Easy investing with just a little money

Let’s talk about your investment portfolio. What? You’re not investing!? (It’s okay, no judgment here.)

Most people put off investing because they believe it takes a lot of money or it’s just too complicated. Neither is true. So, here are a few tips for easy investing with only a little money.

andrew-neel-218073Not enough is just enough

You may think your budget is too tight, but it doesn’t take thousands to begin investing. Start with small steps. Save a little at a time. You can start by actually putting $10 a week away in a shoebox, envelope, safe or even a cookie jar. Just don’t dip into it, and in a year you’ll have over $500.

The electronic version of the cookie jar is an online savings account connected to your checking account, such as an MCU Ultra Checking or Checking Plus account. Start small and increase as you’re able. When the stash is big enough, you’ll be able move it into some actual investment vehicles.

Do it on the jobdane-deaner-334260.jpg

As we mentioned in our last “Heads & Tails” post, an employer-sponsored retirement plan, such as a 401(k), is an excellent way to save and invest. The great news is that you can have small amounts withheld, even just 1 percent of your salary, but because of the tax deduction you get for 401(k) contributions, the actual effect on your take-home pay is even less than 1 percent. Increase the amount with pay raises, and if your employer provides a matching contribution, all the better.

Invest your time elsewhere

When you have a little more to invest, you still may not have the time to spend learning about all the options. Stocks, bonds, commodities, currencies, REITs … the list goes on and on. Fortunately, you can do just fine without being an investment expert. Online automated portfolio management services, sometimes called robo-advisors, use computer algorithms to create investment plans based on your answers to a number of questions. They are great for those new to investing without a large amount to open an account and those who don’t want to spend a lot of time picking individual stocks.

jimi-filipovski-189724Betterment and Wealthfront are two sites that offer robo-advising options. Both helped pioneer the industry and are good solutions for many investors. Both also offer low management fees with no, or small, account minimums.

How soon is now?

Your good intentions don’t earn interest or dividends. The most important thing about investing is actually starting. So do it. Start building wealth through good habits – budgeting, saving, etc. Make investing a routine now and you’ll be in a much stronger financial position down the road.

First Paycheck Fundamentals

Getting your first paycheck is a rite of passage. No matter how mature and grown-up you feel, getting paid at your first real job says “I’m an adult now.” If you’re just experiencing this, or soon will be, congratulations and welcome to adulthood. As a new adult, you could probably use some tips for how to get the most out of that first, and future, paycheck.

helloquence-61189Net is not gross

To effectively manage your paycheck, you need to know how much money you really make (tip: it’s not the number you agreed to when you got the job offer). Your net, or take-home, pay is the amount after taxes and benefits are withheld. By the way, the gut punch of seeing the difference between the two is also a rite of passage. Look closely at your first paystub to see where it all goes, and to know how much you actually have left to spend.

There’s a budget for that

Once you know what you’re working with, it’s important to create a budget and stick to it. The 50/20/30 budget is perfect, especially for young adults just starting out, for helping you keep your spending in alignment with your savings goals. Get into the budgeting habit early and it will be a far simpler task throughout your life.

50+20+30=good planninggreen-chameleon-21532

The 50/20/30 budget states you should set aside 50 percent of your net income for essentials, 20 percent for savings and 30 percent for personal expenses. Essentials are generally the same for everyone and include housing, food, transportation costs, utility bills and minimum payments on loans (such as student or car loans). Savings include savings plans, debt payments and rainy-day funds. The personal category is everything else, from totally discretionary expenses like vacations or concert tickets to cellphone and cable plans, which many consider a necessity but are personal expenses. The key is to pay for essentials first, then put money into savings before you get to personal expenses. We know it’s tough, but you can do it.

Saving is fun!

Okay, so we’re more into saving than the average person. But here’s something to get excited about: Get into the savings habit early and you’ll have far more fun later in life when expenses like college educations for your kids and your own retirement pop up. It’s hard to put money toward savings when so many other enjoyable options keep presenting themselves, but the good news is that your employer can often help you save more easily.

Look carefully at your benefits package when you start. If your company offers a 401(k), open an account. A 401(k) is a retirement savings plan that lets workers save and invest a portion of their salary before taxes are taken out. Some employers even offer 401(k) matching, which is like free money. If you contribute a certain amount, the company may match a percentage of the funds. Start contributing to your 401(k) early and get used to having money deducted.

Having a real adult income is exciting (even if you think it’s not enough). If you establish good habits managing your money early, you’ll ensure you get the most out of every paycheck earned.