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How Much Money Do I Need to Start Investing?

There’s an old saying, “it takes money to make money.” But no matter how much you have in your bank account, there’s a way to start investing today.

One of the most effective strategies to expand your money over time is to invest. However, a widespread misconception that keeps many from getting started is that it takes a lot of money to get started. The truth is that you may not require as much as you believe.

Yes, making sure you're managing whatever debt you may have and developing your savings is an excellent idea. However, no matter how much money you have in your bank account, there is a way for you to get started.

Here's how much it costs to begin investing and what you can do to get started.

How much do you need to invest?

Because investing isn't a one-size-fits-all game, the amount you'll need to start varies depending on who you choose to invest with. No matter what your financial starting place is, technology has made it easier than ever.

Apps like Stash and Acorns, for example, allow you to start investing for the price of a latte and allow you to start with as little as $1 each month. If you're new to investing, these apps provide convenience but not much guidance. You can also choose a robo-advisor that builds your portfolio for you using more complicated algorithms (along with some human aid). The minimum deposit for them usually ranges from $500 to $5,000.

Working with a financial professional to design your portfolio is another alternative. The minimum deposit in this scenario will differ depending on which bank institution you work with.

However, in each of these cases, the minimum deposit amount is not the only cost to consider. Consider expenditures such as management and/or sales commission fees, as well as other costs associated with the service you choose. Make sure you've done your homework and are aware of all the charges involved.

When to start investing

If an employer-sponsored retirement account is available, take use of it. Some employers will match your contributions up to a specific level. Furthermore, pre-tax money are directly deducted from your salary for contributions.

If you don't have enough money to cover the minimum deposit or other expenses involved with investing, you'll need a strategy to get there. It all begins with having your money in order. If you have a lot of debt (or haven't set up an emergency savings plan), you should prioritize those activities before investing. To get everything in order so you can start investing wisely, follow these three steps:

1. Assess your net worth and pay down debt

First and foremost, determine your net worth in order to establish a foundation for your entire financial wellness. This is the difference between what you own (assets) and what you owe (debt) (liabilities). If you have high-interest debt, such as credit cards, pay it off first, putting as much money as you can each month toward it.

2. Build up your savings

You'll need some extra cash in case of a major life change, a health issue, or another unforeseen event. Having at least six months' worth of household income saved aside for emergencies, such as unexpected medical expenditures or losing your job, is a good rule of thumb.

If you're short on cash, start by putting aside a tiny amount every month. Remember that putting aside a small amount of money each paycheck is preferable to doing nothing.

3. Plan for different life stages

Your investment approach doesn't have to stay the same; it may and should change depending on where you are in life. Examine the following three factors to obtain a sense of the type of investor you are:

Goals. What are your financial short- and long-term objectives? At different times in your life, you may have different priorities, and unforeseen circumstances may need you to rethink your plan. It'll be crucial to remain adaptable, but keep your objectives in mind at all times.

Risk tolerance. How much risk are you willing to take when it comes to investing? To help you decide how much risk is appropriate for you, compare how much money you have to invest against your ambitions.

Timeline. Take into account how close you are to retirement. If you're planning on retiring in a few decades, you might want to be more aggressive. Someone approaching retirement, on the other hand, may wish to be more cautious.

Investing might be frightening, but you can carve out your own route once you examine your present financial status and investigate your possibilities. If you have any questions about how to get started, contact a financial professional.