Sometimes, your paycheck doesn’t excite you. Instead, it catches the attention of the rent, pending utility bills, and groceries. However, it seems that all you can afford is bare lifestyle expenses in inflationary times.
The worst part is when your paycheck buys you less bread and groceries. It requires one to re-analyse the finances and plan a budget. It would help you analyse the amount you can realistically invest. Moreover, prioritise savings and debts before investing. You must save at least 30% of your income.
Out of this, you can invest about 10% in your emergency fund. It would help you create a fund to tap in emergencies. Afterwards, check how to invest this in the way to leverage the most benefits. Moreover, the investment amount may vary according to an individual’s income and liabilities. For example, if your debt ratio is low, you can save more and vice versa.
If you are new to it and want to start investing on a simple note, the blog may help.
Easy ways to invest money in a low-income (for any income)
Most individuals believe they need a good lump sum to begin investing. It’s a myth. You can begin by investing just £1000! Precisely, it does not matter how much you invest every month. Instead, how strategically do you do it to double up returns? You just need to transform even a small amount of money into the beginnings of an investment empire.
Let’s now analyse the strategy to build investments hassle-free:
1) Analyse the investment purpose
So, you have decided to invest. Have you asked why? Why do you want to invest in the first place? Having a clear purpose will help you utilise each penny you invest initially. Moreover, it is a crucial step for individuals with low income. You can have short, medium and long-term goals to begin investing. For example: You want to invest money to buy up your home post 10 years of investment. So, this is a long-term goal and choose low-risk investment bonds and shares, mutual funds, etc.
Accordingly, you must decide the goal to begin with.
2) Decide the amount to invest
It is the next big thing to ponder about. You cannot choose any number randomly. As mentioned above, the amount you can invest depends entirely on your liabilities and income. You can follow a 50/30/20 savings rule. In this, 20% of your salary goes towards investment. Apart from this, analyse how you plan to use the rest 80%. It may include liabilities and savings.
For example, if you earn £25000/month, you invest around £5000 in the feasible investment types. You can use the rest £20000 to save around £6000 and the remaining towards liabilities.
Therefore, you must have a budget to follow the investment and saving process hassle-free. However, be wary of the volatile investments and analyse them carefully.
Alternatively, if you face an emergency and need £10000 but do not want to disturb the investment and savings graph, facilities like personal loans for people with bad credit scores may help. You can utilise these loans to finance emergencies.
Individuals with low income struggle with maintaining credit history, these loans may find you well. Moreover, it helps retain the financial journey and goals.
3) Open an account for investing
To invest money in a mutual fund, bond, or individual stocks, you need an investment account. As a beginner, you would need a broker’s support here. He may help you open up an investment account for a brokerage. Alternatively, some banks offer the option to invest cheaply. You pay less here than a broker. However, the choice may differ according to the investment purposes, knowledge of the industry, risk-taking ability, income and other financial liabilities.
If you want to partner with a broker, analyse whether he provides the below offers:
a) No minimum fee balances
The initial investment amount should be higher than a broker’s fee. There is no point in giving extra on something you are just beginning with. Thus, if he charges high for a low balance fee, avoid it.
b) No transaction fee
Well, brokers do charge a commission fee for their services. However, you must not pay a transaction fee. You can spot brokers offering £0/per transaction on trading.
c) Allows fractional share prices
He must allow a fraction purchase of a share instead of buying up the whole share. Some brokers provide fractional shares on special events like re-investing the dividends. It is beneficial for individuals investing £1000/month.
4) Decide and create an investment strategy
It is the most important part of regulating your investments and profiting from them. The investment strategy depends on your savings goal and the time you would need to each them.
For example, as a beginner, save a small amount towards a long-term goal. It could be anything like- buying a home. For this, you can set up an ETF account, or low-cost mutual funds.
Alternatively, if saving for a short-term goal like- renovating the home, buying new furniture, education and admission, you must practice patience with safe investing. Here, pick a cash management account, or an online savings account.
However, some individuals find it challenging to decide on the right investment cover. In that case, you must consult the financial expert. He may advise you to either opt for a long-term retirement fund, emergency fund or funds to get taxation relief.
On the other hand, if you need money for the short term and do not want to invest money, explore other funding ways. Check facilities like unsecured loans for bad credit without a guarantor can help. You can finance your short-term needs like replacing furniture with this quick cash flexibility.
5) Invest in “yourself”
You must read, research, and experiment safely alongside. It would help you remain in tune with the recent developments in the market, the new potential stocks to invest in and the income. Investing in yourself would help you make more money in the long run. However, if you want to invest in a training program, analyse whether it offers training about the most important aspect of investing or not.
Bottom line
Thus, you don’t have to have hundreds of dollars sitting around investing. Thanks to the technology and innovation. Investment today is more accessible than ever it was. Thus, investing in bits can help you garner good returns in the long term. Just prioritise savings, paying timely bills and investing a part of your income towards low-risk bonds and shares
