Invest A Few Dollars Today, Count Your Riches Tomorrow

Whenever I speak to someone who is hesitant about investing, I’m always curious as to the reason why. The answers vary from person to person (e.g. lack of knowledge, fear of losing money, previous bad experiences, etc.), but one of the most common is “I can’t afford to invest.”

Upon hearing this, my typical reply is, “you can’t afford not to invest.” I then go on to stress the importance of starting as soon as possible by explaining the power of compound growth. Following that, I’ll jump into detailed explanations of ways to eliminate debt and methods of budgeting that focus on reducing expenses so that funds can be re-allocated to saving/investing.

Frequently, by the end of this conversation, the person has been convinced of the error of their ways and is excited to begin investing (many still fail to follow through, but at least the seed has been planted). However, many people remain unconvinced no matter what I say to them. Many claim that, at best, they can only afford to set aside a few dollars each week for investing and that it simply wouldn’t be worth the effort. Let’s put that assertion to the test.

Byron was recently introduced to GoGreenDollar.com and, after reading some articles, is feeling super energized about investing. He’s set up his investing account and has his strategy ready but there’s one problem. He doesn’t have a lot of “wiggle room” in his current budget. In fact, Byron thinks he can only afford to deposit about $25 a week into his investment account. Will that be enough?

Assumptions
Rate Of Return = 8.5%
Investment Contributions = $25 / week

Results ($25 Per Week)

Even with a contribution rate of only $25 per week, Byron’s investment portfolio would grow exponentially over time. In fact, if Byron maintained this contribution level long term, he would accumulate hundreds of thousands of dollars!

Let’s change things up a bit. What if, instead of maintaining a $25 contribution rate, Byron decided to take advantage of his periodic raises at work and increase his weekly investment contribution by $1 each year (i.e. year 1 = $25, year 2 = $26, year 3 = $27, year 4 = $28, year 5 = $29, etc.)? Let’s run the numbers.

Alternate Results ($25 Per Week + $1 Each Year)

Amazingly, increasing his weekly contributions by just $1 each year would add 10’s or even 100’s of thousands of dollars to the long-term value of Byron’s investment portfolio! With enough time, Byron could even become a millionaire. All by starting with just $25 per week!

If the question is whether investing a few dollars each week (or month) is worth the effort, I think we have established that the answer is, unequivocally, yes.

Note: I realize that there are many people who are truly struggling financially. People who, in some cases, cannot afford to allocate even a single dollar to anything outside of their most basic necessities. For someone in this situation, the focus should not be on investing. Instead, they should focus on increasing their income. Here are a few options: Request a raise at work, change jobs/companies, create a side hustle (blogging?), get a second job, go back to school to learn a new skill or trade.

Get a head start on your journey toward achieving financial independence by analyzing and tracking your income, expenses, investment performance, and overall net worth with the free online wealth management tool Personal Capital.

We use Personal Capital regularly to analyze our investment fees, track our investments, and project our net worth. We also periodically review our progress toward retirement with their retirement planning calculator.

If you’d rather do things on your own, become a subscriber today and you’ll receive our Free Financial Planning Dashboard. This tool allows you to enter your income and expenses to create a detailed budget. You can use it to track your spending habits over time or just to get an idea of where your money is going each month.  Take a look at the automatically generated charts and you may discover you have a little more cash to invest than you thought.

If you’re interested in detailed instructions on how to budget, save, pay off debt, and invest, check out The 6 Phases of Building Wealth. This book provides step-by-step instructions for working through each “Phase” in the process of achieving Financial Freedom. If you're just starting out, the information in this book will provide you with an invaluable resource. You can pick up the digital version for only $2.99 on Amazon.

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