Investing on a Shoestring Budget (It’s Possible)

If you are newly employed or paying off a mortgage or a student loan, you might also be on a strict budget. Unlike a generation ago, young people under 30 have to balance debt with essential living expenses such as buying a house. This usually means restricting household expenses. Unfortunately, being in a dire financial situation typically doesn’t allow income earners to invest.

But this doesn’t need to be your situation. Investing is something you should start doing as early as possible. Don’t let a frugal livelihood keep you from investing in your future and retirement years. Financial advisors strongly advise young people to start investing as early as possible. You should let your investments mature for as long as possible for interest to compound optimally.

If you are currently living on a shoestring budget, here are several ways you can start investing now and not miss out:

Match Your Employer’s 401(k) Contributions

This is one of the easiest ways to invest. When your employer contributes to your 401(k), you are essentially receiving free cash. To get the best advantage of this retirement plan, match your employer’s contribution at least minimally. Your contributions come right out of your paycheck, so you won’t have to find cash. Besides, your contributions are tax deductible. Therefore, don’t miss out on this easy and highly advantageous form of retirement investing.

Trade Cheap Stocks

Matching your employer’s contributions in your 401(k) plan is a relatively risk-free way of investing. If you are willing to take on some risk, you could consider buying and selling only the best penny stocks. Also known as pink sheet stocks, these securities are valued at under $5. That’s right; you can become a stock owner with just a dollar buying cheap shares.

It’s important to be aware of certain misconceptions surrounding pink sheet stocks right away. First of all, low-end stocks are not “get rich quick” schemes. It’s highly unlikely that you would end up becoming a millionaire trading cheap stocks. Additionally, you should be aware of rampant pump-and-dump scams associated with these stocks.

A vigilant investor can certainly turn a profit trading penny stocks. It would require patience and a willingness to stay informed and do research. If you can perform a thorough background check on the companies and understand their products, you will be able to identify the promising penny shares among the overblown and worthless types. As mentioned before, it can be risky. But it’s possible to earn modest amounts of profits through cheap stocks.

Save Towards a Certificate of Deposit

Are you looking for a hassle-free way to invest your money safely, such as placing it in a savings account? A certificate of deposit is such a financial tool offered by banks that allow you to earn a slightly higher interest rate than with a savings account. You can put $100 or more in a CD to mature within a certain time period, such as 3 months or 10 years. The higher the deposited amount, the more your returns would be.

Try to save over $100 for a 5-year CD to earn the best returns with a relatively short-term investment. You can aim for a longer option as well. You should initially try to save a large amount because you aren’t allowed to withdraw or deposit money once a CD is in effect.

Becoming a savvy investor doesn’t require massive capital to start with. You can turn a profit with even a dollar as long as you are willing to learn and responsibly invest. Therefore, if your budget is limited, you can still try one of the above methods to start investing.