For many, investing is scary. Memories of the financial crisis and stock market crash of 2008 and 2009 and the tech bubble burst in the early 2000s scare many consumers away. On top of that, the myth that you need a substantial amount of capital to start investing persists. With worries about stock market crashes, concerns about money and fears about picking the wrong stocks, many consumers are missing out on the chance to build wealth over time.
Investing doesn’t need to be scary.
The good news about the democratizing influence of technology is that it makes it easier for ordinary folks to start investing. A number of tools and products aren’t “scary,” and they’re also cost-effective in the long term. Invest in low-cost index funds that offer exposure to the entire market, so that you don’t have to worry about picking a “winning” stock. You can also use a strategy called dollar-cost averaging to buy shares each month. Just invest as little as $100 each month, and you can buy shares in an index fund. This consistency can help you build wealth over time. When you consider that the stock market, as a whole, has never lost money over a 25-year period, investing for the long haul doesn’t seem so scary. Short-term market dips can be concerning, but if you play the long game, consistently investing in an index fund — often held in a tax-advantaged account like a 401(k) or an IRA — over the course of 30 years, you stand a good chance of coming out ahead.
How to find extra money to invest
Once you decide that investing is something that you want to include in your financial plan, it can be difficult to get started. To make the most of a long-term plan, consistency is key. You need to invest regularly each month. So, how do you find that extra money to put toward your future?
New investment programs like the MyRA allow you to invest as little as $5 per paycheck, and the investment app Acorns allows you to invest whatever you can to start. While it’s true that these small amounts won’t lead to an early retirement with a huge nest egg, the important thing is to get started. Start small and work up to a larger amount.
Here are some of the ways you can begin to find money for investing this year:
Keep track of what you save with coupons. Whenever you use coupons, use that saved money to invest. If you save $7 each week with coupons, that’s an extra $28 a month you can put toward investing.
Save your change. When you pay with cash, put all your coins and dollar bills in a jar at the end of the day. By the end of the month, you should have some money to invest.
Reduce spending on unnecessary items. Think about the things that you buy that are unnecessary. We all end up with waste in our budgets. Review your budget and figure out where the waste is. Trim the fat and direct that money toward investments. You might be surprised to discover that you can afford the $100 per month minimum it takes to invest with Betterment, a low-cost brokerage that can help you use dollar-cost averaging to better advantage.
Earn extra money. Sell items that you no longer use. Consider freelancing, or finding some other way to earn money online. Start a side business. Pick up an extra shift. No matter what you are doing, chances are that you can come up with extra money to invest. And, as you begin to see the benefits of investing and realize how possible it is, you can begin to find ways to invest even more money, increasing your contributions to a point where they really can make a difference in your long-term financial future.