How to Start Investing on a Budget

If you're interested in investing but have little disposable income left over each month after you pay your bills, you might think it could be years before you will be able to explore the investment world. However, you don't need a lot of money to get started. The steps below can help you free up some cash and decide just where you want to put your first investment dollars.

Find Extra Savings

First, you should take a look at your budget and where you can save money. Some of those ways may be relatively painless. Shop around for lower home and car insurance rates, and use a student loan calculator from Earnest.com to find out what your monthly payment will be if you refinance your student loans. This can be significant savings in some cases. You should also look at other areas where you might be spending money you could be saving as well, such as eating out instead of cooking at home.

Put the Cash Out of Reach

You need to put the money for investing out of your reach and there are two ways of doing it. If you hate using cash and prefer to use your debit card for everything, an old-fashioned piggy bank that you put cash into might just do the trick. Even if it is only a few dollars per week to start with, it will add up quickly. The other option is to have money automatically deducted from your account and placed in a savings account that you cannot access with your debit card. One advantage of this approach is that you might be able to earn a small amount of interest on your savings account.

Choose Your First Investments

The next step is to choose your investments based on how much money you have and how risky you want to be. With just a few hundred dollars, you can get started with a roboadvisor. The roboadvisor will ask you questions to determine how risk tolerant you are and what your goals are and will then make investments for you in stocks and bonds. It takes steps to maximize your investment, shifting your portfolio around as needed.

There is a percentage fee for roboadvisors, so as you learn more about stocks and bonds and feel more confident making your own choices, you may eventually want to take over. There are several apps that can help you make your first stock market investments even if you only have $100 to spend. Finally, if you aren't already, be sure to enroll in your employer's retirement plan. This is one of the easiest types of investments you can make, with payments automatically deducted from your paycheck, and you may get matching funds from your employer.

Mutual funds are another way for you to pick up a portfolio of stocks and bonds. You may have looked at mutual funds and become discouraged because you did not have the $500, $1,000 or even more required as a minimum investment. However, you may be able to find a mutual fund that allows you to waive the minimum in exchange for automatic monthly investments.