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When you are a single mom, it can be tough to find the time and money to invest in your future. But it is important to remember that investing is one of the smartest things you can do for yourself and your family. In this blog post, we will discuss some tips for getting started as a single mom investor on a budget. We will cover everything from basic wealth principles, different investment options to tips to keep you focused. So, whether you are just getting started or you have been investing for a while, read on for some helpful advice!

One of the best things you can do when starting out as a single mom investor is to keep it simple. Do not try to invest in too many different options at once – this can lead to confusion and lost money. Instead, start with one or two basic investment types that you feel comfortable with. For example, if you are interested in stocks, invest in a few well-known companies or mutual funds. Or if you are more interested in real estate, start by investing in a small rental property or being a capital contributor in partner with other investors.

Budgeting for Investments

When it comes to budgeting for investments, it is important to be realistic. Do not try to invest more money than you can afford – this will only lead to frustration and disappointment. Instead, start small and work your way up. If you can only invest $25 or $50 a month, then do that! I opened my first IRA account with a $50 investment and have it automatically drafted out of my account monthly. Eventually, my plan is to max it out at $5000 per year but earning compound interest on what is in my budget now is better than nothing. You may not see immediate results, but over time you will begin to see the benefits of investing.

What is Compound Interest?

Compound interest is when the money you make off your investments earns interest on top of that. This can result in increased earnings over time if the reinvested earnings continue to earn interest. For example, if you had an investment account with an annual return of eight percent and you put in $100 into it one time, after five years you would have almost $146.93 in the account, assuming no additional contributions were made. However, if you earned a ten percent return instead, you would have over $161.05 in the account. It may not seem like a lot, but ask yourself how much interest have you earned on the money in your savings account in five years? It was not $46 or $61. Also think about if you contributed more to that account than just the $100, pretty cool, huh?!

Are you trying to figure out how to calculate how soon your money will double? It is simple, use the rule of seventy-two!

When it comes to investing, the 72 Rule states that if you divide seventy-two by your expected rate of return, you will get the number of years it will take for your money to double. For example, if you expect a 12% return on investment (ROI), it will take six years for your investment to double.

This is a great rule of thumb to use when thinking about investing your money and determining where you should invest your funds. Remember that there are many other factors to consider when investing, such as risk and time horizon. It's important to consult with an advisor to figure out what's best for you or use tools like a retirement calculator or if you have no desire to manually do the math of the rule of 72 than use this compound interest calculator.

Where can you invest on a budget?

Employer 401k Plans

If you have a job and your employer offers a 401k plan, this is an excellent way to get started investing on a budget. You can elect to have a certain percentage of your paycheck automatically deposited into your 401k account each pay period, and most employers will offer some sort of matching contribution. For example, if you elect to have $50 per week withheld from your paycheck and your employer matches that contribution, you will have $100 invested each week. The most important thing to remember is max out on the employer’s match because that is free money!

My employer matches my 401K contribution up to 4%, plus an additional 1 %, so I maxed out my personal contribution to 4% and get their 5% as well. Using this strategy is you are on a budget is the best place to start. It helps lower your taxable income in your paycheck which means you pay less taxes and bring home close to the same amount in your paycheck after taxes. Sounds like a win win to me!

For the longest I did not make the adjustment to max out my employers’ match contribution and that was thousands of dollars I gave away and when I made the adjustment it did not affect my spending at all, except for $11 less dollars. However, do what works best for your budget and household. If maxing out right now is too much, then increase it by 1% every year or every time you get a raise.

Health Savings Account

Another great way to invest on a budget through your employer is through a Health Savings Account (HSA). An HSA allows you to set aside money each year to cover qualifying medical expenses if you have a high deductible health plan. The funds in your HSA grow tax-free, and you can withdraw them at any time without penalty. The compound interest rates on HSA accounts can range from 0.3% or 2 %, which is more than you will get in your standard savings account. Putting money in an HSA account also allows you to have money available for medical bills not covered by your medical insurance and are not subject to federal income tax when the funds are deposited.

If you do not have an HSA or 401K, because you are self-employed, do not worry these are two of many ways you can start growing your money.

Ibonds

When you are investing on a budget, it is important to choose investments that are affordable and have the potential to provide good returns. One option for budget-minded investors is iBonds. These bonds offer stability and modest earnings potential, making them an attractive choice for those looking to get started with investing.

iBonds are government-issued bonds that are backed by the full faith and credit of the United States government. This means that they are a low-risk investment, which can be appealing for those who are new to investing or who have a limited budget. Another benefit of iBonds is that they offer tax-deferred growth, which can help you save money on your taxes.

When it comes to choosing an iBond, there are a few things to consider. The first is the length of time you want to invest for. iBonds come in terms of one year, two years, three years, five years, and thirty years. The longer the term of the bond, the higher the yield.

Another thing to consider is the rate of inflation. iBonds offer a fixed interest rate and semiannual interest rate, which means that your earnings will stay the same regardless of how high or low inflation rates are. If you think that rates are going to rise in the future, then you may want to choose an iBond with a longer term so that you can maximize your earnings.

iBonds are a low-risk, budget-friendly investment option that can help you grow your savings over time. If you are looking for a way to get started investing, iBonds may be the perfect choice for you.

Investing in Stocks

Stocks are shares of ownership in a company, and they offer the potential for greater earnings than bonds. However, stocks also come with greater risk, so it is important to do your research before investing.

When choosing stocks, there are a few things to consider. The first is the company's financial stability. You will want to choose a company that is healthy and has a good track record. Another thing to look at is the company's future prospects. Is the company growing? What are its plans for the future?

You will also want to consider how much risk you are willing to take. Some stocks are more volatile than others, which means they can go up and down in value more frequently. If you are investing on a budget, you may want to choose less risky stocks so that you do not lose money. Another way to protect your investment from loss is planning to hold on to the stock long term. With the ups and downs of the stock market it is normal to see a dip in your investment, but do not let that run you away. Patience is a virtue.

Remember, do your research! Also, here is a great book, “The Little Book That Still Beats the Market” by Joal Greenblatt, I read that helped me understand the market better.

Investing in Mutual Funds

If you are looking for a more hands-off approach to investing, mutual funds may be a good option. Mutual funds are investments that are made up of a variety of stocks, bonds, and other securities. This means that you do not have to choose individual stocks yourself, and you can spread your risk across multiple investments.

When choosing a mutual fund, there are a few things to consider. The first is the type of fund. There are a variety of mutual funds to choose from, including bond funds, stock funds, and balanced funds. The second is the risk level. As with stocks, some mutual funds are more volatile than others.

The third thing to consider is the cost. Mutual fund fees can vary significantly, so it is important to compare rates before you invest. Finally, you will want to consider the fund's performance. How has the fund performed in the past? What is its current rate of return?

Mutual funds can be a great way to get started investing, especially if you do not have a lot of money to spare. They offer a variety of investment options and come with a variety of fees just like individual stocks. However, it does not take much to get started to owe a portion of a share or a whole share of a company or mutual.

To find mutual fund, and individual stocks you can use many of apps available such as Webull, Public, and Stash. Or you can go to investment advisor companies that have been around for years like Vanguard or Fidelity. Many of the apps allow you to start investing with $5 or more, while investment advisor companies may require you to buy a full share on the mutual fund or $1000.

That is not the last resort if you are not feeling confident about setting up these accounts on your own, most financial advisors at companies like Wise Financial, Primerica, Northwestern Mutual can assist you with these services. They usually do not charge you a fee and you can invest in a mutual fund with as little as $25 per month.

Budget investing does not have to be difficult or complicated. By doing your research and being aware of the risks involved, you can make budget-friendly investments that will help you reach your financial goals. Start by choosing a company that is financially stable and has a good track record, then gradually add more risky investments as you become more comfortable. And remember to always consult with a financial advisor before making any major decisions if you feel like you need more support.

That said, there are a few general things to keep in mind when budgeting for investing:

– Start small: When you are starting out, it is important to start small and gradually increase your investment as you get more comfortable. This will help reduce the risk associated with investing and allow you to incorporate it into your monthly expense plan.

– Risk: Depending on the amount of money you want to invest and how soon you need to reach your financial goals it is important to determine the risk of the investment and if it is in alignment with the financial plan you have set for yourself. Do not put your money in too much jeopardy if you are not in position to take too much loss.

– Stay disciplined: Don't take your money out of the investment account or sell the stock just because the market may be down, remember if long term investing is your goal than stay the course. Also, put your investing amount of auto draft to withdraw from your account each. Now you know your money is being compounded versus losing value by sitting in your checking or savings account.

No matter how you choose to get started, it is important to begin budget investing as soon as possible. The sooner you start saving and investing, the more time your money will have to grow. And do not forget budgeting and investing do not have to be difficult or expensive – just start small and gradually increase your contributions over time. Be patient. Do not expect to become a millionaire overnight – that is just not realistic. Investing takes time and patience, so be prepared to put in the work and wait for the payoff.

By following these tips, you can get started as a single mom investor on a budget. Just remember to keep it simple, budget realistically, be patient, and track your progress. With some hard work and dedication, you can achieve your financial goals. Investing may seem like a daunting task, especially if you are on a tight budget. But it is possible, and there are plenty of ways to get started even if you are a single mom. I am here to help coach you through the process so that you can make the most of your money and grow your wealth.