How to Find Money to Invest
One of the biggest obstacles of investing is finding the money to invest. This, to many who bank on getting rich from investments, is kinda like the classical chicken-and-egg problem: You can’t get rich from investing if you don’t have money to invest to begin with. Of course, those who have decent savings now know that you don’t have to be rich to invest. But you have to start investing to be rich.
The typical American spends $28,000 on a brand new car. This translates to approximately $8,000 yearly to own and drive the car. Imagine if you spent $15,000 on a used car instead. You could invest the leftover. You may think the leftover is not much. But when I think about how a $10,000 investment could grow into a $1 million in 50 years, I would hesitate spending even a dollar from that $10,000. Every dollar could be worth $100 in 50 years. Do you really want to lose $100 in 50 years just so you can have that Wrigley’s spearmint gum?
Now, hitting that million-dollar mark is not easy considering you need to first come up with that $10,000 to invest. Many of us in our twenties will have a hard time finding disposable income to invest. Between the slick, new iPhones our co-workers so proudly show off and their shiny BMW 330s, it’s unbearable to imagine how you would look holding your boring, free Sprint Sanyo cellphone and driving your dented and scratched 1995 Honda Civic. Yes, I know, first impression is very important. What would your co-workers say? I can feel their judging eyes on me whenever I walk into the office. Hey, if it’s any consolation, I’m the kind who drives a scratched, dented (and I mean a huge dent) car and never pays for a cellphone. I think it takes a lot of self-confidence to understand consciously that what you drive does not necessarily represent your wealth nor your intelligence. But this is the kind of peer pressure that causes us to spend beyond our means simply to impress. We load up on debt so we can look stylishly successful in a Hugo Boss shirt and a pair of Ferragamo shoes flanked by a 35,000-dollar Mercedes C300.
Stop.
Before you spend another penny, think about your priorities. The only reason you are spending all that money in luxury goods is because you want to appear rich. Ask yourself, “Is looking rich now more important than becoming rich later?” There’s nothing wrong wanting to be rich. I’ll be the first to admit I want to be rich. But if you make becoming rich later your top priority, you’ll begin to realize that spending too much now will significantly hinder your progress to becoming rich. So get your priorities straight. Every time you feel the urge to buy that pair of sexy Manolo Blahniks, think about how the $60,000 in 50 years could pay for a car. Spend only what’s necessary and invest the rest. Now, I’m not saying you can’t eat at your local Ruth’s Chris steakhouse. If you gotta have a great T-bone, go ahead. Just don’t spend on a Patek Phillipe if you could settle for a Fossil. You can have all the Pradas you want when you are rich, but not now. Prepare a budget, set a goal, pay yourself first, and remember to reward yourself after.
Once you have your priorities straightened out, you will begin to see that all of a sudden you have more money to invest. Wonderful! But now you need to think about accelerating the journey to riches. The most obvious move is to increase your current source of income. As an employee, the best way to increase your income is to negotiate a higher salary. Know what you’re worth. Find what others in your position are earning in your city. Walk in to your manager’s office tomorrow and ask for a raise. Back it up with your research findings. Tell him the opportunity cost you are incurring for sticking with this company. Someone once said, “The best deal is the deal you are walking out on.” If you have the leverage to walk away and get a better paying job, it’s hard for your employer to deny the raise.
Another way to add to your investment coffer is to find supplemental sources of income. One idea I’ve seen many succeed in is writing a blog. Share your journey towards a debt-free you. A blog about you is unique and personal. Plus, it’s motivating when readers support you along the way. It also inspires others. In addition, posting ads on your blog could earn you some significant moolah should your blog become popular. If you have a hobby, turn your hobby into a source of income. Sell your homemade chocolate truffles online. Who knows, you might be the next Kristy Choo.
For the more ambitious, starting a business could be your answer to wealth at warp speed. If you are bold, debt-free and carefree, quit your day job and start a business. Seth Klarman said, “If you’re going to work 100 hours a week, work for yourself. Don’t work for anyone else.” But if you need some stability in income to pay off that mortgage, don’t quit just yet. Start a consulting business on the side. When your revenue ramps up, you can quit and focus on your business. It’s a lot of 18-hour days. But if you are persistent and determined, I assure you that it will pay off eventually.
Finally, as soon as you saved up some money, don’t leave more than you need for emergency in the savings account. Start investing now. Because of the magic of compounding, the sooner you start the better off you are. If you don’t know anything about investing, start with a low cost index fund such as the Vanguard 500 Index fund. If you crave a better return, look for mutual funds run by investing gurus. Pick one from GuruFocus. As your investment income grow, you get to plow the profits back to earn more income.
How do you find money to invest? I would love to hear your ideas.
