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If you want to get started investing but don’t have a ton of extra cash to put away, don’t worry—financial advisors say you don’t need to max out your retirement accounts for investing to make a difference. Even small amounts add up over time.

“You can enter a lot of investments at a very low price point,” says Jody D’Agostini, a certified financial planner (CFP). “Even if it’s $100 a month, swipe it over” to your investment account.

This is getting easier and easier for investors to do thanks to more financial firms offering fractional shares and low-cost mutual fund and exchange-traded fund (ETFs) options that provide the diversification investors need.

If you’re on a tight budget but still want to prioritize investing, here’s what financial experts advise.

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Get the basics in order

Before you start investing, financial advisors recommend you first establish an emergency fund and pay down high-interest debt.

An emergency fund is a savings account with multiple months’ worth of expenses stashed in it. Exactly how much you need to save is dependent your own situation and responsibilities. But financial advisors generally recommend you to set aside enough money to cover three to six months of necessary expenses. That said, others suggest increasing that to six or nine months worth for added peace of mind.

Paying off debt like your credit card balance is especially important as the Federal Reserve continues to raise interest rates—the same debt will cost you more and more over time, and will outweigh potential investment returns. Make this your top financial priority, and once it’s paid off you can divert the money you were using to pay it down to your investment accounts.

Look for ways to trim your budget

Rising inflation doesn’t make finding the money to invest easier on anyone. Ultimately, you may have to make some other sacrifices if investing is a goal, financial advisors say. If there’s any room in your budget to cut $50 in spending to funnel into your investments, that can make a big difference. Don’t get stuck on a certain number—just save what you can to start.
“Any savings is better than none,” says Nilay Gandhi, senior wealth advisor at Vanguard.
If you can, try to minimize the largest line items in your budget: rent, car payments, grocery bills, etc., says Laura Medigovich, CFP and director of advanced planning at Janney Montgomery Scott. That will give you the greatest control over your finances and reaching your investing goals.

“It’s about being mindful with how you are interacting with your money,” says Medigovich. “This is my money, how do I want to spend it? Buying organic food or going to a restaurant with friends? Maybe my budget wont allow for both.”

Take advantage of your 401(k)

Once you’re ready to invest, financial advisors recommend you start by contributing to your retirement plan at work, if you’re offered a 401(k) account (or similar). Typically, you will select a couple of funds from the options provided by your plan sponsor, and then contribute a percentage of your salary with the money removed every pay period.

Many employers offer to match contributions dollar-for-dollar, up to a certain percentage. It should be your goal, advisors say, to at least contribute enough to receive the whole match. This is effectively a 100% return on your investment and essentially a raise.

If you can’t afford to set aside that much of your salary, aim for at least 1%.

“Don’t start from 0 to 100. If you haven’t invested, put 1% in your 401(k),” says Medigovich. “Try it for three months, and if you don’t feel the squeeze, then increase it again.”

A 401(k) takes some of the pain out of the investment. The money is taken from your paycheck before you even see it, eliminating the temptation to spend it rather than invest, as well as the possibility of trying to time the market. This helps increase savings.

Beginning in 2025, employers starting new retirement plans will be required to enroll their employees into 401(k) plans if they provide them, starting at 3% of the employee’s paycheck. Each year, the contribution will automatically increase by 1%.

Open a Roth IRA

If you don’t have access to a 401(k)—or you want to invest outside of your workplace account—then advisors say a Roth IRA is an ideal place to start, if you meet the income requirements.

A Roth IRA is a great investment vehicle for younger workers because of how it is taxed. Contributions are made after your money is taxed, unlike with a traditional 401(k) or IRA. This allows the investment gains to grow, and withdrawals are tax-free in retirement. With a 401(k) or traditional IRA, you contribute money before you are taxed on it, paying the taxes when you withdraw the money in retirement.

“Put $100 a month in there and go from there,” says Medigovich. “The compounding really does work in your favor.”

Additionally, Roth IRAs can be used as a kind of backup emergency fund, says Vanguard’s Gandhi. Because the contributions have already been taxed, investors can withdraw that money at any time without incurring a penalty or paying additional taxes. (But under most circumstances you cannot withdraw any gains until age 59 and a half.) Remember, though, the point is to allow the contributions to grow and compound so that you can build wealth for retirement.

You can open a Roth IRA at many financial firms, including banks, online brokerages, or via a robo-advisor. There are limits on how much you can contribute to your Roth IRA each year (as well as salary caps in order to take advantage of the tax-free status), and these can change annually. For 2023, the IRA contribution limit is $6,500, and $7,500 for those 50 and older.

Start early, stay invested

The best thing investors can do, besides starting early and investing consistently, is to tune out market noise, advisors say. If you’re investing for the long-term—and retirement is most likely a long-term goal—then day-to-day fluctuations shouldn’t deter you.

Even last year’s market drop shouldn’t necessarily worry you if you are decades away from needing to tap into the money in your account. Technically, you only take a loss—or “realize” it—when you sell your investments. If you just leave them alone, then they will have time to recover. (This is where having a fully-funded savings account comes in handy. You don’t want to have to sell off your investments at a market low in the event of an emergency.)

And historically, the stock market has returned about 10% per year over the past almost 100 years—but again, that’s the average. Some years, returns are negative, but they’ve always balanced out over time. Past performance isn’t a guarantee of future returns, but stay invested. Time in the market is critical to your returns.

“Don’t check the balances of your investment accounts every day or every week,” says Medigovich. “Investments are long-term. Just follow through with it and don’t let the market turmoil misdirect you.”

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This article was written by Alicia Adamczyk from Fortune and was legally licensed through the Industry Dive Content Marketplace. Please direct all licensing questions to [email protected].