Although investing is one of the surest ways to build wealth, many people tend to think that you can only invest when you earn a certain amount of money or when you are rich. It is easy to agree with this line of thinking as investing requires capital. But as a low-income earner, there are many opportunities still available for you to invest.
How can a low-income earner invest?
1. Build multiple streams of income
This is one of the first steps to investing. Having multiple streams of income will help you earn more money and consequently help you afford to save and invest. It is not enough to earn just enough to meet your immediate needs, earning more gives you a wider range to invest and build wealth.
2. Clear off debts
If you owe debts, you’ll most likely want to spend your money trying to settle them before thinking of investing. Also, debts usually have interest rates that increase the debt with time. Instead of allowing those increases, clearing off your debts is the way to go.
3. Start saving
For low-income earners, saving is usually the first step before investing. You might not have a lot but it is important to set aside at least 10% of your income to save, preferably before you start spending on any other thing. This way you won’t forget because the expenses were much.
4. Create an emergency fund
It is counterproductive to be investing and using your dividends to sort out emergencies. It is not a sustainable way to build wealth. With an emergency fund, you don’t have to panic when unplanned expenses come up and you also don’t get to spend outside of your budget.
5. Have a budget
A budget helps you spend as intended according to your income capacity. You know what you’ve budgeted for and it helps you streamline your expenses. With a budget, you can manage your finance and investing is easier when you reach your money goals. Here’s how to create a budget.
6. Spend less than earn
Many people tend to upgrade their lifestyles as their income increases. When you spend less than you earn, there is a better chance to save money and invest consequently. You don’t have to start ordering rides if public transportation still works fine for you. The goal is to reduce your spending and not increase it.
7. Research on low-income investments
Learn more about investments. Learning about the investment opportunities available to you helps to sharpen your interests and makes you know your options. This will help you plan as you gain access to money.
8. Start investing
After cutting costs, saving, and learning about investment opportunities, it is only right that you start investing as soon as possible. This helps you grow your money and puts you on a path to financial freedom.
9. Invest in yourself
Investing in yourself can include pursuing education or training that will help you increase your earning potential, starting a side hustle, or even improving your health and well-being. By investing in yourself, you can set yourself up for long-term success and financial stability.
Investment options for low-income earners
- Exchange-traded Funds (ETFs)
- Dividend Reinvestment Plans (DRIPs)
- Target Date Funds
- Index Funds
- Mutual Funds
Bottom Line
Investing might seem like a luxury but it’s not. Being a low-income earner is more reason for you to invest. With time, your financial capacity grows and you can invest more. It is important to state that you should not spend your returns on investment but instead reinvest them. Building wealth is a long journey and the best time to start is now.
>> Invest in mutual funds from as low as N1000
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