I am wondering what the best approach to begin investing for retirement is with an income under 25k a year. I'm expecting to gain employment within the next year with a job that has a much higher salary but of course it is better to invest today compared to tomorrow. I am pretty good with balancing my budget so my bills are paid every month no worries, and I'm ready to start having my money work for me, best way to approach this?
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Possible duplicate of Best way to start investing, for a young person just starting their career?– yoozer8Nov 30, 2017 at 19:08
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I'd say it is a bit different as this person has not yet started a career. At this point they are less than half the national average for income, and probably close to poverty level.– Pete B.Nov 30, 2017 at 19:10
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Poverty level is $12k for a single person in the US.– BrythanNov 30, 2017 at 22:23
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1 Answer
This may sound very "tongue in cheek", but the best thing you can invest in is to raise your income in order to increase your retirement savings.
How much are you able to contribute to retirement now? I think you would be lucky to do $150/month and most months probably less than that. However, if you were making like 60k/year, and allowed a little lifestyle bloat, you could probably easy put away 20k/year. Once you are able to do that the savings you can manage now will be quickly eclipsed.
Often times when people consider "having their money work for them" they often neglect to factor risk. Prior to investing one should have a proper emergency fund in place. That is 6 months or so of living expenses in a nice safe savings account. Those earn about 1.25% these days, which is pretty meager, but it does earn something.
Once the emergency fund is in place, one can invest with impunity. Without it, you will have to liquidate investments if economic calamity strikes you. This could be done at a loss furthering the harm done by the calamity.
Increase your income and create an emergency fund. Do those things first.
