When it comes to money, sometimes it can feel like you are fighting a losing battle. The idea of investing can sometimes feel too overwhelming when you are already working to manage your day-to-day budget. However, there are many simple steps you can take to invest your money intelligently and develop some savings for the future. In this article, we’ll talk about why investing is important, how you can start investing right now, and how to manage your money frugally.
Benefits of Investing
There are many benefits to investing your money in some form. Many people assume that investing is only for older people or people who are wealthy, but anyone can invest and do well at it. The biggest benefit of investing is that it can provide you with long-term financial returns that you can use to support your retirement or your family. Instead of just putting money in a savings account, you can invest that money instead and grow your nest egg. Although there is some risk involved in investing, you have many different options, and if you invest intelligently, you’ll be surprised at the financial benefits you will experience down the line. The earlier you start investing, the more money you can make in the long run, even if you are only investing small quantities.
Easy Investment Strategies
If you want to start investing, there are so many ways to get started. Here are some of the best investment options for those without any previous investment experience.
- Use an app or roboadvisor: There are now so many different programs you can use that will do most of the grunt work of investing for you. Called ‘roboadvisors’, these programs allow you to deposit money into their system, and then they will automatically invest it for you. They do usually charge a small fee, but for many people, the convenience of a program like this is well worth it. There are programs available for many different financial situations. Betterment is a great roboadvisor that doesn’t require much money to get started. Some other popular options are M1, Robin Hood, and Acorns. Acorns is particularly unique because they allow you to set up automatic investments in very small amounts, or you can set the app to round up all of your purchases to the next dollar and invest the spare change. Fundrise is another great investment platform that focuses specifically on real estate investing. These programs will give you simple portfolio options to choose from, and there are choices available for people of all risk tolerances.
- Invest in Treasury securities: If the idea of investing in risky stocks feels overwhelming to you, you might want to consider government securities. These are available in low denominations and will accrue interest over time. They are a reliable investment that can earn you a little bit of extra cash with minimal risk. They won’t make you a huge amount of money, but their trustworthiness makes them a favorite investment for many people.
- Invest in a high-yield savings account: This is another option that is good for people who are very risk-averse. A high-yield savings account has a much higher return rate than the average savings account, so if you leave your money there for long enough, you can earn a decent amount. It’s helpful to have some money saved up anyway, and this is an easy way to make a little bit of extra cash while you do it.
- Invest in mutual funds: If you have a larger sum that you are willing to invest, look into a mutual fund. Mutual funds are an existing stock portfolio that you can invest in with just one transaction. This takes a lot of the guesswork out of investing, because you don’t have to research and select the stocks individually. You can often make automatic investments each month with mutual funds. They do usually require higher minimums than other investment options - you will usually need between $500 and $1,000 to get started. However, a mutual fund can land you strong returns and are very convenient. They’re also run by expert investors who will be happy to work with you on your investment goals.
Easy Money Management Techniques and Hacks
In order for you to start investing, you need to have a bit of extra money to put towards investment. Therefore, you will need to be able to manage your money appropriately. For some people, this comes more naturally than others. Here are some helpful tips for staying on top of your money so you can thrive financially.
Focus on paying down debt before anything else
Many people try to start saving or investing while they still have outstanding debt, whether that be credit card debt, student loan debt, or something else. However, the best approach is to pay down your debt as quickly as possible, then focus on investing and saving. This is because the longer you let your debt sit there, the more interest it will accrue. This can result in your debt going up by hundreds or even thousands of dollars in the long run. If you have debt in many different places, look into consolidating it with your bank. This way, you will only have one payment that you need to make each month, and you might be able to negotiate a better interest rate as well.
Use budgeting apps
If you aren’t taking advantage of any of the amazing financial apps available, you need to start right away. There are plenty of apps out there that will manage many different aspects of your budget for you, even giving you analytics so you can honestly assess where your money goes each month. These apps can remind you when you have payments due, help you set limits for your spending, and make it easy to plan ahead without complicated math.
Repair your existing items instead of buying new ones
Many people’s reaction when one of their items breaks, wears down, or even just starts to get boring is to buy a new one. However, you can save a lot of money in the long run if you repair your items instead, particularly if you can do it yourself. This is particularly true if you invest your money in higher-quality items that are more likely to last a long time anyway. For example, instead of buying a cheap blazer that will fall apart after a few months of wear, invest in one that’s a bit better quality, and get a tailor to fix it if you find a rip or a button falls off. This goes for so many of the items we use regularly - you can get your car’s upholstery redone, your shoes resoled, your phone’s screen replaced - the list goes on and on.
Learn the skills that will save you money
If you find yourself consistently paying money for someone else to do the same thing for you, consider whether you could learn to do it yourself. With a little time and effort, you can master skills that will save you a lot of cash in the long run, and then you will be able to put that money towards an investment, savings, or a major purchase that you will really benefit from. For example, many people prefer to eat out instead of cooking. While this may seem convenient, it is a huge money drain that can be easily fixed by learning a few recipes. You can also learn how to do your own car repair (or change your tires at the very least). There are so many things you can learn how to do - deep clean your own house instead of hiring a cleaner, cut your own hair instead of going to the barber, and even more.
Take the time to understand your company’s 401k, health insurance, and other financial benefits
Not all companies offer these types of financial benefits for their employees, so if yours does, count yourself lucky! You should take the time to really understand how these financial benefits work so you can take full advantage of them. A 401k can actually be a great investment option as well as a savings tool - many companies give you the option to invest some of your savings in a company stock portfolio. You should also learn about your company’s health insurance benefits so that you can take full advantage of them instead of spending your own money on healthcare. Some companies even offer health savings accounts, which allow you to take money out of your paycheck and designate it for spending on healthcare.
Make the most of your taxes
Most people don’t enjoy doing their taxes, particularly for freelancers or business owners who end up owing money at the end of the day. However, if you take the time to learn about your own personal tax situation, you can end up cutting down some of the costs of taxes and get more money back on your return. Look into what you can and can’t deduct on your taxes. You’d be surprised at what the government actually does allow you to deduct on your statement. If you are feeling completely overwhelmed at the thought of doing your taxes on your own, you can also take them to a professional for some help. Just ask them to explain everything to you so you understand how your situation is working, and so you can do it on your own next time.
Establish clear financial goals
Many people struggle to save money or cut down on spending purely because they don’t have a specific goal in mind. When you have a defined goal in mind that you know is going to motivate you, it makes it much easier to make smart financial decisions, because you will be able to think about the cause and effect behind it. For example, if you know you want to save for a down payment on a house, you will think about that house every time you go shopping, and it will naturally lead you to be more frugal. You’ll compare the value of each potential purchase against the value of the house, which will make it easier to say no to things that you don’t really need. Designate a time every few months to re-evaluate your financial goals, and take the time to reflect on what you value and what you can live without. You might be surprised by what you can do when you find the right motivation.
Get in the habit of comparison shopping
When you need something, whether it’s something relatively small like a new shirt or a larger purchase like a new car, it’s sometimes easy to just go with the first thing that’s available because it’s convenient. Although this can be tempting, it can lead you to spend far more money than you really need to in the long run. To break this cycle, start comparison shopping, even for small purchases. Look up different options online, and don’t bite the bullet until you know for sure that you’ve selected the product with the best value. This doesn’t necessarily mean cheapest - it means the item that provides the best combination of affordability and quality. You can even do this with your local coffee shop or your liquor store - is there another place you could get a similar espresso or bottle of wine for less? Eventually, you will get in the habit of doing this, and it will help you keep more money in your bank account.
With a little bit of practice, it will get easier to make your money work for your needs. Financial stability is often the result of good planning, so just taking the time to really sit down and figure out your goals and assess your spending patterns can make a big difference. Don’t be afraid to invest either - you would be surprised by how easy it is to invest just a little bit of money for a rainy day.