Three ways to invest when living paycheck to paycheck
Jun 30, 2023
When you’re restricted to a tight budget it can make investing appear out of reach. Learn how small and steady contributions can help you take control of your finances and invest in your future.
When you're living paycheck to paycheck, it can feel like you're stuck in an endless cycle with no way out. Although investing can help you break free, it's challenging to find ways to stretch your paycheck. A recent study revealed that 52% of Americans aren’t investing and, for many, it’s because of financial insecurity.
With costs on the rise, it’s easy to run out of funds. In fact, according to an SSRS study on Dayforce Wallet users conducted on behalf of Ceridian, 71% of respondents revealed that they ran out of money between pay periods.1
But investing can get you on the path to financial freedom and improve your well-being. Although it might seem out of reach, investing on a tight budget is possible.
With small and regular contributions, you can slowly make your way to financial stability. Here are three budget-friendly tips to help you get started on your investment journey.
Tips on how to invest with a strict budget
Contrary to popular belief, you don’t need a lot of money to start investing. Making small and manageable contributions can go a long way. Remember, every dollar counts, no matter how big or small.
Tip 1 – Automate your investments
Investing often gets neglected on a tight budget, but it can help to start treating investing like a bill. Essential expenses and deductions like taxes, rent, or utilities are automatically withdrawn from your pay, ensuring you don't miss a payment. So why should investing be treated any differently?
With automatic withdrawals, you will save no matter what and without having to put any effort or thought into it. Plus, it can reduce the temptation to spend your money elsewhere.
Automating your investments is easy – simply connect your investment account to your bank account and decide on your withdrawal schedule and amount. Try scheduling deposits on the first of the month to get them out of the way.
Don’t feel pressured to start big, even $10/month can make an impact. Over time, and with consistency, your small contributions can grow.
Tip 2 – Round up your purchases
Rounding up your purchases is an easy way to make investing a daily practice. The idea behind this strategy is to round up any non-whole number transactions to the next dollar amount and invest the difference back into your investment accounts. For example, with a purchase of $15.55, 45 cents would be added to your investments.
There are many ways to round up your purchases. You can either do it manually or automate the process with the use of apps or various bank providers. With the automated process, your bank card account is linked to your investment accounts, and any transactions will automatically be rounded and invested for you.
Rounding up is a manageable investment strategy that won’t put a significant strain on your budget. Plus, with consistency, even a few cents can add up over time and create an ongoing stream of contributions.
Tip 3 – Take advantage of financial wellness tools offered by your workplace
Your workplace might offer financial wellness benefits that make investing more convenient and affordable for you.
Many employers offer investment plans like 401Ks, RRSPs and ESPPs that might be available whether you work hourly or salary. These kinds of investment opportunities can help you buy valuable shares at discounted prices and save on taxes. Plus, the contributions come directly from your paycheck, making it less of a burden.
Another resource that your workplace might provide is on-demand pay, where you can access your pay before payday, making it possible to invest daily.
With early-wage access, you have greater control and flexibility over your money, meaning you don’t have to wait until payday to invest. For example, you can make it a habit to withdraw $10 every Friday to contribute towards your investments without going into a negative balance. An SSRS study on Dayforce Wallet users, conducted on behalf of Ceridian, revealed that 38% of respondents use on-demand pay2 to invest their wages sooner.
Every dollar counts
Investing on a smaller scale is something that anyone can get involved in.
You might believe that smaller contributions won’t make a big difference but over time your investments can grow in profitability and give you more financial security.
Not only does the practice of daily investing make you more disciplined but with consistency, you can stay on top of your finances and achieve your financial goals.
90% of Americans are stressed about money but knowing that you are contributing towards your investments can help ease the financial stress and make you feel more secure about your future.
Remember, it’s more useful to start small than to not start at all.
1 SSRS Research Study on Dayforce Wallet users conducted on behalf of Ceridian, December 2022
2 Not all employers choose to offer on-demand pay with Dayforce Wallet. Check with your employer to see if this is available to you. Some blackout dates and limitations may apply based on your employer's pay cycle and configurations. GO2bank does not administer and is not responsible for on-demand pay.
Investing involves risk, including the possible loss of principal. The value of investments will fluctuate over time, and you may gain or lose money. The content contained in this blog post is intended for general informational purposes only and is not meant to constitute legal, tax, accounting, or investment advice.