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Given what’s happening to this country and the rest of the world, the idea of building wealth seems a little laughable right now. With the economy in recession, surely nobody is making any money, right?
Now suppose that you’re on minimum wage. The idea that you could start investing seems even more ridiculous. You need all the money you earn to live. There’s nothing left over at the end of the month.
But are either of these ideas true? Do you need a certain minimum income to start investing? And is the recession so bad that nobody is making any money?
It will probably shock you to know that if you’d invested before the crisis began in the stock market, you’d actually be about 10 percent better off by now. In other words, the value of your savings would have gone up, and you’d have extra income to do as you please. That’s because investments have continued to make money.
Remember, it’s not the owners of capital who’ve suffered in this recession – it’s people working in marginal jobs. It’s been easy for hospitality businesses to lay people off. But landlords are still collecting rents, and big companies like Amazon are still selling products over the internet and making profits.
Okay – that’s all well and good – but if you’re on minimum wage, how are you supposed to start investing? Is it even possible for people earning less than, say, £15,000 per year?
There are two important points here:
- How much money you save depends on what you spend
- Many financial products allow you to invest small amounts, without incurring large fees
Starting to invest isn’t a logistically difficult challenge. There are so many apps and accounts out there that make it simple. The real challenge is getting your head in the right place and facing the challenges as they present themselves. Saving money is difficult. It means giving up buying things right now.
But savings have a habit of coming back around and benefiting you in ways you never imagined. The first few years will be hard and will likely involve cutting back. But after you get that out of the way, the rewards start to pile up.
So what can minimum-wage workers do to start investing?
Evaluate Your Living Costs
Before you do anything, you should evaluate your living costs and ask yourself whether there are any ways you could lower your outgoings. What you’re spending right now is the biggest impediment to building savings – if that’s what you want. So looking for ways to cut down can help a great deal.
One idea is to switch supermarkets. Some are a lot less expensive than others.
Another idea is to flat-share with friends – easiest for people who don’t have a family.
You can also try things like selling your car or getting rid of expensive subscriptions you don’t need. You can also clear your debt.
You get the drill – you want to find ways to change your lifestyle that mean you have a little extra money left at the end of the month – even if it’s just £100. Savings can add up fast.
Look For Opportunities At Work
While minimum-wage jobs help you get into the world of work, they’re rarely a long-term solution. Almost everyone is able to provide more value than that. In the back of your mind, therefore, you want to be thinking about getting a promotion or how to move up the career ladder.
For most minimum wage workers, that will mean going into management. In five years, you want to be the person who manages all of the other workers. And so you should take steps to do that right now.
One option is to make your intent clear to your employer. Once you state your desire to become managerial, act the part. Be more professional. Make it clear that you can be responsible.
Find Micro Investments
People tend to believe that investing is just for the wealthy and that everyone else works. But that’s not true at all. As organizations like Plenti point out, you don’t need to give brokers massive cash tranches. You can invest much smaller amounts.
The trick here is to find a company that offers percentage-based commissions. Let’s say that at the end of the month you have £100 to invest. It doesn’t make sense going through a broker that charges £12 per transaction. That’s just not worth it.
But what about if they only charge a percentage – say 1.5 percent. That way, you’re only paying £1.50 every time you invest £100 – which is pretty good.
Micro investments are all over the place. You could buy a single stock of a company or put your money into an account that a lender then lends to other people, earning you interest.
Also, be sure to look for investments that pool your resources into a bigger pot. These generally allow you to make use of more lucrative financial instruments.
Use An App
In the old days, you had to go through an investment broker to buy assets – and that priced a lot of people out of the market. But today, things are much more democratic. You can now do a lot of investing via user-friendly apps from the app store. And what’s more – they tend to offer much lower commissions too.
When you’re on an app, you’ll first need to transfer funds from your regular account to your brokerage account. You can usually do this by charging a card payment to the app account. Then you’re free to invest where you please.
Where possible, choose diversified investments. These are usually better because they tend to rise slowly over time and usually wind up positive over the course of decades.
You can also use ETFs which diversify investments for you automatically. They charge a small fee, but you’re usually free to buy as many or as few of these instruments as you like. Prices vary, but most ETF managers try to keep the purchase price of a single unit under £50 by splitting shares, making them affordable to buy one at a time.