How to Invest in Stocks: For Beginners with Little Money
Updated: Jun 3, 2023
*Not financial advice - your money, your choice*
Living in a high-cost-of-living city like Seattle can be very hard especially if you’re making minimum wage or a slightly higher than the minimum, but still low, income.
I used to work at a bike shop in Bellevue and since they don’t have the same minimum wage laws that Seattle had at the time ($15/hr) I was making about $14.25/hr.
When I decided to quit working at that bike shop and move to a bike shop closer to school, I was making about $16.50/hr. Still not a lot but a little better. Since wages in Seattle have come up a bit in the past 2 years we’ll use $16.50/hr as the income for my example of how to save & invest with a low income.
First, let's standardize that hourly wage into the language of finance:
Yearly Gross Income: $16.50 * 40 hours in a week * 50 work weeks in a year = $31,680
Tax: 16% = 5,068.80
Net Income: $26,661.20
In Seattle, rent can set you back about $1,200/mo (what I was paying at the time) and food can be as low as $500/mo if you cook most of your meals… $600/mo if you eat at Chipotle 2x a day.
Rent: $1,200 * 12 months = $14,400
Food: $500 * 12 months = $6,000
Together: $20,400
I’m a big fan of having a budget for spending on whatever you want with no regrets so let us set that at 10% of salary so…
Your Money, Your Choice: $3,160
Quick maths:
$26,661.20 - $20,400 - $3,160 = $3,101.20 left to invest/save
Donut Chart of Annual Lowish-Wage Budget
Saving/investing all of that leftover money (not financial advice) with half going into a Roth IRA and the other half going into a High Yield Savings Account from Ally Bank, SoFi, or Marcus by Goldman Sachs would be what I’d try and do.
This comes out to about $130 on each paycheck but we’ll round it down to $100 per paycheck.
My estimations assume a few things here, one is that you have employer-provided health insurance. If you don’t, Medicare/Medicaid/Healthcare.gov is your next best bet.
I’m also leaving out transport costs as I lived within biking distance of work.
Now you may be saying “Why would I only save and invest $200 or as low as $100 per month? Is that even worth it?" My answer will always be YES.
The reasoning for this is that more important than the amount you invest is creating the habit.
Much like building a habit of going to the gym, what you do is less important than showing up.
I tell people who want to start working out or going to the gym to go but to only run for 30 seconds.
The habit is more important than what you do in the short term & the thinking is usually that if you’re there already, may as well do some other stuff too.
As you get more comfortable going to the gym (investing) and you get stronger (your income grows) the habit will already be there and you’ll be able to maximize the time you spend in the gym (investing).
Even if you invest $100/mo over the next 30 years, that money will likely be worth over $100k with $71k of that $100k being from interest alone (not financial advice, your results may vary):
Graph from Calculator.net
Of course, if you follow and subscribe to my Insta and YouTube, you’ll learn how to automate your investing! Imaging automating your gains from going to the gym consistently… I wish I could passively turn into TURBOGigaChad:
Picture from KnowYourMeme.com
Not actually but passive fitness gains would be sick.
As usual, if you find this useful and think a friend may find it helpful please share and do all the liking commenting, and subscribing your fingers can handle!
Happy Sunday gang!
Click here to go back to the home page and check out different posts.
Comments