Investing: How to save money for investment capital when you are not rich

Hello there! Many of you probably don’t come from a privileged family background and have some mental barriers to start investing. One of the common obstacles to investing is the lack of finances to do so. You may think that investing is only for the rich like Warren Buffet. Nothing can be further from the truth. While it is true that you need money to make money, it is also true that the earlier you start investing, the less capital you need to get started. Simply because of compounding interest which will grow your capital exponentially over time. It is precisely that we are not wealthy that investing is a urgent priority to better our future finances. And also, there are risks to NOT investing too. For example, there is inflation which will eat away the purchasing power of your savings every year.

So how do we start saving especially if we don’t have a trust fund dedicated to us by our parents? Well, it is simple. Keep accurate records for at least a year on how you spend your money. For me, I used to keep a notebook on the things I spend on everyday. But I then changed to excel spreadsheet recording for my monthly expenditures during 2014. Since then, every night before I go to sleep, I record my daily expenses such as eating out expenses, transport expenses, medical expenses and etc. I do this every day without fail. And whenever I spend my money, I always ask for a receipt from the merchant I buy from whenever possible to keep track of my spending.

So how much did I spend every month? Well, since I am living with my parents and am still single, I am fortunate enough to have some of my expenses taken care of by them. I have my daily meals eaten at home when my parents cook or when they don’t, I eat out at as low a price as possible. For instance, I have a chocolate waffle and 3-in-1 instant white coffee as my breakfast and for that meal I only spend about $1.80. When I am working, I usually eat out at heartland coffee shops where the prices for food is much cheaper than in the town centre. So I eat  my lunch at $2.50 and my dinner at the same price. Fruits I buy at $1. Total cost of meals for the day = $7.80. Assuming I eat the same prices for my meals daily, on average my total monthly expenditure for my meals would cost only $241.80. One of my friend who is a financial adviser says that that is a very low cost lifestyle. Oh well, maybe opinion varies from person to person. Some of you may save even more than me. So , its very hard to say who is more frugal. But overall, I believe I lead a fairly frugal lifestyle. Also because I don’t earn much from my current job. I am working part time at a call centre as a customer service agent and the pay is minimum wage. So recently, I got my paycheck in the bank. I compared my pay and my monthly expenses for last month January and guess what? Despite earning a low salary, I still have some savings leftover for the month. It may not be a lot, but what matters more is the consistency of your savings, not how big your savings is though that matters to a certain extent too.

One of the key things to get started in investing is patience. This is especially important if you don’t have a fat salary like I do. If you save $100 a month, well done! Keep saving for 2 years. $100 for 24 months is $2,400. Not a big sum, but a good milestone to start investing. The key thing is to take small, consistent action. Most people give up when they see that the effort they put in will take very long to get their rewards. They are unable to delay gratification for the long term. For those of you who are spiritual, there is even a bible verse that describes this: dishonest money dwindles away, but whoever gathers money little by little makes it grow (Proverbs 13:11). Slowly, the pennies in your savings account will snowball into dollars, and hundreds of dollars. But you need to start saving first. No savings, no growth of capital.

So, when you keep accurate records of your expenditures for over a year, you will start to see patterns of your spending. Take particular note of the expenses you incur on a daily basis. Is there any possible way to reduce your daily expenses? If you save $1, it would be $31 of savings a month. $31 of savings a month is $372 of savings a year! You can see that the savings will snowball if you do it on a regular basis. Of course, you will also want to make sure that you make enough money for savings. Ultimately, it is what you keep than what you earn that matters.

This advice of earn-save-insure-invest is common from financial advisers but unfortunately, common sense isn’t common practice. Do you have an experience you would like to share? Share, like, comment or subscribe to this post if you have anything to say!

One thought on “Investing: How to save money for investment capital when you are not rich

  1. Henry

    Well written blog.. A good reminder to be disciplined in allocating our monthly salary to the various buckets (savings, investment, expenditure) no matter how small or how much one’s salary is.. What we have comes from God and we are called to be stewards of the talents and resources that He has given to us. Thus it is key that we stay prudent and keep a simple lifestyle..

    Liked by 1 person

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