The Scale Is In The Start: Investing Within Your Paycheck
- Financial goals that involve investing are the key to staying focused and committed.
- Your investing goals can be a game-changer for your finances.
- Often people feel that they don’t make enough money to invest, but that isn’t always true.
The Tides Of Investing Are Changing
Investing in the stock market has been a popular buzz topic over the last decade and even more during the COVID-19 pandemic. People often ask how they can get started investing in the stock market with their current budget. However, investing goals can fit almost any budget, and you will also be able to see your financial portfolio grow and learn more about the stock market.
Often people feel that they do not make enough money to invest, but that isn’t always true. For example, a survey conducted by CNBC highlighted that 26% of Americans began investing in 2020. Yes, in the middle of a pandemic!
Investing in the stock market can be another income stream while also building generational wealth. For many years People of Color have felt that they couldn’t invest due to a lack of funds, which has caused us to miss time in the markets. But, now we have options to enter the stock market within our budget and leverage our income more than ever before.
Know To Grow
The first step to invest within your income is understanding your financial objectives. The first question to ask yourself is what goals do you have financially? You should have short (1-3 years), middle (4-7 years), and long-term goals (8+ years).
Write out your financial objectives and goals to have a clear picture of what you should start working toward. After writing them out, layer them into actionable and measurable steps.
Now that you have set a few goals, it’s important to audit your wallet. But, first, you must know what’s going in your wallet (paycheck) and what’s going out of your wallet (expenses, bills). This is where a budget comes into play to help you keep track of your money and your investing goals.
When you build your budget, see how much of your income you can leverage to invest. After you pay your bills and add money to your emergency fund, what do you have leftover to start investing?
It's important to invest to build toward your financial goals. You can start as small as investing $5, $10, or $20 bi-weekly (or even monthly). One of my favorite sayings is, "The scale is in the start."
Ways To Invest
Now that you know how much you can invest, it’s time to make a strategy with the methods you can invest. Over the last five years, investors have had more options to jump into the stock market than generations before us!
One of the best ways to invest in the stock market is through fractional shares. This is where you buy a fraction of a stock share.
For example, I used this method to get my first full share of Amazon stock. The process of this allows you to buy stocks based on your budget. Here’s how to get started:
- Research a stock that you have on your watchlist. This will give you an idea of how much a certain company’s stock share will cost.
- Know that you can contribute $5 (or more) weekly or bi-weekly towards it. The consistency of investing depends on your budget.
- At the end of the second month of investing, check the stock’s performance to see if you want to continue to invest until you gain that full share.
I like investing in fractional shares because it allows you to learn as you leverage within your budget. The budget that you set to invest gives you a baseline to commit to the habit of investing in your financial future.
Another investing method is exchange-traded funds (ETFs) which allows you to get roughly 50-100+ stocks for one price while decreasing the risk of focusing on investing in individual stocks. As a result, you can invest in an ETF for under $50 or a fraction of the entire cost.
Recommended Read: Investing Risks Every Great Investor Should Know
As an investor, it’s a must to research the investing method you want to try. However, remember that investing isn’t a get-rich-quick event. As Nipsey Hussle would always say, “It’s a Marathon.”
Platform And Positioning
Now that you know how to invest within your paycheck, let’s talk through platforms! Several platforms allow you to invest through fractional shares, brokerages like Charles Schwab, Fidelity, and Investment Apps like Robinhood or Public Invest. In addition, some platforms allow you to invest your spare change, such as Acorns and Stash.
But, be mindful of the fees that may come with purchasing shares before opening an account.I would also recommend setting up a separate account to transfer your allotted amount. Also, see if you can set up an auto-transfer schedule into your brokerage account.
As you grow as an investor, you can look for extra cash to invest as you go along. So whether you gain extra cash from a holiday bonus or decide to decrease your spending, look to see if you can add that to your investing fund. This will allow you to scale your position within your stock or on your watchlist.
Another way to get a financial boost is by turning on that DRIP feature within your brokerage account. Dividend Reinvestment Plan (DRIP) is when you get a dividend and use that money to reinvest into additional shares (even fractional shares). So, again, staying consistent within investing is how you will see your wealth grow.
You can pay down debt, save and invest, but the core is to know your paycheck and the capacity in which you can do it. Doing what you can with what you have will always outweigh doing nothing. So even with what's going on with the economy, what can be certain is your ability to become an investor.
Mellody Hobson, one of my favorite women in finance leadership, says, "The biggest risk of all is not taking one." Bet on yourself and your paycheck!