How to Invest if You Have No Money

If you’re broke, barely able to cover your bills, you may laugh in the face of the person who tells you to save for retirement, college, etc. Ha! How can you do that when you have no extra money? However, you know if you don’t, you’ll get into a lot of trouble later when you need a nest egg and don’t have it.

Truth is, everyone can cut something; it’s just a matter of getting disciplined. Think about how you could pocket an extra $50 a month: perhaps cut out the latte each morning, skip the bar on weekends with friends, limit takeout once a week with the family, limit stops at the drive-through at lunch time. If you can save $50 a month, that’s $600 a year with which you can invest. Over 20 years’ time, that’s $22,000 if you save the same $600 each year, according to Forbes. Still think you can’t save??

Invest in your company’s 401(k). This is the easiest way to save money without having to think about it. Your contribution is taken right out of your paycheck so you don’t even miss it, plus you get even more money if your employer offers a match. Head to HR and inquire about setting one up if you haven’t already.

Consider investing directly. In order to cut out the middleman, you can go with direct purchase plans, also known as DPPs. You don’t have to worry about paying brokerage firm fees; you just buy right from the company. You may have a limited selection, though, as not all companies offer this option. Do your research and choose one that looks promising. You’ll have to dig a bit because DPPs aren’t advertised for all to see. You save money by not paying a commission to a broker, plus you can buy just parts of shares rather than the whole thing. If a particular company’s stock is selling at $100 a share and you only have $50, simply buy half a share and build up when you can.

Go with low minimum companies. Some no-load fund companies out there are great and very well known, such as Vanguard, but they require up to a $3,000 minimum investment to start off. If you had that kind of cash to begin with, you wouldn’t be reading this article. Instead, go with a company like Charles Schwab, which only requires $100 minimum, or T. Rowe Price which has no minimum provided you sign up for one of their funds and open the account with them.

Try EFTs. Similar to mutual funds, ETFs are traded like stocks and you can buy small amounts of shares which is kinder on your wallet. Just be careful, as you’ll still have to pay commissions on trades which can be as low as $4 and as high as $11.

Using a broker is something you can do once you start making more money, as those commissions can really eat into your profits. But simply having a broker doesn’t mean you can rest on your laurels. Always be aware of what your broker is doing with your money, and call your securities lawyer if you suspect something fishy.