Welcome to April! I don’t know about where y’all are, but here in the south, things are blooming, baby! To me, that’s what spring is about. Renewal. Every spring is like an extended version of every new day. It’s a chance to start over, to take stock of where you’re at and plant new things. Once you’ve gotten rid of all the old stuff that has been covering your garden or weighing you down, you’re ready to begin anew. Then the fun really starts, you get to sit back and watch your little seedlings turn into all kinds of beautiful, wonderful and amazing things.
Now, what does this have to do with your bank account? Think about it like this, since it’s spring you can start looking for green everywhere, including your budget. Just what you wanted, another tired article about budgeting. Your eyes are already glazing over, right? Or, maybe you just got hit with an unexpected tax bill and you are scrambling, trying to figure out how to pay it. Begin with the budget, baby!
Your budget is fertile earth, ready to produce a mighty oak of a bank account from a tiny little acorn’s worth of savings. Believe me, even the most modest budget can produce a meaningful amount of money to save and/or invest. If you save even $5 a week, by the end of the year you’ll have $260. That may seem like a small amount of money but, it can buy two new tires for your car or pay for a trip to the doctor for you or your child. That $260 is just the money you’ll have after a year of saving in a basic savings account. However, the fertility of your budget is maximized when you harness the power of compound interest by not just saving your $5 every week but, investing it.
Before I get started on investing with $100 or less, I want to caution you about a couple of things. First, I am not holding myself out to be a financial advisor. I am not and will never be. I always, always advise you to consult a qualified financial advisor before you start investing.
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Second, make sure whoever you are investing with is not gouging you with fees. Look at what they are charging for management fees AND annual expenses. High fees can seriously eat in to your returns so, keep an eye on those fees no matter what.
Also, as soon as you can save up enough money, switch to a Roth IRA and use that as your primary savings/investment account. One technique you can use is to start with a money market account (they generally pay more in interest than a regular savings account), and use it as your emergency fund once you’ve hit your $1000 mark. You can use the $1000 to start your Roth IRA and keep your MMA open as your emergency fund. Keep adding to both accounts until you have three to six months of expenses in your emergency fund, then you can focus on your Roth IRA.
Remember, a single person can only contribute up to $5500 a year to a Roth IRA. Once you hit that mark, keep the habit of saving by continuing to add to your MMA account. Also, if you’re employer has a 401(k), enroll in it, pronto! Make sure to contribute enough to get the match, if there is one. If there isn’t contribute as much as you can stand, financially.
Okay, so, let’s say you just have a few bucks a month to invest. You can start by checking out some of the following investment companies: Acorns, Schwab or Betterment. While I invest primarily with Vanguard (and have for years), I like Acorns for college students and Schwab for people who are a little more established. You can get a free account with Acorns while you are in college and Schwab is a well established company that is known for low-cost investing.
You’ve opened the account, now what do you buy? Well, ask your financial advisor first. My rule of thumb is never buy individual stocks. Stick with mutual funds, index funds and products like those. They are a much safer way to dip your toe into the world of investing. Your clock can get cleaned if you buy individual stocks! Stay save and stick to funds.
My last word on investing is consistency. The way to make your money grow through investing is to set up a dividend reinvestment on your account (aka DRIP), and automate your investing as much as possible. Every month, like clockwork, you should be putting money in your investment account and buying whatever fund you decide on. Don’t just put the money in and not buy the fund! I’ve seen people do that and the investment company has closed the investment account due to inactivity.
Now that we’ve talked about how to start investing on a shoestring, your next step is to figure out how much money you have to work with. Again, making a budget and sticking to it is the first step in spring cleaning your finances. Get rid of all your unnecessary expenses like unused gym memberships that are billed monthly or subscriptions to magazines you don’t read. Cancel your cable and start reading more. Whatever is leaking money from your budget, plug the leak and use that money to start investing!
Finally, remember that no one will do this for you. It’s up to YOU to make it happen.
The Dollar Lama
P.S. Make sure you check out my online courses, books and resources, too! Investing in your money management education is an investment in yourself. That’s the best investment you’ll ever make, I guarantee it! Don’t forget my weekly Facebook live videos on Facebook.com/newcashview, Instagram @joyalfordbrand and on my YouTube channel NCVTV. You can catch me twice, on Mondays between 3:00 p.m. and 4:00 p.m. for my Monday Money Management Minute and Thursday evenings between 7:00 and 9:00 (Eastern Standard time), for my weekly NCVTV episode. They are packed full of useful and entertaining money management information! If you’ve missed any NCVTV episodes, you can see the latest on newcashview.com or you can check out my YouTube channel and get caught up! You can get there by clicking here. Remember, like and share the NCVTV videos on Facebook and all your social media platforms, so others can benefit from them, too!
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