When it comes to building wealth no amount is too small to start. Whether it’s $1000, $100 or even $50, every single dollar can be put to good use to grow your wealth.
It doesn’t seem much but investing a small amount on a regular basis is the key to wealth. You’ll be stunned at how quickly it grows. The worst thing you could do is think “it’s not enough so I’ll just spend it“.
The one big hurdle is how to make that small amount work hard. Unfortunately, small amounts can often be slugged with high fees, but there are options.
1. Open an online savings account
Set up an online savings account to act as a holding station. Park any extra money there while you figure out the best place to invest it. The fees are minimal on online-only accounts and the interest rates are generally better (though bear in mind that none are especially good).
Set the account up so you can quickly deposit any unexpected excess dollars whenever they appear. Money an elderly aunt sends on your birthday, an unexpected bonus from work, or weekly cash saved from giving up the smokes or making your own coffee.
2. Pay off your debts
The disadvantage of this is that it’s not obvious that anything has happened to your money. You can’t see it grow, so there’s no instant gratification of “doing the right thing”. Such as you get when you grow an investment or savings account.
However, paying off debt is by far the best way to invest a small amount of money and consistently grow your wealth. If the $100 or $1000 is paid off the mortgage, it’s providing a tax-free return equivalent to your interest rate.
Even better, use the money to pay down an outstanding credit card balance and enjoy a tax-free benefit of 10-20 per cent, depending on the card.
3. Make a personal super contribution
The frightening fact is that if you want to retire on half your current salary, you will need to contribute 12 per cent of your current salary every year for your working life.
That is a significant difference to the 10 per cent your boss is currently paying.
But a word of warning. Small contributions to superannuation can often be slugged with high management fees from the fund manager, so make sure you are in a low cost fund before you use this strategy to grow your wealth.
4. Buy blue chip shares
Australia has one of the world’s highest share ownership rates, with around 35% of adults owning shares outside of their superannuation.
While $1000 is too small to buy yourself a decent portfolio of shares, there is no reason why a lazy thousand can’t be invested in a solid blue chip company.
Alternatively, find a listed investment company or fund… companies which invest in other shares.
Buy through an online broker to keep costs down and for a small investment you have bought into diversified share.
5. Gain diversity in a balanced fund
The money is then invested in a cross section of shares, property and fixed interest.
A good mix is a fund with 50 to 60 per cent invested in growth assets, like shares, and 30 to 40 per cent in safer fixed interest investments.
Also look for a fund with a regular savings facility which can be as low as $100 a time.
6. Improve your home
The family home always offers opportunities for good investment. Rises in value aren’t taxed, so look for home improvements that will add even more value to your investment castle.
For $1000 there is a lot you can do. A fresh coat of paint inside or out, some landscaping or paving, new carpet for the living room are just some of the possibilities.
Look at improving the energy efficiency of the home. The new energy efficient light bulbs, a new fridge replacing the old electricity guzzler, increased insulation or skylights for better natural lighting will not only improve the capital value of the house but create ongoing power savings.
7. Invest in yourself to really grow your wealth
Finally, remember that improving your skills is an investment in itself.
Perhaps consider a public speaking course or getting up-to-date with computer training. Adding to your work skills is a must in this current social and economic climate.
Any outlay should pay for itself in career advancement in the long run.