idea of where your money is going, you can identify expenses to cut out or cut back on. Even if that only amounts to a few bucks per week initially, that’s enough to start investing.
2. Make investing a priority
One of the reasons it can be so hard to find the money to start investing is because too often we put that money as an afterthought. It seems cliche, but investing really is about paying your future self first. Rather than waiting to see what’s left over after all your other spending, make investing a priority.
After reviewing your spending, redo your budget and include investing as a line item. Put it in there as a high-priority item. When you get in the habit of singling out investing as an activity you want to do, you’ll be more likely to stick with it. Plus, when you make it a priority and put it ahead of some of your less-important budget items, there’s a higher probability that you’ll have the money.
3. Invest automatically
Finally, invest automatically. Sometimes we just distracted and forget to move the money from the bank account to the investment account. Rather than rely on your memory, make it automatic. Many investment websites and apps allow you to set up recurring, automatic transfers. Then, the online broker will invest that transfer automatically in the way you direct. An automatic investment plan is one of the best ways to find the money to start investing. You can build wealth without even thinking about it.
If you don’t feel like you can set up recurring transfers, consider looking at apps, like Digit, that will find extra money in your account, and then automatically transfer it and invest. These tools automatically analyze your patterns and account and then move money for investing purposes.
Increase Amounts Over Time
After you’ve started and your portfolio is growing, you can look for more ways to increase what you invest over time. Once you see the results of even a small amount of money invested, it can encourage you to look for even more room in your budget for money to invest.