How can you achieve your investment goals on a tight budget

How can you achieve your investment goals with your tight budget?

When you are operating on a tight budget, it might be difficult to consider investing. However, without investments you will be living from hand to mouth, using all the income to cover the expenses and not having anything to secure for the future or invest for future returns. Hence, to secure your future, you need to start setting some amount of money aside and investing it regularly to take advantage of the compound interest offered by different investment options. Investing does not necessarily require a significant initial amount so if you are operating on a shoestring budget, you can start with small amounts and allow them to grow over time. Here are some insights that will enable you to achieve your investment goals and secure your future despite how constrained your budget might be.

Develop or create a budget

Investing becomes much easier if one has extra cash that is not tied to any expenses. However, it becomes a hustle if your expenses take all or almost all of your income, or if you feel that you are far away from retiring. The first step to succeeding in your investment goals is creating a budget. This involves determining your monthly income and expenditure, then you can plan on the remaining amount and decide on what amount goes to savings and investment. This will probably be a small amount but it will enable you to develop a saving and investment culture. Starting is the hardest part. So however small the amount is, just start then you’ll be motivated by the growth in the subsequent months.

Choose an investment or investments that you understand

Once you have set aside the amount you intend to invest, you should choose the most suitable investment to direct your money. At this point, you should choose an investment that you understand to enhance the safety of your investment and lower risk. Different financial institutions and financial advisors can enhance your knowledge of the different investment options and from there you can go with the one that you understand more.

Go for an investment that matches your financial goals

This step starts with defining and classifying your financial goals into short-term, medium-term, and long-term goals. Plan on saving for short and medium-term goals and choose the right investment for the long-term goals. You will also be expected to consider your liquidity needs and evaluate how tolerant you are to risk.

Diversify your investment portfolio

You diversify your investments by spreading them across different assets to lower risk. This means that you put your money in different investments instead of a single investment to ensure that if one investment performs poorly you can still earn returns from other investments. Even on a tight budget you should spread the amount on different asset classes and keep adding small amounts over time to develop a balanced portfolio.

Increase your investment as your income grows

As your income grows, focus on increasing your investment amount and spreading it across the different assets within your portfolio. The income growth can be attributed to a promotion at work, bonuses and other additional income from the employer, increased profits from business, or side income-generating activities. You can also choose to reinvest the earned dividends to enhance compound growth.

Hence, even on a shoestring budget, you can still achieve your investment goals as long as you decide to start. As hard as it might seem, spare some amount on your budget and just start investing. It doesn’t matter how small you might start but just start.

Next article