The Best Way to Invest with Little Money - It’s Not What You Think
If clicked on this article, you may not have a ton of extra money to invest, and that’s okay. I’m going to explain to you the best thing you can do for yourself financially, and I’ll be as upfront with you as possible.
If you don’t have a lot of money to invest, and you’re wondering what’s the best way to invest your money, then you’re asking the wrong question. Investing with little money does almost nothing to help your financial position because the amount you can earn is so small.
Let’s say Person A has $1,000 they’re able to invest. They invested in an asset that gave them a 20% return. That means over the course of the year, they earned $200.
Then we have Person B who invested $25,000 and received a 10% return, earning $2,500 throughout the year.
Person A, who earned an above-average return on their investment, only earned $200. Yet, Person B earned half the return as Person A and earned $2,500. This shows you that someone with little money has limited their ability to make a lot of money through investments.
If you have a small amount of money to invest, instead of worrying about choosing the best possible investment, you should focus on increasing your savings rate so that you can actually make a worthwhile impact on your financial situation when you do invest.
Your savings rate is how much money you save at the end of each month compared to what you earn. So, if you earned $1,000 for the month, and you saved $200 (meaning you spent $800 out of the $1,000 you earned), then your savings rate is 20%. The goal should be to get your savings rate as high as you can while also being comfortable and happy with your lifestyle.
So really, the BEST way to invest with little money is investing your time into decreasing your expenses and increasing your income. I want you to focus on that, because it’s more valuable to learn how to be purposeful with your money than it is to spend all your time trying to find the investment of a lifetime.
So, I challenge you to figure out how much you’ve saved this month, because THAT is the very first step if you want to make worthwhile investments. Here’s what I want you to do.
Add up how much money you’ve earned this month (Income)
Add up how much money you’ve spent this month (Expenses)
Subtract the two to find how much you’ve saved (Income - Expenses)
Once you find how much you’ve saved for the month, do it again for the next month, and every month after that. The goal is to save more than you did the previous month.
If you commit to doing this, then congratulations. You found the investment of a lifetime – you’ve invested into yourself. Good luck my friends. Please reach out if you have any questions at all.
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