Did you know that people under the age of 35 have, on average, over $67,000 in debt? This debt includes student loans, car loans, mortgages, and credit card debt.
Up until your mid-40s, the older you get, the higher your debt burden becomes. Not until you hit your late 40s does your debt load begin to subside.
One way to work towards financial freedom and debt reduction is through investing. There are many different ways to invest and several of them only require you to start with a small amount of money.
Keep reading for seven investment ideas that can help get you on the path to financial freedom.
Investment Ideas: Investing in Your 20s and Beyond
The earlier you can start investing, the better. Because of something called compound interest, you make more money the sooner you can invest your money. Basically, compound interest is interest on interest. As you make money on your investments, you re-invest that interest, rather than withdrawing it.
Some smart ways to get started early include:
1. Savings Account
While it seems like a boring option, a savings account is a safe option. If you have little or nothing in your savings account, you should start funding it immediately. Some experts say you should have at least six months worth of savings put away and some others say a $1,000 emergency fund is necessary.
Either way, a savings account is a smart and safe way to make sure you can handle a financial emergency, like a car repair or home repair. While the interest you earn on a savings account isn’t high, it’s a safe investment and you won’t lose any of your money.
If you want to make some interest with your $1,000, but cannot currently afford to lose any of it or you need to have quick access to the money, then some sort of savings account is going to be your best option.
2. Retirement Accounts
Most employers provide retirement accounts. Whether it’s a 401(k) or 403(b), take advantage of employer-sponsored retirement accounts. Many employers contribute to the account or match your contributions, so the more you can set aside for retirement, the better.
You can also start an IRA, which allows you to sock away post-tax dollars that you can withdraw upon retirement. The nice thing about an IRA is that it doesn’t need to be sponsored by an employer. There are limits to how much you can put in an IRA though, so educate yourself on those restrictions.
3. Peer-to-Peer Lending
Peer-to-peer lending is a way to allow investors to contribute to funding a loan. Every investor gets paid back, with interest. Peer-to-peer lending allows a group of investors to act as a bank of sorts, making a loan to an investor.
Investors typically get to review a credit assessment of the people looking to borrow. Borrowers with lower credit scores usually pay higher interest rates, but you also take the risk that they might default on the loan.
Another great thing about peer-to-peer lending is that you can often invest with a small amount of money.
4. Small Businesses
Investing in a small business idea is a way to invest but also follow your passion. If you have a great idea, why not explore how to make that a reality?
There are many benefits to being self-employed. Whether you start an online shop or boutique, offer your professional services, or even make your passion into a side-hustle, it can be a good investment if you’re passionate about it.
5. Stock Market
Investing in the stock market can seem overwhelming and confusing, but it doesn’t have to be. Something called “dollar-cost averaging” is a good option for investing in the stock market. This strategy calls for buying fewer shares when the market is high and more shares when the market is low.
You don’t have to go at it alone, either. A stockbroker can guide you on the best stocks to buy and handle the transactions for you. If you feel confident in your investing skills, there are many websites and smartphone apps that allow you to invest as well.
6. Real Estate
Real estate is a smart investment to make, whether its a home for you to live in or commercial or residential rental properties. Becoming a landlord isn’t for everyone, but if you have an interest in real estate investing, rental properties provide monthly income with a small amount of effort on a regular basis.
Real estate can be a long-term investment or you can make a plan to get out when the market is hot.
If you have an interest in investing in real estate, but don’t want to have the responsibility of taking care of a physical property, an REIT might be a good choice for you. An REIT, which is a real estate investment trust, takes a group of investors, pools their money, and then uses that pool of money to invest in a single real estate property.
REIT companies usually only require a small amount of money to start, sometimes as little as $500, so you don’t need to save up a ton of money to get the investment ball rolling.
One last, bonus way you can invest is cryptocurrency. A new type of investment, you can use a crypto trading bot to invest for you.
The Bottom Line
Financial stability will allow to enjoy more things in life and reduce a great deal of stress. Investing can seem like it’s overwhelming, but the reality is that you can get started with a small amount of money and there are plenty of resources out there to provide credible guidance.
Don’t wait any longer to start ensuring your financial freedom.
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