Tuesday, June 10, 2008
How to get rich without really trying
Posted by Josh in 401k, Investing, IRA, Money, USA Today
Many of us know we should be investing. We have read countless stories or have gotten earnest talks from our parents. We look at a nation that is helplessly in debt and vow, “not me!” But we know that we should be investing in the same vague sort of way that we know we should work out, call our grandparents or not drink until 3 am on a Tuesday.
I haven’t started investing yet. After I factor in my other costs (student loans, ramen soup) I figured the costs were prohibitively high. My general understanding was you needed at least $1000-2000 to start investing. I was totally off. There is a great article in USA Today that details how even the completely broke can start investing.
The American Funds, for example, is the largest broker-sold fund group in the nation. You can invest in most of its funds for $250.
A few funds will let you start with $50 via an automatic investment program, or AIP. An AIP allows the fund company to tap your bank account on a regular schedule. You promise to keep investing until you reach the fund’s normal minimum.
But if you keep going, and increase your contributions regularly, you’ll have some decent savings. Had you started with a $50 a month investment in the fund 20 years ago and increased your contribution by 5% every year, you’d have about $45,500 now — certainly not enough to retire on, but enough to make a down payment on a vacation home.
Very cool. Most of us can probably swing $50/month. One other tip is to check to see if your office offers a 401k. You can contribute as little as $10/month pretax which is then invested for you. Many employers also offer employee matching — the company matches every dollar you invest up to a point. That is FREE MONEY. Many younger 2.0somethings won’t have worked at a company long enough, but it is worth looking in to.