We’ve all heard the old “make your money work for you” adage, right?
That means taking basic Finance 101 steps — like investing. But sometimes we’re a little too busy working for our money and forget to invest.
And sometimes the idea of investing becomes a bit overwhelming. You might picture scenes from Wall Street, starched suits and maybe people soaking in a bathtub full of money. (That can’t just be me?)
But investing can be for everyone — even if you only have $5.
Before You Start Investing, Here’s What You Need to Do…
First of all, your ability to invest — and how much you can afford to invest — is going to depend largely on your budget, goals and capacity to face risk.
For that reason, we can’t offer tailored, personalized advice. Sorry. You’ll need a financial advisor for that.
However, we can offer an overview.
Before you start investing, you need to make sure to tie up any loose financial ends and plug up any financial holes in your life. So we’re borrowing money advice from financial guru Dave Ramsey.
Before you invest…
- You should establish a cushy emergency fund. Ramsey suggests at least $1,000 to start, but eventually you’ll want to get that up to three to six months of living expenses.
- You should have your debt paid off. He suggests using the debt snowball effect.
If you don’t meet these two Ramsey-inspired qualifications, you can still invest; it just might not be in your best interest.
Also, you might already be investing through your employer retirement account, such as a 401(k) or IRA. Yup, that’s investing, and it’s not too scary, right?
How to Start Investing — Based on Your Budget
You don’t need thousands of dollars to start investing. You can actually start with as little as $1.
We’ve aggregated four investing platforms and have categorized each one based on your budget.
If you only have $1 and some change to spare…
Rounding up purchases to the nearest dollar is all the rage right now. Those remaining pennies add up fast.
Acorns is embracing the trend and allows you to start investing with just a handful of change. Plus, it’s all done with a few taps on your phone.
Once you download the free app, you’ll pick your portfolio based on your age, income level and your aggressiveness. Acorns determines the rest; you don’t have to pick and choose individual investments.
Then, if you so choose to round-up your transactions to the nearest dollar, that spare change will stack up until it hits $5, which will trickle into your investments.
Each month, you’ll pay $1 for the service. If you work your way over $5,000, you’ll be charged 0.25% of your balance a year.
If you have $5 to spare…
Stash is another fan-favorite app. You only need $5 to get started — plus you’ll bank an extra $5 when you sign up now. So really, it’s kind of free.
Here’s how it works: When you sign up with the SEC-registered investment adviser (that means your money will be safe), you’ll gain access to more than 30 investment options.
If you don’t know where to start or already feel overwhelmed, Stash will walk you through the process with personalized assistance. It even defines any financial jargon. You’ll buy fractional shares, which basically means you can pick and choose what you can afford to invest in.
Your first three months are free. After that, you’ll pay $1 per month, though if you build a portfolio of more than $5,000, you’ll be charged 0.25% per year.
It all starts with $5. And by clicking, “download.”
If you have $100 to spare…
If you read The Penny Hoarder, you’ve probably heard of Aspiration. We frequently write about how much we love its free Summit Checking Account.
It also has an investing platform called Aspiration Redwood Fund, which invests your money in sustainable businesses that are “leaders in their industry when it comes to caring about their people, the planet, and their company’s purpose and mission.”
That means you’ll feel like a good, socially responsible human when you invest through the platform.
You’ll need $100 to open up an account, but the additional service fee is totally up to you.
Gasp.
You know how some investment firms getcha when it takes a huge chunk of your returns? Aspiration lets you decide how much you pay its portfolio managers.
If you want to make sure this is real, go ahead and read up on the Redwood Fund here.
If you have $500 or more to spare…
We’ve got two options for you: Lending Club and Betterment.
Do note you don’t necessarily need $500 to start accounts with these two options, but the bigger the better.
With Lending Club, you only need $25 to purchase a note. OK, let’s back up.
Lending Club is considered a platform for social lending, or peer-to-peer lending. Basically, it connects you with individual lenders and borrowers through an online marketplace. So you’re lending money directly to an individual — without the middleman.
Here’s how it works: A borrower fills out a loan application. Lending Club experts evaluate it, set an interest rate and compile loans. The borrower then chooses a loan and activates it.
Then comes the investor (you). You can choose how much you want to fund in $25 increments (called notes). So you’re helping the borrower. Once the loan is funded, the borrower gets all the money. Each month, the borrower starts paying back the funds — with interest.
Annual returns average 5% to 7%, which is a lot more than your average savings account. But also note 99% of its investors invest in 100 or more notes, which equates to $2,500.
We have a complete guide on how it works here.
The second option we’ll talk about is Betterment, an automated investing service. With Betterment, it’s OK to have a $0 balance, and the annual fee hovers at 0.25% (the same as larger Acorns and Stash balances).
Perhaps Betterment’s best tool is its personalized recommendations. Type in your age, employment status (retired or not retired) and your annual income. Out spits recommended goals.
You’ll get suggestions for a conservative “safety net” portfolio, with 40% of your investment going toward stocks and 60% going towards bonds. It also generates an annual recommended target amount, which is going to be a pretty big chunk of money, depending on what you make.
You’ll also get personalized suggestions for retirement plans and general investing.
Once you sign up, the Betterment team will manage it all for you!
Again, we’ll always recommend speaking with a professional to figure out what your best move is based on your personal finances (because, well, they’re personal).
Your Turn: What’s your favorite investment platform that’s best for your budget?
Disclosure: Here’s a toast to the affiliate links in this post. May we all be just a little richer today.
This was originally published on The Penny Hoarder, one of the largest personal finance websites. We help millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. In 2016, Inc. 500 ranked The Penny Hoarder as the No. 1 fastest-growing private media company in the U.S.source The Penny Hoarder http://ift.tt/2oSgON2
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