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If you have a low income, you may think you can’t invest. It’s only for the rich, right?
Wrong.
Today it’s easier than ever to invest with even spare change. You don’t need to make much money to invest. Instead, you need a proper budget in place to ensure you have the money, no matter how little, to invest each month.
So how do you invest on a low income? Here are X simple tips.
1. Create a budget
If you don’t have a budget, create one now. You can’t invest if you don’t know where your money goes each month. So grab your bank and credit card statements and see where you are spending.
If you don’t know where your money goes, a budget will help. A budget is like a roadmap for your money. It tells you where you need to spend your money and how much you have left for spending or investing.
Recommended Read: An Essential Guide in how to get out of debt fast
https://www.buymeacoffee.com/dividendtalk
2. Cut back on unnecessary spending
As you look at your bank statements, see where you can cut back. Categorize your spending and see which categories you spend too much on.
Common areas people overspend include:
- Coffee shops
- Impulse buys
- Online shopping
- Hair and nail appointments
- Credit card interest
- Unlimited data at home or on your cellphone
When you cut back on a few expenses, you free up money for investing.
Recommended Read: 20 Easy Ways t Save Money Today
3. Invest your spare change
Believe it or not, you can invest with your spare change. Revolut is a bank where that rounds your purchases up to the nearest Euro and transfers the change to your savings account. You can also invest in stocks and crypto within Revolut from your savings.
You can link your most used debit or credit card to your Revolut account, and every time you spend, they transfer the change to your savings account. So, for example, if you spend €23.30 at the store, Acorns would round it up to €24 and invest the €0.70.
Now there’s no excuse not to save money or Invest on a low income.
Recommended Read: Paying Off your debt or Investing
4. Contribute to your pension
If you work for a large company, they may offer a company match on your pension contributions. Company match means your employer will match your contributions. Some employers match euro-for-euro up to a certain point, and others match may even match 2 euro for 1 euro up to 5% of your income.
Most employers max out the contributions at 3% – 5% of your salary. Since pension contributions are before tax, you’ll pay fewer taxes and have a larger take-home pay because of it.
Even if you only contribute a small amount, it will double with your employer’s match. So, for example, if you contribute €2,000 for the year and your employer offers euro-for-euro matching, you’ll have €4,000 saved for retirement at the end of one year.
5. Save every €5 bill you have
It sounds crazy, but every time you pay in cash and receive a €5 bill, put it in a cookie jar. It may not seem like much, and that’s the point. You won’t feel like you’re sacrificing by putting away €5 at a time. At the end of the year, though, you’ll likely find that you have a couple of thousand dollars.
There are many ways you can invest that money. Whether you invest it in a ETF and let it grow slow and steady, or you invest it with a Robo-advisor investing in stocks, or you invest in real estate crowdfunding, the point is that you invested €5 at a time and made it work.
6. Join a Robo-advisor that invests in fractional shares
Many Robo-advisors today make it easy to invest in even the ‘big name’ stocks. Trading 212, for example, allows you to invest in fractional shares. Let’s say, for instance, you wanted to invest in Amazon. You know they are doing well, and you want a piece of the action, but you don’t have €3,345 to buy one share.
With Trading 212 or other brokers that allow fractional shares, you can invest a much smaller amount. For example, let’s say you have €100 to invest – you can buy a fraction of Amazon and still enjoy their incredible growth.
7. Invest in real estate
You probably think you need hundreds of thousands of dollars to invest in real estate.
You don’t as you can still invest on a low income.
Today, you can invest in crowdfunding with as little as €500 in some cases. For example, Property Partner requires just €500 to start, and you can diversify your investment across various Real estate investments.
With real estate crowdfunding, you don’t have to manage or handle the properties physically, but you still get to take part in the profits they create. Each investor earns a prorated amount of the returns based on the percentage of the asset they invested.
Recommended Read: What are REITS
Final Thoughts
Don’t let the old myths stop you from investing. Today you can invest with less than €1 in some cases. No matter how much or how little money you have, there are ways to invest.
To start, open high-yield savings account online and start putting money away. This will get you used to investing. Then, as you get more comfortable with the idea and see that it works with your budget, start taking more risks by investing the funds in ETFs, mutual funds, stocks, and even real estate.
Assess your risk tolerance and set up a diversified portfolio with decent returns, but that doesn’t put your entire investment at risk. Instead, diversify across several industries and assets for the best results.
If you would like a copy of the template I use to to perform stock analysis than feel free to grab your copy below.
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Recommendations
Simply Investing Report review – For investors who might like to have all the research done for them
Sure Dividend – Ben and his team help individual investors build high-quality dividend growth portfolios for the long run and offer a lot of excellent content for free. I also write company review articles on Sure Dividend each Quarter.
Dolphin Utilities – If you want to save money from your utilities than check out these guys. (If you mention my name, i receive a small fee while you save money)
Disclaimer - Engineer my Freedom is not a licensed or registered investment adviser or broker/dealer. We are not providing you with individual investment advice on this site. Please consult with a licensed investment professional before you invest your money. This site is for entertainment, informational, and educational use only. Any opinion expressed on the site here and elsewhere on the internet is not a form of investment advice provided to you. We use information, data, and sources in the articles we believe to be correct at the time of writing them, but there is no guarantee of their accuracy, completeness, timeliness, or correctness. We are not liable for any losses suffered by any party because of information published on this site or elsewhere on the internet. Past performance is not a guarantee of future performance. By reading this site or subscribing to it, you agree that you are solely responsible for making investment decisions in connection with your funds.
Step 1 is indeed the most essential step, not only for investors with low income. I talked to a couple of acquaintances with medium income and was surprised that some of them do not know the bigger chunks of their spending at all. They were fully trapped in lifestyle inflation without knowing.
Additional tip: If you get a salary increase, celebrate it with a one-time expense like a nice dinner. But do _not_ start to extend your spending with an extra subscription here and there. That should be a reasonable way to counter lifestyle inflation.
Great tips!! And I’d say the order matters a lot as well. Knowing where your money goes and what your monthly balance is (aka step 1, budgeting), is a the crucial part. I personally would split step 2 in, debt reduction and cut on unnecessary spending. As you pointed out in your debt reduction article, makes no sense to invest at 3% when your credit card gets 10% off of you. So tackling debt first, will perhaps be the first and biggest investment opportunity in a way.
Great article!