Are you interested in investing, but feel left out, because of your limited income? I will show you how to invest on minimum wage.
I want to start by saying that I have been working on minimum and even below minimum wage for quite some time before. But during all of this time I managed to create a portfolio and grow it steadily over the years, despite having limited income.
Before we start you can check my article on how to save money on minimum wage. It is definitely not easy, but it is possible and there are ways to indeed save and invest, while working on a minimum wage job.
Also, this article is about investing in the stock market. There are other ways, such as investing in real estate, or businesses and whatnot, but my experience is in the stock market, so that is what I can share with you.
There is a little story on how a janitor made $8m investing in the stock market. Of course that doesn’t happen overnight, but it is possible. Let’s get to the tips I can give you to make it possible.
Save
In order to invest you first need to get into the habit of saving money. It doesn’t matter how much—anything is a good start, it’s the habit that is important. Once you start, you will see how it kind of hooks you in. You will see your money slowly growing, and it’s a great feeling.
It’s kind of like training, or eating healthy. Once you start, you don’t want to ruin everything by going back to old habits.
If you think it’s impossible to save on minimum wage—it’s not. I mean, for some people it might be incredibly hard and I get that. I know some people’s personal circumstances might genuinely not allow them to be able to save.
But I was fortunate enough to be able to save some money, while working a below minimum wage job. Again, if you want some tips, you can read my guide here.
In short—try to do the basics right—avoid spending money on stuff you don’t need, try to cook at home, live within your means, stash extra earnings and so on.
Again, the most important part is to get the habit. Once you see having some money leftover at the end of the month, your perspective will change. You will think twice next time before buying that jacket you don’t really need.
Another very good habit to get into is paying yourself first. There is a book explaining it very well called “The Richest Man in Babylon”. It’s one of the books that changed how I operate with my money. The general idea is that you make kind of a budget every month and save some part at the beginning.
Once you have some money saved up we can go to the next part—investing them, so you can start getting the effects of compound interest.
Start Today
I recently made a survey on seasoned investors. I asked them one simple question—“What was the one thing you wish you knew before starting out”. Many of them answered that they wish they started earlier. I have a similar experience—one of my mistakes is that I didn’t start investing soon after I started saving.
I’ve always had the habit of saving money, but I knew very little about investing, and I lost a couple years of compounding because of that. My advice to you is to start whenever you have the chance. You can read my guide on how to start in the stock market. It gives you a step-by-step instructions on how to start, what to learn and all the basics you need to get going—free and easy.
My point is that today you can start with as little as $10. And honestly, it doesn’t really matter with how much money you start. What matters is your strategy and consistency, but more on that later. If you want to understand the idea a bit better, read my article on how much money you need to start investing.
Starting with little money brings me to our next point.
Don’t Pay On Commissions
If you are starting with like 50 quid you cannot afford to pay investment brokers like $5-$10 for every trade you do. In fact, that was a problem for me when I was starting out. 3-4 years ago the cheapest broker in the UK was offering like £5 for a buy and sell order.
That meant that if I invest £100 I had to pay £5 in commissions. In other words I had to be paying 5% of every investment in commissions, and another 5% when I sell, or 10% in total. I had to invest once every couple of months, as I didn’t have enough money to justify those fees.
Luckily fast forward a couple of years and we now have plenty of options to invest with zero to no fees. That means you can put in as little as you like every month. I personally use Freetrade to do my investing and I recommend it to everyone starting out in the UK. If you sign from this link, you and me will both get a free share, not that bad for a start. Keep in mind that they are UK only, at least for now.
For everyone in Europe my recommendation would be DEGIRO or Freetrade if you are in the UK. They offer very low commissions, have a simple interface and a wide variety of tools at your disposal.
For everyone in the US my recommendation is M1 Finance. It’s an incredible platform for beginners and long-term dividend investors. They have great functions, and I am honestly kind of jealous I cannot use them, as they operate in the US only.
Just for the record—both platforms are commission-free, so you don’t really need anything to sign-up and start investing with as much as you want.
Have A Strategy
That brings me to my next point. So far you have saved some money, opened up an account, it’s time to pick a strategy that will stick with you over the years.
Remember that investing is a long-term game. And by that I mean decades, a portfolio can even last for generations if built right.
That’s why it’s important to pick the right strategy for you from the start. It is kind of like a foundation of a house you are building, or the soil for a tree you are planting. You can kind of build a house on crappy foundation, but you will get in trouble down the road.
You can read my guide for different strategies. Pick one depending on your time-horizon, risk tolerance and your overall goals in the stock market. This is where I want you to take some time and really think about those things.
After all investing is something you do for the future and I want you to really think about why exactly. I want you to get a piece of paper and ask yourself a couple of questions. Yes, it sounds weird, but it works incredibly well.
I want you to ask yourself some questions about the future. Get a piece of paper, write the question and then write the answer.
- Where do you want to be in X amount of years? The time horizon is entirely up to you. Just pick a reasonable date—it can be 5 years, 10 years, whatever. But that question is quite vague, so you want to dig a bit deeper.
- Where do you want to live in 10,20 years?
- Why do you want to live there?
- When do you want to retire, why do you want to retire?
- What is your dream job, why is that your dream job?
- What are your dreams?
- Why is that your dream?
I hope you get the gist. After those questions you will know yourself much better and will be able to take a better decision about your future. Sadly I cannot offer you a super personal advice, because every person is different and investing is a very personal thing.
One person’s dream might be living in a small cottage in the mountains. That means he needs like £50,000 or something and he is set.
Another person might want to have a yacht and a villa, which costs like £10 million. Those two people need totally different strategies in the stock market. And there is nothing wrong with any of the options, it’s in fact quite beautiful how different people are.
But that’s why I cannot give a generalised personal advice to all of you, so you will have to work some of the things for yourself. And that is honestly the best approach you can take. Find what your personal goals are and find the best way to approach them.
What I can do for you though is to help you with that process in finding everything you need. I have created multiple guides that will help you pick your strategy, build your own portfolio and so on. The most important thing—avoid getting stock recommendations from anyone, especially random dudes on the internet.
I hope you know understand why—everyone is different. Then you see someone making an article labeled “Top 3 stocks to buy today”. I mean who are those top 3 stocks best for? Are they really what you need? Does the author even know who you are, what your goals are and so on?
That’s why you will not see me recommending random stocks on here and I hope you now understand why. Just because a stock is good for me doesn’t mean it’s good for you. I share my portfolio fequently, but that is for accountability purposes only and not a recommendation to buy or sell a given stock.
Have A Plan
Ok, you have opened an account, you have a strategy, it’s time to develop your plan of action. My personal plan is the following—first thing I did was learn the basic stuff and checked some of the most successful people’s strategies. You can check the section with my favourite books if you are interested in checking some of them out.
Once you know the basics, a good idea would be to create a watchlist. I am not going to get into the details now, you can learn more about it from the article I made on how to create a watchlist.
In short—pick some stocks that you like and place them on that watchlist. Then buy the ones that seem at good price. If you want to understand how to pick those companies, you can read my article on how to research stocks.
And honestly that’s pretty much your foundation built. Once you have your strategy, a watchlist full of solid companies and you know how to pick them at the right price there is not much left to be done. The only thing now is to be patient, which brings me to my next point.
Have Patience
This is the part that is actually going to make the difference between you making money in the stock market or not. Warren Buffett have a quote that explains it very well—“The stock market is a device for transferring money from the impatient to the patient.”
I will try to explain that to you with an example. Here is a graph of the S&P500(The biggest stock index in the world).
When you look at it you can see two things—number one the graph goes up and down along the years. But the second thing is that the graph ultimately goes up over time.
And imagine two people—one of them is patient, the other one is not. The patient one just keeps buying stocks, regardless of what is going on. The impatient buys and sells, influenced on news and recommendations by other people.
What happens is that while the impatient is selling, the patient is buying shares. Those shares ultimately go up over time, resulting in the money transferring from the impatient to the patient. It’s a very simplified example, but I hope you understand the quote and the importance of patience in the stock market.
Don’t Fall Into Traps
Here’s the thing—investing requires a certain long-term mindset. And what do I mean by that? Let’s say you start investing and five years down the road you are up to about $45,000. That’s a great milestone, but also a bit tricky. Just five years ago you had nothing and now you have close to $50,000 in assets.
Without a strong mindset you can end up just spending the money on a car, or a fancy vacation, or whatever. And then after 5 years of hard work you are at ground zero again—no savings, no investments, nothing for the future.
I am not saying you shouldn’t spend some money here and there, of course you should. But try to save for it in a separate pot without touching your investments.
Get Some Extra Income
There are loads of ways to make extra money today. You can offer freelance services, you can work at side gigs and many more. You can also start a Youtube channel or a blog. You can start a blog today with Bluehost for something like $2-$3/month.
Honestly, there are tons of things you can do today to make some extra money. If you have spare time there is really nothing complicated to do some of those. Here is an article with over 100 ideas for side hustles you can do in your spare time.
Summary
Working on minimum wage is tough and I know it very well. But that doesn’t mean we should just give up. Investing is a way for us to get out of that low-level life and try and create a better future for ourselves.
Luckily today investing is much easier than before and services such as M1 Finance and Freetrade make it super-easy to start with as little as 10 quid.
That’s why I encourage you to start your investing journey today, even it’s just by learning at the beginning. I will finish this by a cliche’ quote you have probably heard already—“The best time to plant a tree was 10 years ago, the second best time is today.”
Thank you all for reading, don’t forget to join the monthly newsletter, you will receive a free ebook on how to build a monthly dividend portfolio and also my favourite information every month. Also consider sharing this with people who think they are not able to invest, just because they have lower income.
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