If you’re in debt, then you might be afraid to ask how to start investing in stocks.
As much as you want your money to grow, you have more pressing payments to make.
However, this is a common misconception.
Even with just a little money, you can begin investing in stocks.
Read on to learn how to start investing in stocks — even when you’re in debt.
How to Start Investing in Stocks: Tips When in Debt
1. Divide Your Income
Sometimes, the most obvious solutions are taken for granted, but they really work.
To start off with, simply divide the income you earn every month.
By doing this, you are able to achieve your investment goals without drowning in debt.
The key here is to not be too ambitious.
Payback a small amount of your debt every month.
Also, find investments that do not require large sums of money.
You can worry about ambition later.
2. Anticipate Your Investment Return
This is a simple financial rule which has helped a lot of people.
Try to find out which is higher: the after-tax interest of your debt or your investment return after tax?
If you can answer this, you may not even have to worry about both investing and paying off debt.
However, if the after-tax return is too low, pay your debt first.
Then, use whatever amount is left for investing.
3. Open a Roth IRA
Why Every Millennial Should Consider Funding A Roth IRA https://t.co/mLMFpSBNtg
— Forbes (@Forbes) December 2, 2017
Opening a Roth IRA in this situation is like killing two birds with one stone.
A Roth IRA is a retirement plan, so technically you are saving up.
However, at the same time, you may also use it to purchase stocks.
This separates the money you use for repaying debt and your investment and allows you to do without worrying about how to get back up on your feet.
4. Avoid Unnecessary Expenses
On a clearly more practical side, plan a new budget.
Further, with this new budget in mind, you should stop spending money on unnecessary purchases.
Doing this may not only help you save, but can also keep you from accumulating even more debt.
Spend only on the essentials.
Yes, it may be difficult for a while, but in the long run, you will reap the rewards of your investments.
5. Purchase Stocks Directly
DPPs or Direct Purchase Plans are available for people who really want to invest but have little to no money.
This arrangement allows you to invest in stocks directly.
When engaging in DPPs, you don’t have to worry about paying a broker or any other people and transactions in between.
This significantly decreases the amount you need to invest.
With this lower cost of entrance, you’ll also be left with enough money to repay your debts.
Watch this video from TIME for more tips on managing your finances:
Investing, even while in debt, is not impossible.
In fact, what these tips have proven is that sometimes it is all the more necessary.
Finding ways for money to grow is only logical when you are running out of money.
Yes, investing is always a risk, but if you do it right, the rewards are worth it.
Do you have any other advice on how to start investing in stocks even when in debt? Let us know in the comments below.
Up Next: How Does Debt Consolidation Work?
