Five Ways to Begin Frugal Investing
If you are going to invest money when you have very little money to spend then you have to think about your investing budget the same way you think about your household budget. In other words, you really do have to live by the words “buy low, sell high”. Here are five ways you can do that without needing a huge bankroll. This is strictly for people who almost no money whatsoever to invest.
1. Set an Affordable Weekly Investment Budget
This is the crucial first step. Whether it is $10, $25, or $100 you have to set aside a small amount of money every week for your investment strategy. I know most people don’t think of $100 a week as a small amount of money but this method really works for everyone.
Let’s say you can only set back $15 a week, or $60 a month. That means you are committing to not spending that money on bills, clothing, food, entertainment, or travel. It’s not for housing. It’s not emergency money. This $60 a month is your investing budget.
I think $60 a month is pretty reasonable for anyone earning $25,000 a year or more but it doesn’t matter if you set back $40 or $400. You just have to be consistent.
2. Buy US Savings Bonds
Saving bonds don’t make a lot of money. In fact you may even lose money on them for a while. But one day inflation is going to return and those savings bonds will become great investment opportunities because the US Federal Reserve will do everything it can to restore inflation to a “manageable rate”.
Savings bonds are easy to buy because you can get them online directly from the government.
3. Buy Stocks Directly from Companies
You do not have to go through brokers and pay broker fees in order to buy stocks. Only a small percentage of companies offer direct purchase plans to the public but those that do usually only require a small purchase amount and they set up Dividend Reinvestment Plans for you. You can start owning shares in companies with as little as $25.
4. Open an Online Brokerage Account
You can make small deposits into your brokerage account and wait until the stock market turns downward. You can either choose index funds on the basis of their 52-week cycles or you can wait for the next recession. The stock market usually plummets right before a recession, so once it has bottomed out and is starting to build up value again you can buy stocks or mutual funds on the cheap.
Don’t worry about how much value your deposit loses against inflation. You’ll make that money back when you buy into a cheap index fund, even if you have to wait 1-2 years.
Just because you have a brokerage account doesn’t mean you have to spend your money on expensive stocks. Just keep making deposits and leave it alone.
5. Flip Expensive Collectible Items
You don’t have to invest in stocks, money, or precious metals. You can invest in almost anything. You may live close to an outlet mall or a large buying club where exclusive merchandise goes on sale. People who cannot buy these items directly will buy them from sellers on Blujay, eBay, eCrater, Etsy, and other online market places. Get a feel for how much you can charge plus shipping on big ticket items (watch them being sold for a while) and then start looking for ways to get these items at 20-30% less.
End-of-season sales are great times to scoop up high-end merchandise from the outlet malls. And the shopping clubs (BJs, Costco, Sam’s) have regular sales where they offer their own deals on high-value merchandise like electronics, appliances, kitchen devices, and more.
You can take the profits you make from flipping items and invest them in more traditional stock index funds or buy even more merchandise to sell, but be careful to watch your inventory. You don’t want to be caught with a lot of expensive merchandise you cannot sell.
Also, take advantage of flat-rate postage as much as possible. If you can fit something into a flat-rate box without risking damage to it your shipping costs will stay pretty low.
