Investing

How to Invest When You Have No Money

When done properly, investing your money is a surefire way of securing profit. Through investment, you can increase your wealth, save money on taxes, make purchases on items you’ve always dreamed of, and even retire from your job at an early age.  However, you might think that you need a lot of money to start investing. Luckily, this isn’t always the case, and it’s very straightforward to invest – even when you have no money.

While you won’t be making high profit returns or trading high-risk stocks with massive rewards at the beginning, you’ll start off slowly so you can eventually get to a comfortable position of profit. Creating a plan and focusing on what you truly want to gain from your investments is the best way to begin.

Start budgeting now

This is one of the most important things to do in order to invest when you have no money. Take a look at your daily and monthly spending. Where can you save? What can you cut back on? If you notice that you’re spending a lot of money on things like going out to dinner or splurging on clothing and accessories, try cutting back. Small changes like this will make a big difference in the long run. Take the money that you would otherwise spend on these expenses and put it aside so you can use it to invest later on.

Create a savings account

Chances are you already have a savings account. But in order to invest when you have no money, you should create another savings account with money you’ll use solely for investing. That way, you’ll accumulate both savings and interest. Make sure you save at least $1000 before you start investing.

You can also start moving a small amount of money from your paycheck into this account. If you put $10 in per week, that’s $520 per year. In only two years, you’ll have saved enough money to start investing. The more you put aside into this bank account, the sooner you can begin.

Pay off your debt

It’s never a good idea to start investing if you have credit card debt. Paying off your credit card debt should be one of your top priorities before you start investing. Taking advantage of credit card rewards and only purchasing items you can afford are two simple ways to prevent the accumulation of debt.

Once you pay off your credit card debt, you can reap the benefits of not having to pay credit card interest. If  your credit card has a 10.99 % interest rate and you’re continuously paying back your credit card debt, then you’re more or less getting a 11% return of your money, since you’re no longer having to pay 11% of your purchases.

Learn a new skill

This is one of the simplest yet most effective ways to invest when you have no money. Learning a new skill is basically investing in yourself. This can be through learning a new language, learning a computer program, or creating something to sell. You can take this skill and apply it to your current job or even get a new job with your newly discovered skillset that pays more than what you currently make. You can put these profits aside to invest.  

Dividend Reinvestment Plans

Also known as DRIPs, Dividend Reinvestment Plans involves the process of purchasing a small amount of stock from a company such as Coca-Cola, and later on receiving profits as dividend reinvestments. These come as shares of the stock of equal value as opposed to cash. It’s wise to use your payroll deductions to make periodic contributions, which will accumulate over time. Companies like Johnson & Johnson and ExxonMobil offer DRIPs with no fee.

Tax deductions

If you’ve borrowed money for taxable expenses, then you may be able to receive an investment via tax deductions when you pay back the interest. This one is a bit tricky; there’s a couple of things you’ll have to do to calculate the expenses of your deductible investment interest. You’ll have to calculate both your total investment income and your total investment expenses. The investment interest is deductible if the expenses are less than your income.  

Enroll in a 401(k)

The way to invest when you have no money is through a 401(k). You may have avoided enrolling in your employer’s retirement plan or a 401(k) because you’re already having trouble saving. However, taking advantage of this is one of the best ways to invest. The key to doing this is to do it slowly, by putting around 1-2% of every paycheck towards your 401(k). Once you start with this, you can begin to raise it by a few percent every single year. This method easily works as you make more money and increase your salary throughout the years.

Earn interest with Treasury Securities

You’ll have to start somewhere, which is why earning interest with treasury securities, or savings bonds, is a great place to start. It’ll take decades to see any profit, however, if you’re broke, this is one of the easiest ways to start. You can then use these profits to later invest somewhere else with a higher return.

If you follow these tips, you’ll likely make a return on your money in no time. The sooner you begin, the sooner you’ll get results with major profit. The key to this is sticking to your plan and being smart with your money. This is the basis to saving and making a profit, and eventually, you’ll be able to place your money into high-risk/high-return investments.  By taking action like paying off your debt and putting aside money to invest later on, you’ll be able to take charge of your income and your life and see the results you want to see.

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