Investing is one of the best ways to build wealth and reach your long-term financial goals. But when you’re just getting started, you may have a limited amount of money left over each month to save and invest. And unfortunately, it’s easy to think that you can’t get started with just a small amount.
The good news is that you can start investing with less money than you think. We spoke with two investing experts to find out just how much money is needed to invest, what to invest in based on your financial goals, and how to get started.
Before we talk about how much money you need to start investing, it’s important to back up a few steps and talk about how you know when you’re ready to invest at all. Financial experts generally agree that there are a few financial foundations that should be in place first.
“A couple of things I look for when reviewing a client’s finances before I even start talking about an investment plan are making sure you’ve paid off all high-cost debt — which we classify as anything with an interest rate above 5%,” said Andrew Westlin, a CFP and Senior Financial Planner for Betterment. High interest credit card debt is the most toxic. Try to get rid of that first before you invest. “Also having an emergency fund are two key things to have in place before we start investing.” An emergency fund can help you tackle unexpected expenses should they arise. Experts agree that it’s best to have a 3-6 month emergency savings in liquid cash.