Connect with Alan

Subscribe to Alan’s Blog

RSS

Grab the RSS feed for Free Updates!


subscribe

Get blog updates sent directly to your inbox by entering your email address above.

Sponsors






FREE Newsletter

Receive over $147 in free bonuses as a "thank you" for signing up.

:       

:


Privacy Policy

How to Invest on a Tight Budget

When you first hear the word “investment,” your mind probably goes straight to Wall Street and the 20-year-old dudes in overpriced suits shouting buy and sell orders over a throng of equally loud and well-dressed 20-somethings.

But there is a lot more to the world of investing than simply playing the stock market. For example, anyone who is a homeowner has already made an investment in an asset that is practically guaranteed to pay off (and hopefully show a significant return) down the road.

You can also invest in bonds, mutual funds, and CDs as part of a balanced portfolio. Some people even invest directly in retail stores, farms, or other types of business (their own or others). And if you are looking to invest safely in your future, contributing to a 401K, Roth IRA, or some other type of investment fund is a good idea.

Okay, by now you might be getting a little overwhelmed by the sheer number of possibilities. But, what if you’re on a budget and you simply don’t have a lot of money to play with? In this case, there are a few guidelines you will probably want to follow to ensure that your money is invested both safely and wisely.

Things to Consider When Investing on a Tight Budget

The first rule, and this is of the hard and fast variety, is never invest more than you can afford to lose. Consider that to varying degrees, investments are like gambling. There’s a chance you’ll win, and you can definitely do your homework and hedge your bets, but if you’re putting up your mortgage payment or the kids’ college funds (in other words, money that you really can’t afford to lose) you need to be aware that there is a chance you won’t get it back.

The next thing you should consider is the speed and size of return you want to see. High-risk stocks can come with swift rewards, but you could lose your shirt just as easily. Money put into CDs, on the other hand, will show only a minor return (within a selected time, between 6 months and 5 years), but it’s fairly safe.

However, if you’re willing to wait until the age of retirement, your best option for investing on a tight budget is to contribute to a retirement account. If your employer offers a 401K, this is a good option (especially if they have a matching program). If not, you should consider starting a Roth IRA. There are two good reasons to go this route rather than, say, stocks and bonds, united rare coins gold, or commodities.

For one thing, any money you contribute to such an account is considered pre-taxable income. So if you put money into a Roth IRA, you can deduct it on your income tax. The other benefit is that retirement accounts use compound interest, which means you have the potential to earn a lot more over time than other types of accounts. Plus, retirement accounts are generally invested in a variety of low-risk stocks, bonds, and mutual funds, and there tends to be strict oversight.

So if you’ve only got a small amount of money to invest, put it into your future. It’s the best way to make your money work for you.

Leave a Comment

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

9 Comments to “How to Invest on a Tight Budget”

Dear Mr. Mater:
I really liked the advice on investing, as I thought of it, but didn’t know where to start. Real good advice doesn’t come by often.

[Reply]

I totally agree on you on this one…

“The first rule, and this is of the hard and fast variety, is never invest more than you can afford to lose. Consider that to varying degrees, investments are like gambling.”

I have tried a few investment program online, a few have scammed me and there are some where i am earning good, but as always i have been careful with putting money on programs (investing), i always start very little most of the times the minimum amount to invest then go from there, either compound the interest or look for referrals for affiliate earnings.

Your post will be a good help to those who are considering investing and is on a tight budget.

[Reply]

Excellent post you share. You have to invest small amount of money to new business you are going to start.

[Reply]

great tips, your advice is so relevant as always, I wish more people understood the importance of never over investing

[Reply]

Those are great options for investment. Insurance can be a good investment too, not just for you but for the whole pack. Thanks for the helpful idea.

[Reply]

I wish more people understood the importance of never over investing.

[Reply]

Excellent post you share. You have to invest small amount of money to new business you are going to start

[Reply]

For a startup, it’s hard to start investing especially when there are a lot of bills and expenses to pay and there is no excess money to use o r simply on a tight budget. It’s hard but it’s important because it is for future use. All of it can be use specially when you needed it the most.

[Reply]

There is misstakes that everyone do when they are new and try to invest in things they don’t even know of. A friend of mine lost a big amount of money because he thought it would be a safe investment over a long term time.

You have some nice points. Sharing this on my facebook if its ok with you :)

[Reply]