Like most Americans, you may be living from paycheck to paycheck. That doesn’t mean investment options are off the table for you. Here is a list of tips for investing when you don’t have a lot of capital to spend:
Open Multiple Savings Accounts
If you spend nearly all your income, then it’s of utmost importance to have a savings account. It’s one of the best ways anyone can invest. You are not taking on major risk when opening a savings account. The yields may be low, but your money will grow. You don’t need to put away large sums of money each month, even a small amount can compound into excellent returns. In addition to a regular savings account, maintain an emergency fund as well. Imagine a scenario where your car breaks down requiring hundreds of dollars’ worth of repairs. You could also get sick, your house’s roof might collapse, and dozens of similar situations can occur where emergency funding becomes a necessity. When you borrow money in such a situation, you are essentially losing wealth and getting into debt, therefore, having an emergency savings account is the best investment you can make for your future.
Understand the Level of Risk Your Finances Can Bear
When you are down on funds, the temptation is high to get involved in so-called get-rich-quick investments. These investments come with a major catch: high risk. You may want to dabble in ventures like day trading or buying stock from a hyped-up company, but you are weighing top rewards against high risk. When finances are limited, it’s not wise to take on high-risk investments that could lead to a major loss. If you plan on trading marijuana penny stocks, for example, make sure you are using cash you can afford to lose. Investing is not gambling. You shouldn’t get involved in an investment without understanding the risk involved.
Pay Down Debt
Paying down debt is an investment you can make yourself. Like most other average income earners, you are probably burdened with common types of debt like mortgage and student loans. Instead of letting these debts grow over the years, pay them down as best as you can. You will be investing in a debt-free future when you do this. Severe debt can hinder your ability to invest in the future. That’s not good news for your retirement fund, therefore, create a sensible plan today to get rid of debt and get ready for serious investments.
Invest in Your Home
Homeowners already have a great asset to invest in: a home. You can earn passive income by renting out parts of your house. You can also consider undertaking small DIY projects to improve your home and increase its value in the future. Even if you have an apartment, you can start earning by renting out a couch. Small apartment improvements can increase its retail value. Perhaps the type of investment you have always been looking for is already under your feet. A modest income that doesn’t leave much after the bills is still not an excuse to avoid investing. There are still plenty of options you can consider. Keep in mind, however, that it’s strongly advised to exercise extreme levels of caution when undertaking investments if you are financially strained.