How to Invest When You’re Broke

Think you can’t invest just because you’re not already rich or successful? Think again!

It takes money to make money, right? That’s usually true (unless you live a life of crime). But you’re going to want to retire one day, and you know you should be investing (…don’t you?). Yes, “investing” — which takes a lot of money, or at least, people seem to think it does. Like, I-also-own-a-yacht kind of money, the kind of lifestyle that sees you sharing stock tips over a round of golf with your financial adviser, whose office has hundreds of leather-bound books, leather-bound Georgian furniture and a boardroom table the size of your living room.

What about the rest of us? Can you still invest if you only have a little money? What if you don’t have any? What’s a guy to do? The good news is, there’s good news. Read on!

So, I actually don’t have any money. How am I supposed to invest?

You aren’t alone! Money’s tight these days: Everything’s expensive, rent is insane, housing costs are skyrocketing. You’ve probably got debts like college, a car, mouths to feed or whatever else. On top of that, most everyone seems to be living a bit beyond their means.

But the truth is, if you want to invest (and you should, because your old-man-self will surely travel back in time and beat your ass with his cane if you don’t), where there’s a will, there’s a way. Unfortunately, that way is cutting back. Whether it’s your beer money, your Netflix subscription or just not buying that video game, if you can scrounge as little as $50, you’re in business.

Did you say $50?

Yes — that’s the minimum balance requirement on some mutual funds. If you can find that every month, that’s $600 a year that you were blowing on other shit besides your retirement. If you can’t even get together an initial $50, just start with a piggy bank. Seriously, put $1, $5 or $10 in it whenever you can. When that piggy bank or coin jar gets large enough, start an account (more on that in a bit).

And where do I put that money?

Let’s first talk about where not put it. Stay away from penny stocks — that’s fertile scam territory. And as every financial person ever in history will tell you, don’t plunk everything you have on one or two stocks, no matter what. Definitely consider your employer’s sponsored retirement account if you have one, like a 401(k) with matching contributions.

At the more advanced level, choose your own mutual fund, or a stock index fund: That’s a specific mutual fund that invests in, say, the S&P 500, so that when the stock market goes up (and historically, in the long run, it always does) so does your small fortune. These are more broadly known as exchange-traded funds (ETFs), and they can even follow particular industries or sectors if you like. The best part is that they take all the guesswork out of investing. Plus, as you know, diversifying minimizes risk, which is exactly what you want (if you don’t, just go to Vegas or something). You can even do these sorts of investments via an IRA (Individual Retirement Account), which gives you significant tax benefits, provided you won’t be withdrawing from this account until you’re allowed to when you reach retirement age.

Another idea: DRIPS, aka dividend reinvestment plans. These allow you to invest small amounts of money in dividend-paying stocks and automatically reinvest the dividend. You may have heard of dividend-paying stocks like Home Depot or Coca-Cola. Your dividends might only amount to a few cents for a while, but keep in mind that it gets reinvested, along with whatever you’re subsequently putting into it, and so, slowly your payouts will get larger. When you get a significant chunk of money from them, you can start to invest that elsewhere if you want.

How can I be sure to put money in? I’m not good at that.

Many investment accounts have automatic investment options that will draw from your bank account. It’s a simple technique to get you the fuck out of your own way and painlessly force yourself to invest. There’s also an app called Acorns. It rounds up the cents on your debit card purchases to the nearest dollar, and puts that difference into an investment account. FYI, though, it comes with a service fee of $1 a month, which can be a not-insignificant percentage of your investment, actually, when you’re dealing with cents.

Where do I go for some of these options?

Some low-cost places include USAA, which offers mutual funds for as little as $50 minimum. There’s also Motif, with a $300 minimum, and so many others. TD Ameritrade has no minimum requirement and lots of commission-free ETFs. Vanguard is more or less the industry leader in index funds — though they have a minimum balance of $1,000, if you can afford it.

One popular robo-advisor platform is Betterment. You start off by answering a questionnaire based on your goals and level of risk, then select an automatic deposit amount each month, and there’s no minimum balance. The platform does the rest, investing it in various ETFs and index funds depending on your settings (which you can subsequently tweak).

It actually sounds… kinda easy?

It is! Despite how batshit crazy this world often seems, investing has never been simpler or more accessible. The other upside? Staying out of those musty, pretentious, financial adviser offices. You can do most of this in the warm, comforting glow of your phone or laptop.