Investing often seems like a tool for those already well off. The reality is different. While you need some spare cash to use for investments it can all come down to prioritizing your spending. Read on to learn more.
Many people say that your first task should be paying off all your debts. Debt is a burden that cripples many people but there are different types of debts. If you have a student loan or mortgage that has a very low-interest rate over a long period of time then you shouldn’t feel in such a hurry to pay it off. In investment 8% is the median return over time. So if you have the choice between putting your $10 into an investment and it becoming $10.8 in one year or paying off a $10 debt that is only increasing by 2% and would, therefore, be $10.2 in one year time, the smart move actually is to welcome the debt and invest the money. Your $10 will earn an extra 60 cents. While this sounds low, when you start to play with the numbers at a higher level the savings can be huge.
Take the free money
In many workplaces, there are schemes where an employer will match an amount that you save in a retirement scheme. Ensure you take this option at the maximum level. If a company is basically doubling your investment that is the easiest way to increase your savings over time. While it may not seem like an investment because you’re not risking that much, that is because it is an incredibly beneficial investment for you. To my last point, I have met some people who say they would love to take part in this scheme but they have to focus on their student debt. That is just wrong, this is a much better place for your money than paying off slow-moving debts.
The final point on investing is to do it wisely. Don’t pay any excess fees as your initial returns will be very low. If you start by investing $100 and have to pay a broker $5, you are losing 75% of your likely return that year already. Try and invest at low costs and put the majority of your investment on conservative stocks. While bitcoin and others sound great, they create more losers than winners. Split your investment between high risk and steady yield and always focus more on the clear win.