Small wins go a long way. Big or small advancements, do not matter. Either way, you are advancing yourself. You can take small wins by investing that money right away. Here is how to invest small amounts of money that will help you build wealth and increase your income.
How to Invest Small Amounts of Money [Step-by-Step Guide]
In this ever-challenging economy, more and more people are finding it necessary to have a new gig that adds some cash to their wallets. Gig economy jobs and side hustles are one of the many avenues that people are using to earn online.
With this platform, you can earn some extra cash online by performing various tasks on your computer, smartphone, or tablet.
Although numerous illegitimate online sites may purport to pay for various activities, there are plenty of legitimate ones like these top survey sites that will pay you cash to answer questions. By just signing up, you earn a $5 entry bonus (depending on the site), cash that you will withdraw after you reach the required threshold.
Getting to add an extra $40 or more to your income is a good thing but, how do you use this additional cash?
A number of articles have been written to enlighten people on the various ways they can use to earn that extra money. In this article, however, we will look at how you can save the money you earn from these small wins instead of just using it.
Sometimes, making money is not an issue; knowing how to save or invest the money you receive is the challenge.
How to Invest a Small Amount of Money (Exact Steps to Take)
There are various ways you can spend or save the money you earn from cashback apps or survey sites, and although the funds may not be much, it can make a big difference.
Here are some steps and methods that can help ensure that you don’t spend all the money you earn from your survey sites, signup bonuses or cashback apps.
Make a Budget
The first and most crucial step is to make a budget based on the income you will get and the expenses you anticipate. Creating a budget helps you to put a limit on the much you want to spend and allows you to avoid overspending.
For example, if you get $40 from the site, it is wise to decide how much of this money you will spend and how much you will save. Since this is cash that was not in your monthly income, you might end up spending all of it without doing anything tangible or beneficial.
A budget will guide you and make sure you don’t spend it all.
Use a free tool like Personal Capital to track all your free bonuses and side hustle income. Then, use it to track your investments and new contributions as you make extra income.
You’ll need it for when you want to repeatedly invest small sums of money.
See Related: Personal Financial Plan Example
Plan to Save and Choose Something to Save For
After you have made your budget, the next step will be to plan what to save and for what purpose. In most cases, it is wise to save 10-15% of the income, but in the case of side hustle income, you can increase the percentage as its extra cash.
If you are having a hard time saving, you should try considering the saving amount as if it was another regular expense like buying groceries. This will help to enhance your saving habits.
Deciding on what you are saving for may also help you get serious on it. You should have a clear goal of what you want, after how long and how much it will cost. This way, you will be able to stick to your plan in anticipation of achieving your goal.
There are numerous things you can save for, including vacation, retirement, wedding, and many others.
Tools like Trim can help you greatly in removing extra expenses and track your progress towards achieving your goals using your mobile phone.
See Related: Why is it So Hard to Save Money?
Opening a saving account can be a significant step towards saving the money earned from side hustles. The account will help you accumulate some good cash which you can even use later to invest in larger investment projects.
Bank saving accounts will surely not earn you huge returns as they give a low rate of return, but it’s a good start to ensure you don’t misuse your money.
The significant advantage of savings accounts is that you can invest with very little money and still earn some interest, which also comes with zero risks of loss.
Although they are not high making investment plans, saving accounts can lead you there.
Use my favorite savings account like CIT Bank. They offer some of the most competitive savings rates out there. It’s what I use to park my cash.
Use the Income to Pay for Debt
Another great way to save the money you earn from gig economy jobs is using it to pay down your debt faster. If for example, you have a monthly loan of like $300, using an extra $30 per month from your side hustle income will go a long way in reducing your loan. $30 every month will amount to $360 in a year.
Reducing your loan by $360 per year will significantly reduce the repayment period, which means that you will finish earlier. This is an excellent way of making sure that your income goes to a right course instead of just spending it. Fully repaying your loan will guarantee you a chance of taking another loan which you even use to invest and improve your finances.
Since a signup bonus is a source of extra income that was not planned for in your monthly income plans, using the income to repay a loan is a prudent idea. Many may think that the money earned from this site is insignificant, but making it regularly for an extended period can have a significant difference in your finances.
If for instance, you have a credit card balance of $800 with an annual interest rate of 15.99%, paying off that card will help you lock a rate of return on your money of almost 16% virtually forever.
Reducing the $800 by $360 in a year from your gig economy or signup income will ensure you clear your card balance on time.
Not all investments require vast sums of money to start. Some investments will need just some few bucks, and you are good to start. Seeing that side hustles may not always be a source of vast amounts of money, you can look out for investment plans that suit the much you can get.
There are multiple online investment options offered by various platforms that require small amounts. These platforms may include:
Similar to Betterment, M1 Finance allows an investor to invest in multiple verticals, although also, it enables the investor to trade for free both in stocks and EFTs. The platform has introduced a new and high perspective on investing.
M1 Finance brokerage has the most significant number of investments with zero fees available in any brokerage.
The platform allows the investor to buy fractional shares and therefore reducing the required amount for investment. For example, if a Microsoft stock costs $400 a share, you as the investor can buy a $50 stock to own 12.5% of the share.
The best thing with M1 Finance is that you will receive free financial analysis before you make any investment with them.
With M1 Finance, you can easily invest the little you get from side hustles and get higher future returns.
Robinhood lets you venture into micro-investing hassle-free without making major financial changes. It offers commission-free stock trades and doesn’t have a fee to use either. It’s one of the many apps that will give you a free share of stock.
One of the most popular and trustworthy investment platforms out there, Robinhood is expected to become a $10 billion company in value in the coming months.
This app, though exclusive, is best for smartphone users, millennials, new investors, small trade, and any rookie who is looking to start investing in a more stable future.
You can use Robinhood to invest in stocks, options and cryptocurrency for no fees at all. No strings attached. This makes it a great option as you can buy one stock at a time with no fees at all.
Acorns is an easy to use app that will automatically round-up your purchases and invest money into various index funds. The app is pretty simple and is best suited for beginner investors.
Acorns invests your money based on the portfolio you choose when you set up the app, whether you are looking to invest “conservatively” or “aggressively”.
If you spent $10.50 on a t-shirt, the app will take the remaining $0.50 and save it.
The investment limit is $5, and once you hit the mark, Acorns will start its investment process. You can either let the app invest for you automatically or set up any preferences you may have.
If your balance is under $5,000, Acorns charges you $1 per month, and if your balance is more, you pay 0.25% of your yearly balance.
There is no fee if your balance is zero. You can also choose from different subscription offers.
Fundrise is an online investment platform that has transformed real estate investing and made it easy.
Think of it as a real estate crowdfunding site with options for non-accredited investors. Traditionally, real estate investing was left to the big players in the economy with the average citizen standing no chance of investing.
Fundrise investing platform has completely changed this norm, allowing the average earner to get a share in the real estate investing cake.
With Fundrise, you can invest in real estate with as little as $500 and get a good investment portfolio. Through the platform, investors can invest in real estate even without becoming a landlord or flipping houses. The platform relies on crowdfunding approach to get enough capital to invest in real estate developments.
Whenever the real estate developments earn money, you also make money. Fundrise, therefore, is an incredible platform you can use to invest the little income you get from side hustles. This will help you to make a significant change in your financial future.
|Min To Invest||Accredited Only?||Fees||Next Steps|
|$500||No||1%/year||Sign Up||Read Full Review|
Don’t misuse that money just because you consider it little, invest it, and earn big in the future.
This is an online peer-to-peer lending platform that connects borrowers and lenders. The lenders/investors offer cash for the borrowers to get loans. You, as the investor, will receive returns for your investment. The reward rates are, and you can earn a significant amount of money through this method.
With as little as $25, you can invest in a single loan, also known as a note. This means that since the initial investment minimum is $1,000, you can allocate your portfolio between 40 different notes.
The major setback of Lending Club is that some states will require you to have a particular minimum net worth for you to invest.
See Related: Is Dividend Growth Investing Right For You?
Betterment is among the best small investors with whom you can invest the few bucks from your side income. The platform will offer professional management on your portfolio and at significantly low fees.
Betterment platform does not require any minimum account deposit for the initial deposits.
You can start investing with as low as $100 with an annual maintenance fee of 0.35% of your account balance. This management fee reduces as your account balance increases.
With Betterment platform, you can comfortably invest the little money you get from side hustles to earn more money in the future.
Invest with Prosper
Prosper is almost similar to Lending Club, and they operate in much the same way. With as little as $25, you can invest with Prosper and spread several hundred dollars across multiple loans.
You don’t need to have thousands of dollars to start investing with Prosper, and therefore, it makes good sense to use side income to do so. Prosper states that their average annual return on the notes is around 16%, which indeed is an excellent rate of return.
Although just like Lending Club, it is affected by the minimum net worth requirement in some states, this type of investing is worth your while.
A significant drawback for Prosper is that you can incur losses if several borrowers on the loans you are holding defaults on their repayments. It is not like in banks where the FDIC insurance protects your investments.
See Related: M1 Finance vs Robinhood – What is Better?
Save for Your Retirement
Small amounts of income can form a great source of money for your retirement plan. Since this is extra money that is not on your paycheck, using it for the long-term retirement plan can be very wise.
You can use this income to contribute to your retirement plan and get good cash when you retire. Don’t let retirement become a dull and pathetic stage of your life; use these little amounts to make it better.
For example, if you inject $360 every year for 30 years, you will have put aside $10,800 at the end of the period. The advantage of retirement plans, especially the traditional IRA is that they are fully tax-deductible. Also, any returns that you will earn on the investment are tax-deferred up until you start withdrawing your funds after retirement.
For the retirement plans, you can choose to go with either a traditional IRA or use Roth IRA.
Although in Roth IRA the contributions are not tax-deductible, they still have the advantage of being tax-deferred until you retire.
See Related: Best Robinhood Alternatives to Invest Your Money
Conclusion on How to Invest Small Amounts of Money
Most people may view side hustles, survey sites or even gig economy jobs as just another additional source of money for spending. But, there are numerous ways you can ensure that the income you get from the platform benefits you even more.
I believe this article offers you great insights on how to best save the money you earn from your various side hustles.
Are you ready to invest your small bonuses, dollars and other easy income? Let me know if you have any questions by contacting me directly.
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