I have this question that has been bugging me for months, I hope someone here would help me find the answer. Your guidance is truly appreciated.
Allow me to describe my current situation. I am 27 years old. I have been working as an accounting clerk for a small company that sells sporting goods. Every month I am only able to save $300. That is more than 10% of my meager paycheck. I am still single thus I pay heavy personal income tax
I would like to raise $10,000 to begin investing. I figure to get to that amount it would take 33.33 months (10,000/300) which is a very long time.
It seems impossible for me to find a second job due to odd working schedule, I normally get home around 9 PM. I would not get any promotion anytime soon unless I move out of my small hometown to find a better job elsewhere.
Could someone please give me some advice on how to raise that much money in one year or less? When I find my guidance, I would be happy to report my progress here Thank you guys and gals!
Thu Jan 07, 2016 6:47 am
christcorp Preferred Member
Cash: $ 39.45
Joined: 05 Mar 2015
This is just my opinion. It's free, so take it for what it's worth.
1. You don't RAISE MONEY to invest. People who raise money to invest, already have money. In other words, if you have an idea, product, service, etc. that you want to promote, you might look for "Investors" to invest in you. That is "Raising Money". But you don't "Raise Money" to invest. That's simply robbing peter to pay pay. You SAVE money to invest, then you roll those investments over to increase your investments.
2. If the $300 you save each month is MORE than 10% of your income, then that means you probably only make about $30,000 a year. (Gross not net).
3. For some reason, you think $10,000 is some magical number. Do you have some "Investment" in mind that requires $10,000? Remember, ALL INVESTMENTS HAVE RISKS!!! Doesn't matter if it's the stock market, real estate, commodities, etc. So, what happens if your $10,000 investment goes bad?
Now, with the pessimism out of the way, here are my thoughts on options.
1. Find a NEW JOB that pays more. If you can't find an additional part time job, then maybe you need to look at a new job that pays better.
2. Live cheaper. Maybe you find a less expensive apartment. If you have a car loan, maybe you should have a less expensive vehicle without a loan so high.
3. Get rid of all debt. If you have credit cards, student loan, car loans, etc. get rid of those debts. That's an automatic RETURN on your investment. Debt free, minus long term loans like a mortgage that actually is an equity, is the goal. Most real estate appreciates in value in time. Cars don't appreciate. Student loans don't appreciate. Credit cards don't provide equity. Those are all negatives.
Bottom line. The BEST INVESTMENTS is to become "Debt Free". There is no better investment. 20-30 years ago, it was different. Investments paid quite a bit more in returns that debt did. You could max out loans and invest. This way, you could pay the debt rates and still profit. That isn't the way it is today. Savings accounts, CD's, even the stock market can't guarantee you a return higher than what you're paying on debt interest. So, the logical best investment, is to eliminate any and all debt that doesn't appreciate in equity or value; (Which is really only real estate). The typical return people speak of for the S&P (Which use to me the STANDARD for investing) of 10-12% is from the old days. Since inception, (1928), the S&P 500 has had a 10% return. But over the last 10 years, the average return is about 4.9%. Again; less than most mortgages or other debt. Yet, over the last 5 years, it's done well. About 10%. Over the last year, it's been a NEGATIVE return. The point is, today's S&P and Stock market, isn't the same market at 20-30 years ago. That's because our economy isn't the same as 20-30 years ago. We are now $19 TRILLION in debt and the market is inflated.
So, nothing wrong with investing. But the first investment needs to be to be debt free. The next thing, is to find a better paying job, and/or reduce your expenses. Then, you can look into investing. But you should be looking at investing LONG TERM. Investing $10,000 isn't a long term investment. That looks like something you want to drop money into and is risky. Nothing wrong with risk if you can afford it. I've invested $20,000 and lost it. Not a problem when I could afford it. But my investments for retirement and such are less risky, uses time on my side, uses dollar cost averaging where I invest a little each month for the last 30 years.
Sat Jan 09, 2016 6:58 pm
oldguy Senior Member
Cash: $ 717.80
Joined: 21 May 2006
quote: I am still single thus I pay heavy personal income tax
I guess it depends on "heavy", for $30,000 income your tax bill is about $1600.
quote: unless I move out of my small hometown to find a better job elsewhere.
Yeah, that's a choice that confronts most of us. The high paying jobs are normally in the larger population centers - small towns usually have local service and retail businesses. When I was in my 20s I drove 18-wheelers, that paid well, quite a bit more than the min-wage retail jobs, and I could usually get OT of hours. These days I see a sign on the back of many trucks on the freeway - "drivers wanted, call 1-800-xx". ie, there is a demand.
Christcorp points out the traditional ways to control risk and manage wealth with a guaranteed outcome. OTOH, I became wealthy by increasing my risk levels (and managing risk). Your wealth-building years are now - you can take risk for about 33 years (age 60) and then move into your wealth-preservation years.
The power of compound interest is surprising - your $300/m, invested at 11%/yr, will be $1,100,000. But a better plan is to move, change jobs, and start investing $500/m. That's $1,800,000. Better yet, bump up that $500/m by 5% each year, then it's $3,000,000. And, as christcorp said, invest some each month for over 30 years, incremental steady investing, always accumulating, never selling.
Sat Jan 09, 2016 9:25 pm
christcorp Preferred Member
Cash: $ 39.45
Joined: 05 Mar 2015
You bring up an excellent observation Oldguy. Time and risk. This individual, younger than 30 years old, has time, and therefor risk on their side. They can definitely take more risk. And that's where the dollar cost averaging of investing regularly each month, as a long rang plan comes in.You, I, and most others were able to invest monthly in things such as the stock market, equities, S&P,, commodities, etc.; knowing that in the long run, we'll be ok. Obviously, not the same options that someone at 50 years old has.
But back to the original posters comment about "Raising" $10,000 to invest. That, I am not a big fan of. Don't get me wrong. I have "Invested" large chunks/blocks of money in my time. But that type of investment is usually higher risk and I only would do such a thing if I already had my "Long Term" investments taken care of (IRA, 401k, etc), and it was money that I could afford to lose. I.e. I've taken large blocks of money and invested in a new IPO, business venture, collectible, etc. It was money I could afford to "Gamble" with and possibly lose. But I would never try and "Raise" that money to invest. It was money I already had.
This was a common practice in the 80's and 90's when people would take equity out of their homes and invest it. Definitely not one of my recommendations. I consider your home as a different type of investment. If you lose your job, run into financial issues, etc. you want to at least have your home. A place to live, and a source of equity. No problem playing with "Investment Property", I just don't recommend doing it with your primary residence. Not to be confused with refinancing or similar. Simply saying not to use your residence as an investment.
But back to the OP. Get a better job, or at least start investing the $300 a month you have. But don't borrow or try to "Raise" money to invest,. Not until you have your long range retirement investments set up.
Sun Jan 10, 2016 6:43 pm
dozulu Preferred Member
Cash: $ 40.15
Joined: 30 Jun 2015
Location: Eastern Oregon
There are two ways to free up more money.
1. Earn more.
2. Spend less.
Although just about everyone focuses on making more money, the spend less is not so popular in our consumer culture.
I have been visiting a forum that works both sides of the equation. Mr Money Mustache retired at age 30. His journey has sparked a movement with thiusands of people whonare working toward FIRE (Financial Independence/REtirement). The forums are a great source of ideas to save more, spend less and retire young.
Becoming truly frugal, thinking about money differently will change how you spend. That will give you more to invest. You have a solid start with your current saving percentage. But there are people over there who save 50+% of what they make! I am not that good yet, but I am learning!
The fact that you are mentally into saving, gives you an edge, most only worry about how much they can borrow!