If you’re new to investing, you might be wondering how much to invest or if you still have enough money to invest. The truth is, you don’t have to wait until you have hundreds of thousands of dollars in the bank to start investing.

Investing can look different by demographics and fiscal underpinnings. Determining how much you should invest starts with assessing your unique financial situation and then with an investment strategy that works for you and your budget.

How much should you invest?

Many experts we spoke to suggested investing a certain percentage of your after-tax income as a general rule. Although this percentage may vary depending on your income, savings and debts. “Ideally, you’ll invest somewhere around 15-25% of your after-tax income,” says Mark Henry, founder and CEO of Alloy Wealth Management. “If you need to start small and get to that goal, that’s fine. The important thing is that you really get started.”

Some budgeting strategies take this into account, such as the 50/30/20 budgeting strategy, which breaks your monthly budget into three categories: your needs (50%), wants (30%), and the remaining 20% to pay off debt. , savings and investments.

Investing 10% of your monthly income is not possible for some, but that shouldn’t be a reason not to invest.

According to the Pew Research Center, even among families earning less than $35,000 a year, one in five has stock market assets. Investing is less about how much you invest and more about how long your investment has to appreciate or appreciate.

“[It’s] about balancing financial priorities,” says Jeremy Bohne, founder of Paceline Wealth Management, LLC. “This starts with short-term cash needs [like] major purchases [or] [an] emergency fund, and once that’s achieved, the priority is to understand the cash flow [or] excess cash that can be invested against what it would take to reach your financial goals, such as retirement at a certain age.”

If investing 15% of your income seems like more than your budget can handle, you can start with a set dollar amount and stick with it. Investing even a few dollars a month can sometimes be enough to get a return if you use the right investment strategy.

Consider the current state of your finances

In some cases, investing even $10 can feel like you’re stretching your budget a lot if your financial house isn’t in order. Before deciding how much to save, consider these key factors:

Your Income: Take a look at your monthly income and consider how much money is left over after covering your non-negotiable expenses. If you’re struggling to make ends meet, you might prioritize putting extra funds into an emergency savings account or paying off debt.
Your debt balances: Debt, especially high-interest debt, can be very difficult to manage if you don’t have a plan to pay off those balances. See how much you owe and the corresponding interest rates. Determine how much you can comfortably invest while making at least the minimum payments on your debts. As you pay off your debt, you can re-evaluate how much you invest each month and increase it accordingly.
Your Emergency Savings: According to the latest data from the Consumer Finance Protection Bureau, 24% of consumers have no emergency savings and 39% have less than a month of emergency income saved. Having an emergency fund is essential if you hope to avoid going into debt when the unexpected happens. If you’re still working on building three to six months of basic spending, consider investing a smaller amount of your disposable income to hit that benchmark.

Set your investment goals

Setting clear investment goals can help you determine if you’re investing the right amount, at the right time, and in the right mix of assets. It can help you set a timeline and provide a starting point for how much you need to start investing and what that translates to your monthly or yearly budget.

Think about:

What you’re investing in: Maybe you’re investing for retirement, or maybe your ultimate goal is to buy a home or fund your child’s education. Deciding what your ultimate goal is can help you set a realistic timeline for achieving it and make it easier to define how aggressively you should invest to make those goals a reality.

What your timeline looks like: Your timeline will look different depending on your objective. If retirement is your ultimate goal, depending on when you start investing, you may have decades to invest and grow your retirement fund. You have the option to start small and gradually increase these contributions.

over time as your income increases. This timeline might look different if you’re investing for a short-term goal, like buying a home or retiring early.

Your risk tolerance: Investing will always involve some level of risk, regardless of the type of asset you invest in. Ask yourself how good it feels to take this risk. “Beginners should think carefully about the mix of investments they want to have in their portfolio because it’s good to have diversity,” says Michael Wang, CEO and founder of Prometheus Alternative Investments. “Traditionally high-risk, high-return investments such as cryptocurrencies or growth stocks offer investors more volatility. For those looking to take less risk in their portfolios, traditionally safer investments include government bonds, money market funds and blue chip stocks that pay dividends to investors.

Reassess regularly

Be aware that your investment strategy can and likely will change over time. It’s important to regularly check in with you and your budget to make sure the amount you’re investing each month is still reasonable. In some cases, you may choose to invest more if you notice an increase in your income, or you may choose to pause the contribution to your investment account if you have been through any financial difficulties recently.

“Investments should be re-evaluated every month. Especially now, macro conditions change frequently,” says Wang. “Investors should keep an eye on the performance of their investments and may want to consider adjusting their investment strategy.”