How to Invest Small Amounts of Money
Starting small is a lot easier and logical than starting big. The same principle applies to investment. When you’ve a bit of money left over, and you’re hoping to start making it grow, either directly or indirectly, here are some ways to start investing, even if your amount is just around RM3,000; it’s still better than nothing!
Build an Emergency Fund
If you do not have any money in a savings account for major emergencies, then you need to build one right away. An emergency fund is exactly what it sounds like: a sum of money that you don’t touch unless something unexpected and urgent comes up in your life.
Some people use credit cards for emergencies, but a maxed out credit doesn’t help – especially if you’re dealing with an identity theft problem. Cash is king, and an emergency fund is an essential thing to have.
You could utilize your small windfall to obtain some career-related certifications. This investment will boost your current job and open doors to new opportunities in your field that may offer higher salary and other, better benefits.
Pay Off Your Debts
Using that small amount of money to pay an outstanding debt is a very wise way to invest it. In essence, you are getting an equal return to the interest rate on that debt – and better still, it’s a tax-free return.
Let’s put this into perspective. Perhaps you owe RM2,000 at 10% on a credit card. That means you are paying RM200 in interests a year. Paying an extra RM500 of the debt leaves you with a RM1,500 balance. RM1,500 at 10% is RM150 a year in interests. Your RM500 “investment” saves you RM50 a year in interests.
Even though you don’t see it, that money is now in your pocket instead of going to the credit card company. The key to paying off your debts is to make frequent payments toward the balance before the interest snowballs.
If you already have a small emergency fund on hand but you’re facing debts, this is a great way to invest your money.
Save It for a Big Upcoming Expense
Maybe you’re getting married soon, or you’re going have to travel to Singapore for your brother’s graduation. Maybe you want to replace your laptop soon or need a car down-payment.
Make Home Improvements
You could enjoy a permanent reduction in your electricity bill by making simple energy improvements in your home. For example, if you invest RM500 in energy efficiency improvements which could cut your monthly electricity bill by RM25 a month, you’ll break even in less than two years. After that, you have RM25 more in your pocket every month.
Some things you can do include installing energy-efficient light bulbs, investing in energy-saving appliances or installing solar tint film on the windows to reflect the intense Malaysian heat, thus cutting down on air-conditioning costs. All these improvements will pay for themselves through electricity bills and an increase in home value.
Everyone is tempted to splurge and reward themselves when there’s some extra cash, but splurging often brings only short-term happiness. If you want to spend your money doing something fun, make sure it will actually be worth it.
It really depends on the individual, but if you’re willing to be patient and think about that question and consider the possible answers, you’ll probably make smarter choices with your money.
It’s never too late to start investing, and there are ways to invest that doesn’t necessarily result in interest gains, but rather, they help bolster our self and our future. Better safe than sorry, right?