Investment Options When Money Is Tight

If you are earning, always make it a rule to invest a part of your income. Make it a habit and think of it as ‘paying yourself’. Investing is your future. Because of the recession the amount of money you are able to invest may be limited and you may be wondering what investment options are available to you when money is tight.

There are a few steps to take like setting a budget. You may even find more money to invest than you think during the process! Note what you owe for your mortgage or rent, healthcare, car payments, insurances, your utilities, groceries, and any outstanding debts. Make an allocation of where your money is to be paid. And always make sure that your monthly commitments are covered.

Although the usual recommendation is to tuck away 10% of your income into a savings or retirement account this may not be possible, depending on your circumstances. But no matter how dire your financial situation seems it is necessary to start a retirement account. Saving for your retirement is a top priority. And if your employer offers retirement funds take full advantage of this.

Retirement Investment in the USA

In the USA there is the 401k fund for retirement. Investing through an employer’s plan has several advantages such as the tax benefit for doing so, this is because your contributions are deducted from your pre-tax income and taxes are deferred. Many employers match contributions made by their employees, so you effectively get free money. Most 401k plans have mutual fund (managed funds) options where investment minimums are waived.

If you are self employed there are other options available such as the special retirement investment options in the US of SEP-IRAs and Keogh plans which allow you to contribute a considerable amount of your pre-tax income.

Retirement Investment in New Zealand

In New Zealand there is KiwiSaver. The minimum requirement is to invest 2% of your income but your employer must also match this contribution so you are doubling your money and effectively getting a pay rise. There is also a one off kick start payment of $1,000 from the Government which is a nice start to your plan. Not only this but each year the Government matches your contribution up to $20 a week or a maximum of $1,042 a year. You can choose among a range of KiwiSaver providers to match your needs and risk profile. When you start a new job you need to opt-out of KiwiSaver otherwise you will automatically be enrolled, but if you have been working and not contributing you need to opt-in to start investing.

Once again in New Zealand KiwiSaver is available to the self employed however there is obviously no employer contribution. As your income may be erratic you can nominate the amount you want to contribute. The best is to at least deposit $20 a week to take advantage of the tax credit of $1,042 a year. This way you double your money.

Other Investment

Both in the US and in New Zealand you are able to invest as little as $50 or $100 a month into some managed fund (mutual funds). The advantage of these funds is that it gives you the opportunity to spread your investment into various areas even though you are only depositing a small sum each month.

Whatever your circumstances you owe it to yourself to find suitable investment options even when money is tight.

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