Monday, March 14, 2011

Invest For Your Future On a Tight Budget

It’s never too early to start investing in your short or long-term future, but like many consumers, you may be working within the constraints of a tight budget. The adage that 'it takes money to make money' is true, but it’s also important to realize that you don’t have to be rich in order to invest for your retirement. There are several ways to affordably invest your money, while making little impact on your budget.

If you work for a company that offers 401k benefits, many companies will match your monthly contribution. This works by taking a predetermined percentage out of your paycheck and that percentage goes towards a fund that is meant for retirement. Most companies will match up to 6 percent of your contribution. Unless your company has a contribution minimum, you can contribute based on your budgetary needs for the month.

An IRA is another long-term investment that doesn’t take a lot of funds to start. IRA stands for Individual Retirement Account, which is an annuity that provides tax advantages for retirement savings. The money from the account is invested in bonds, mutual funds, and other assets. The benefit of an IRA versus a 401(k) is that any money contributed to the account can be removed before retirement age with a 10 percent penalty, while any funds removed from a 401(k) through a loan provision must be repaid within five years with additional interest.

If you’re developing your investment portfolio, then you should consider using a broker to manage your investments. Brokers can cut into your profits with high commission rates, but there is an undeniable advantage of hiring a broker for their knowledge and experience. You might want to start small with investments, like penny stocks. These are stocks that trade for five dollars a share or lower. They’re great practice short-term investments for people who want to get a feel for the stock market or just want to turn a profit quickly. Penny stock picks are usually bought and sold cheaply and quickly. There is a level of risk, so if you are investing in penny stocks make sure that it’s an amount that you don’t mind losing. The cost is so low that many like to use these, potentially, high yield investments.

Often times there are investment opportunities that require an initial minimum investment that can cost you several thousand dollars. Don’t let this stop you, because there are many options that make it affordable for anyone to invest. You don’t have to spend thousands in order to start saving thousands.

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1 gave me some sugar:

Frances said...

Excellent advise. A lot of companies have cut down on their matches for 401ks. Mine has. But it still pays to put in at least enough to get the match. After all, that is FREE money.