How to Build Wealth on a Budget

Investing isn’t just for the ultra-rich, and making smart moves with just a little bit of money can pay off big in the long run. Planning your monthly budget should include more than paying bills and setting aside money for entertainment. Making a few smart moves every month can help ensure you have money for rainy days, college, and even retirement. Here are some simple ways you can invest and begin to build wealth on a budget.

building wealth

Invest in a REIT to Build Wealth

REITs, or real estate investment trusts, let you invest in real estate without having to find a lender, take out a mortgage, or take on landlord responsibilities. You can find REITs across a number of industries, including residential, hospitality, retail, and medical, so you can select the investment that appeals to you most. Funds like DiversyFund’s value-add real estate growth plan let you invest a small amount in a portfolio of vetted multifamily assets. You can stick with just the initial investment or contribute to the fund monthly, depending on your budget plans. Some people use REITs as a hedge against inflation, while others use them as an opportunity to get in on the real estate game and build wealth.

Consider Commission-Free ETFs

For individual investors on a budget, taking a chance on the stock market can be expensive. Commissions and other fees add up quickly, and not everyone can afford to cover those costs. ETFs provide a convenient alternative for beginning investors and those on a budget. These funds invest in a collection of different securities, much like a mutual fund, but they are traded throughout the day like stocks. Commission-free ETFs do not charge fees for each of the trades performed throughout the day, saving you money while helping you build wealth. There are many companies offering commission-free options, such as Vanguard and Fidelity, though you’ll want to spend some extra time researching to ensure you understand any additional fees you might be charged. The best part is that many companies require no minimum investment, so you can get started with however much you can spare, even if it’s only $5.

Open a Certificate of Deposit

Your investment strategy should include putting money away for emergencies, but typical savings accounts don’t pay the interest rates they once did. With lowered rates, you can potentially lose money by leaving a sum in your old-fashioned savings account. If you’re looking to keep some extra funds stashed away, consider opening a certificate of deposit, or CD, instead. Online banks sometimes offer higher interest rates when compared to brick-and-mortar institutions, and the APY tends to increase depending on the length of the CD you choose. While you won’t get rich off of CDs, you can use them to grow your savings. You might also want to consider building a CD ladder, which is a series of short-term and long-term CDs. When set up strategically, a CD ladder provides a predictable rate of return on your investment, and your accounts are FDIC-insured for added peace of mind.

Start a Virtual Piggy Bank

Sometimes, the most difficult part of investing on a budget is finding the extra cash to use for your investments. Virtual piggy banks take the idea of saving spare change into the 21st century, giving you a simple way to put a little bit of money away each day, week, or month. Many of these savings options are available in apps, so you can watch your money grow on your smartphone or tablet. Some virtual piggy banks work as higher-yield savings accounts, while others let you invest pocket change on the stock market. Your bank may even have a round-up program, which rounds up each purchase you make to the next whole dollar and puts those extra cents in a separate savings account for you. While virtual piggy banks won’t net you huge rates of returns, you can use the money you save each month to open a CD, invest in a REIT, or open a commission-free brokerage account. 

As you plan your investment strategy, be sure you only invest what you can afford to part with. Many types of investment accounts include fees and penalties for early withdrawals, and there can also be some tax implications as well. Discuss any investment strategy with a financial expert to ensure your plan aligns with both your current financial needs and your long-term wealth-building plans. With the right approach and just a little bit of money each month, you can begin your journey on the road to a bright financial future.

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