How To Start Investing On A Low Income
If you're on a low income, you may feel that investing is out of reach. After all, investing usually requires a certain amount of capital upfront which can seem difficult to achieve if you're already struggling to make ends meet. But the truth is, investing can be achievable even on a low income. With a bit of planning, research, and understanding, you can start investing for the future. In this blog, we'll be looking at the different options available to you as a low-income investor and how you can get started on your journey to financial freedom. So, if you're ready to take the next step, keep reading to find out how to start investing on a low income.
Consider Investing on a Smaller Scale
If you're on a lower income and you want to start investing, it's important to consider investing on a smaller scale. Even though the potential returns may be lower, you don't need a lot of money to begin investing.
For example, you could start investing in stocks and shares by setting up an account with an online broker. These accounts typically require a minimum deposit to open, and the amount is usually quite low. This means you don't need a large sum of money to get started. You can then purchase individual stocks, ETFs or mutual funds, allowing you to diversify your portfolio.
You could also consider investing in real estate as a way to start investing on a lower income. This doesn't necessarily mean you need to buy an entire property - you could start investing in property through a managed fund or a REIT. This allows you to invest in a portfolio of properties, which is a great way to diversify your investments.
Finally, you could also consider investing in a managed fund. This is a professionally managed portfolio of investments that can be tailored to your specific investment goals. These funds typically require a minimum investment to get started, and the fees may be lower than those associated with individual stocks and ETFs.
It's important to remember that investing on a lower income doesn't mean you have to sacrifice returns. By investing on a smaller scale, you can still access the same types of returns as someone with more capital. The key is to be patient and disciplined, and to make sure you do your research before investing.
Utilize Tax Benefits Strategically
When it comes to investing on a low income, utilizing tax benefits strategically can be a great way to maximise returns.
Firstly, understand the tax benefits that are available to you. In Australia, there are various government incentives for low-income earners. Understanding what these are and how they can be utilised is key for making the most of your investment. For example, the government offers a tax offset of up to $1,080 for those with an income of less than $37,000. In addition to this, there are also tax deductions available for those investing in shares, managed funds, and other investments.
It’s also important to remember that the tax benefits available vary from year to year. It’s important to be aware of the changes that could occur and how they could affect your investing strategy.
Additionally, it’s important to consider the cost of investing. Investment fees and charges can take a significant chunk out of your returns, so it’s important to invest in products with low fees and charges. Investing in index funds or ETFs can be a great way to keep fees to a minimum.
Finally, it’s important to be aware of the tax implications of any profits you make. Investing on a low income may mean you have to pay less tax on any profits you make. However, it’s important to be aware of the tax rate that applies to any profits you make and plan accordingly.
Overall, utilising tax benefits strategically can be a great way to maximise returns when investing on a low income. It’s important to understand the tax benefits available, consider the cost of investing, and be aware of the tax implications of any profits you make.
Automate Your Savings
If you’re looking to start investing but are on a low income, automating your savings can be a great way to get started. Automating your savings allows you to set aside money automatically each month, so you can start building your investments without having to worry about manually transferring money each time.
The first step is to open up a savings account. This can be a high-interest savings account, a term deposit, or an online savings account. Once you’ve set up the account, you’ll need to decide how much you want to save each month. It’s important to only save what you can afford - you don’t want to put yourself in financial hardship.
Once you’ve decided how much you want to save, you can set up a direct debit or automatic transfer from your main bank account into your savings account each month. This ensures you’ll never forget to save, and you’ll be able to build up your savings over time.
It’s also important to keep an eye on your savings account. Even though you’ve automated the process, you need to make sure the money is being transferred each month and that you’re still able to make ends meet. If your income changes during the year, you may need to adjust the amount you’re saving.
Finally, you should consider investing your savings. Once you’ve built up a decent amount of savings, you can look into different options like investing in the stock market, property, or even opening a managed fund. However, it’s important to do your research and understand the risks associated with different investments before you start.
By automating your savings, you can start investing on a low income without having to worry about manually transferring money each month. However, it’s important to make sure you’re only saving what you can afford, and that you’re keeping an eye on your savings account. Finally, make sure you understand the risks associated with different investments before investing your savings.
Research and Compare Investment Options
When researching and comparing investment options, it is important to look at both the short and long term benefits of each option. The most important thing to consider is how much money you can realistically afford to invest. It is also important to consider the risk associated with each option.
It is important to do some research on the different types of investments available, such as stocks, bonds, mutual funds, exchange traded funds (ETFs), and certificates of deposit (CDs). You should also research the tax implications of each type of investment.
It is important to compare the costs associated with different investment options, such as management fees, transaction costs, and other related fees. You should also compare the potential return on investment and the associated risks.
It is important to understand the tax implications of investments in Australia. For example, investing in certain types of investments can provide tax benefits, such as capital gains tax concessions. It is also important to understand the impact of negative gearing, as this can affect the amount of tax you will need to pay on your investments.
You should also consider the liquidity of investments. Some investments, such as stocks and bonds, are more liquid than others, such as real estate or collectibles. It is important to consider how quickly you can access your money if you need it.
Finally, it is important to research the different investment options available in Australia. There are a variety of online resources available that provide information on the different types of investments available. You should also speak to a financial adviser before making any investment decisions. They can provide you with valuable advice and help you find the best investment option for your specific situation.
We understand you and we want to help
Starting to invest on a low income can be daunting, but it doesn't have to be. With a little bit of planning and research, you'll be well on your way to building a solid portfolio. At Ello Lending, we're here to help. Our team of experienced mortgage brokers are dedicated to helping Australians of all incomes navigate the complex world of investing. If you have any questions or would like to discuss your investment options, please don't hesitate to contact us. We'd love to help you get started on your investing journey.
