How to Save Money to Invest When You Feel Like You Don’t Have Any
One of the problem a lot of new investors have is simply coming up with money to start investing. As with most pursuits in life, whether it’s an athletic goal, wanting to start your own business, or doing literally any challenging activity, the key is just getting started. Seriously, starting small TODAY is the best step you can take if you aren’t sure what to do right now. Having no money to invest is an okay excuse for about five minutes. I’m sorry if that sounds harsh, but it’s true.
I could write another essay about the virtues of saving money and why it is important that we do it, and even convince you (not that it’d be hard), but what would you gain from that? There are already thousands of articles out there which talk about that. We know that it is important to be investing or to be saving, but we don’t do anything about it. With so much information out there, it’s incredibly understandable that we get sidetracked. Psychology research has shown that more choice leads to less action. My favorite paragraph from that article is this:
Understanding how we choose could guide employers and policy makers in helping us make better decisions. For example, most of us know that it’s a wise decision to save in a 401(k). But studies have shown that if more fund options are offered, fewer people participate. And the highest participation rates are among those employees who are automatically enrolled in their company’s 401(k)’s unless they actively choose not to.
Setting up an automated savings plan is easy. I use ING Direct as my savings account, as it is free to use and doesn’t carry any minimum balance requirements or anything. I paused in the middle of writing this to test how easy it was to set up and it took me literally 2 minutes 43 seconds to set up a recurring savings plan. This includes me moving slowly and checking my checking account balance to see what would be possible, so it can be done even more quickly if you focus. But it’s ridiculous how easy they make it for you to do.
Seriously, if you already have an account with ING it will take you less than 5 minutes to do even if you check email once or twice while doing it. The steps are as follows: 1) log in to your account through ING Direct; 2) click on “Automatic Savings Plan”; 3) set up the dollar amount and frequency. That’s it. I set up a weekly transfer from my checking account (which is through Schwab) into my savings account of $25. Not enough to break the bank, but it still amounts to $100 each month that you can then transfer to your brokerage account to invest a little bit. Every little bit helps. It is much easier to stomach transferring $25 or $50 each week out of your account instead of $1000 all at once. Having too many decisions or choices cripples our thought process, so we take the path of least resistance which is always to do nothing.
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- Ready to Invest? Some thoughts to keep in mind.