Getting Started in Investing Without the Silver Spoon
A quick look at the investment landscape can lead to discouragement if you don’t have a burgeoning bank account. The ability to build wealth through investment might look like a closed shop, something only available to people who already have wealth in the first place, but this really isn’t the case. They may not be as visible, but there are lower rungs on the ladder where you can get started even if you’re currently living paycheck to paycheck.
Stabilize Your Finances
Investing should not be your first step toward organizing your finances, except for making regular contributions to an employer sponsored retirement account. Instead, you should focus on making a budget and building up emergency funds in case of a financial need. How careful you need to be with your finances and how much debt you need to pay off first will vary based on your personal situation, and there are several books, articles, podcasts and more than can help you with these initial steps.
Consider Your Goals
It’s a good idea to think about your current position in life and your goals. Someone who wants to remain single and childless and retire at 40 will go about this very differently from someone whose main goal is to ensure that their children and grandchildren never have to worry about money. Consider your tolerance for risk and uncertainty as this will have a big influence on the vehicles that you put your money into. Think about how hands-on you want to be and if you would prefer to put your cash somewhere and forget about it.
Real Estate
It may seem far from investing 101, but real estate is actually a great way to get started even if you don’t have much cash to put toward it. You don’t have to purchase an entire building or apartment to take advantage of the great returns, regular cash flow, and tax breaks that real estate offers. Fractional real estate investing allows you to invest in a portion of a property with just a little bit of cash. Taking part in fractional ownership removes not just the financial burden but the hassle of being a landlord as well. Later, as you accumulate more cash, getting into real estate in a more traditional sense can also be an excellent way to earn passive income.
Other Types of Investing
Real estate is not the only way to start growing your money with just a small amount at the start. You can create an online brokerage account and start purchasing stock shares, mutual funds, and similar items, often with just a few hundred dollars or less. You also don’t have to be an expert. With the help of a roboadvisor, these platforms can choose the types of vehicles where your money can do the best for you based on your profile. If you’d like to be more hands-on or you just want to try before you buy, there are online simulators that let you experiment without spending any real money.
Some types of life insurance policies can function as investments. This is not true for every policy, so if this is something that interests you, be sure to do your research and purchase the right type of plan. There are also low-cost investment opportunities such as penny stocks that can be tempting. It’s not impossible that these could turn into wealth building opportunities, but it’s unlikely. These stocks tend to be priced low enough that you aren’t going to lose much by putting money into them but be sure to do your homework so that you know what you’re getting into. Other risky investments can be costlier. For higher risk opportunities, only use money you can afford to lose.
Don’t Underestimate Your Retirement Savings
It may not look very exciting, but the retirement account that you maintain with your employer can be one of the best sources of building wealth over the long term. This is especially true if you are young and you’re putting money away and leaving it there. Over the many years between your 20s and retirement, this money grows exponentially. Try to avoid the temptation to hold back on contribution or on taking money out to pay for other things.
