How Much Money Should I Invest Every Month?
3-minute readJanuary 26, 2021
Preparing Your Money & Your Mind
This post contains affiliate links, which means we receive a commission if you click a link and purchase something that we have recommended. Please check out our disclosure policy for more details.
Investing is an excellent way to grow your money and build wealth, but it can be hard to figure out how much you should devote to this purpose each month.
This post will help you determine how much money you should be investing every month for financial stability.
3 Steps To Take Before Investing Your Money
When determining how much money you should save every month, there are a few key steps you should take before making investments:
Write Down Your Financial goals
Start with your financial goals. Write down what you want to accomplish. Are you saving for a lifelong nest egg, to start a business, trying to reach a million dollars or building an emergency savings? Knowing these numbers will help determine the amount you want to save each month in addition to what you can invest.
Calculate Your Monthly Expenses
The other key point is how much money you have for investing after you pay your bills. The first step on the road to investing is being able to pay all your monthly bills on time and having money left over at the end of each month. Once you reach that point, then you have the funds to create an investing strategy you can stick to.
Learn How To Invest
Lastly, learn how to invest. It doesn’t matter how much you invest, if you aren’t doing it wisely, you may be throwing money to the wind. Educate yourself on the terms, how to read the financial news and learn what your investing personality is – risky versus conservative.
How Much Money Do I Need to Invest?
The good thing about investing today is that you can start with a little or a lot. There used to be a time when the minimums for investing were unreachable for everyday people. Not today! Once you have determined how much disposable income you have, you can then allocate a portion to investing using one of the options below:
Micro-investing allows you to get started with just your spare change. Yes, that’s right, you can begin investing without having the barrier of thinking you don’t have enough money. You connect your bank account, set your investing goals, choose which investments and you set the amounts you want invested. Some will withdraw automatic small amounts if you select that option. Many of the apps also have educational components as well so you can learn while you earn!
You can start investing with an online brokerage account and set up recurring deposits weekly or monthly. Most do not have minimum requirements so you can start with whatever you have.
This is your 401(k), 403(b) or TSP Savings Accounts provided by your employer. You can generally start with any percentage, but many companies have matching requirements. For example, if you contribute 1%, they may not match until you are contributing 5%. Others match any amount you contribute each pay. Either way, do what you can afford and are comfortable with. There is nothing wrong with starting low, just get started!
What If I Have Debt?
Begin to eliminate debt before you invest heavily. Many people want to invest before they are ready. If you have debt and want to pay it off while investing, start with contributing a small percentage in your 401(k) or other company retirement account as mentioned above. Do not try to max it out until you have paid off more of your debt. Investing is part of your overall financial strategy, a piece of the pie.
For Example: Rob has $30,000 in total debt and no 401(k). He has $350 left over monthly after paying bills. He should focus on using that surplus on paying down his debt but could also put 3-5% of his income in his employer’s retirement account. He can set a goal to increase the amount once he has paid off half the debt ($15,000) and max out his contribution when it’s paid off. He can also consider mutual funds or other investing each month now that he has more disposable income.
Many of the barriers to investing have been long gone with the elimination of account minimums and development of easy, online brokerage accounts. You can invest at any income level from the comfort of your home. The amount is really determined by your financial goals. Don’t be intimidated by the terminology, educate yourself little by little and ensure your personal finances are in order so you can build wealth strategically with investing.
Apply For A Mortgage Online
Should You Manage Your Own Portfolio?
It’s never too early to start thinking about investing — even if retirement seems like a faraway concept. Read our guide for tips on portfolio management.
That ‘Trusted’ 4% Rule For Retirement Might Not Be The Best One To Follow
Guidelines such as the 4 percent rule are helpful when determining how much you need to save for retirement. But following them blindly doesn't mean that you'll be guaranteed a financially healthy retirement.