How to Make Room in Your Budget for Investing Next Year
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If you’re like many people, you’re already thinking about how to get your finances in order next year. Budgeting, saving and investing are all likely on your list. Speaking of the latter, if you want to start but don’t know how to make room in your budget for investing, you’ve come to the right place.
Right now is a great time to start investing. We’re in a bull market, which means the stock market is very strong and has been for the past few years.
While Americans who already have investments in the market are seeing great returns, a shocking number of people don’t invest at all. It’s one of several scary investing stats that also include the fact that more people own cats than own stocks.
The reason more Americans don’t invest is that they either do not have extra money on hand to invest or don’t have access to 401(k) plans or other employer-sponsored retirement accounts.
People who invest typically have access to work sponsored retirement plans or are in upper-income brackets.
However, that doesn’t have to be the case.
In fact, I truly believe that anyone, including those who don’t make a lot, can (and should) invest on a low income. Below are some tips on how to get started.
automate your investing
Many people view investing as something you do after budgeting. However, one of the best ways to put it at the forefront of your mind is to pay yourself first.
The easiest way to do this is to automate your investing. Choose a specific amount of money, even if it’s only $20, and set it to automatically invest on a specific day each month. This is very similar to automating your savings, except you’re automating your investing. Many online brokers make automating deposits very simple so you don’t have to remember to save each month.
When you budget for investing, you’re telling yourself that your future is a priority. You’re ranking investing alongside your primary bills like your mortgage, your electricity and your water.
Investing in your future should come before entertainment expenses, like dining out or heading to the movies.
Increase Your Investment Contributions Gradually
Thankfully, there are companies that make it easy for you start investing with very little money. In fact, both Ally Invest and Betterment have no minimum balance requirement so you can start with whatever you want. These are just a few of the brokers that make investing available to everyone.
That said, even if you start with a small investing budget next year, make it a point to increase your contributions gradually. This should be one New Year’s resolution that you’re determined to keep.
You can do this by setting reminders on your calendar to increase your contributions every 3-6 months. If you don’t know how you’ll make enough money to increase your investment contributions, consider finding ways to make extra money.
There are many ways to earn extra money, even if you feel you have little skill. Here are 30+ ways to make extra money that require little skill and can help grow the amount you have available to invest.
Really, all of this is a mindset shift. Instead of spending the extra or unexpected money you make on frivolous items, use it to pay your future self, which is exactly what investing is.
Weather the Storms
Lastly, keep in mind that investing for your future isn’t about making money in the short-term. It’s about the long-term. Over the course of your life, you will see your investments go up and down.
However, it’s important to weather these storms. Fluctuations in the stock market aren’t fun to experience, but it’s the long-term view that’s best to take.
Time is the most important component of investing. It’s easy to think that the amount you start with won’t do anything for you and we’ve all been there. However, the key is to start investing – regardless of the amount. Over time, the power of compound interest will help your investments grow, but you need to give it time.
If you are new to investing and want to incorporate it into your budget next year, start with the steps above. I also encourage you to keep learning.
Start reading investment books, here are some of the best investing books for beginners to get you started. Read financial blogs. Ask the advice of someone you trust.
Really, as long as you take the time to make investing a priority, make it a line item on your budget, and consciously add to your investments each and every month, you’ll be well on your way to building wealth in the future.
Do you include investing as a line item in your budget? How often do you put money in your investment accounts? What are your goals for your investments in the future?