You Don't Need to Be Rich to Start Investing

How to Build Wealth on a Regular Person's Budget

Let me guess. You've thought about investing but figured you needed a pile of cash to get started. Maybe you've heard people throw around numbers like $10,000 or $25,000 as if that's just pocket change for most folks.

Here's the truth: that's nonsense.

You don't need to be wealthy to start investing. In fact, starting small is often the smartest move you can make. The real mistake isn't starting with a small amount. It's not starting at all.

So let's talk about how regular people with regular paychecks can start building wealth, even if you're working with a tight budget.

Busting the Biggest Myth About Investing

Somewhere along the way, investing got a reputation as something only rich people do. You know, the folks with summer homes and country club memberships. But that's just not reality anymore.

These days, you can start investing with as little as $50 or $100. Some platforms will even let you invest with less than that. The barrier to entry has never been lower.

The key is understanding that investing isn't about having a ton of money right now. It's about consistently putting away what you can and letting time do the heavy lifting.

Think of it this way: would you rather have $50 sitting in your checking account doing nothing, or $50 working for you and potentially growing over the next 10, 20, or 30 years? The answer seems pretty obvious when you put it like that.

The Magic of Starting Small (And Starting Now)

Here's something that might surprise you. Someone who starts investing $100 a month at age 25 can end up with more money than someone who starts investing $300 a month at age 45. How? Time.

When you invest, your money has the potential to earn returns. Then those returns can earn returns. And those returns can earn returns on top of that. It's called compound growth, and it's basically the closest thing to magic in the financial world.

Let me give you a real example. Say you're 30 years old and you start putting away $100 every month. If your investments averaged a 7% annual return (which is a reasonable long-term average, though not guaranteed), by the time you're 65, you could have around $170,000.

Now, if you wait until you're 40 to start with that same $100 a month, you'd end up with about $76,000. That 10-year delay cost you nearly $100,000. Ouch.

The point? Start where you are with what you have. Even if it's small, it matters.

Step 1: Get Your Financial House in Order First

Before you start investing, you need to handle a couple of basics. I know, I know. This is the boring part. But trust me, skipping these steps can come back to bite you.

Pay Off High-Interest Debt

If you've got credit card debt charging you 18% or 20% interest, pay that off before you invest. Why? Because there's no investment out there that's reliably going to earn you 18% to 20% a year. Paying off that debt is essentially giving yourself a guaranteed return.

Think of it this way: you wouldn't borrow money at 20% to invest it at 7%. That would be ridiculous. But that's exactly what you're doing if you invest while carrying high-interest debt.

Build a Small Emergency Fund

You don't need six months of expenses saved up before you can invest (though that's a good long-term goal). But you should have at least $500 to $1,000 set aside for emergencies.

Why? Because life happens. Your car breaks down. Your water heater dies. Your kid needs glasses. Without an emergency cushion, you'll end up pulling money out of your investments at the worst possible time, often at a loss.

Once you've tackled these two things, you're ready to start investing.

Step 2: Take Advantage of Free Money (Yes, Really)

If your employer offers a retirement plan like a 401(k) or 403(b) and they match your contributions, this is your first stop. Not your second. Not your third. Your first.

Here's how it works: let's say your employer matches 50% of what you put in, up to 6% of your salary. If you make $40,000 a year and contribute 6% ($2,400), your employer throws in another $1,200. That's free money. That's an instant 50% return before your investments even do anything.

Not taking advantage of an employer match is like leaving a bonus check on the table and walking away. Don't do that.

If your employer doesn't offer a match, or you don't have access to a workplace retirement plan, don't worry. You've still got options. Move on to Step 3.

Step 3: Open an IRA and Make It Automatic

An IRA, or Individual Retirement Account, is a tax-advantaged account that anyone with earned income can open. There are two main types:

Traditional IRA: You might get a tax deduction now for the money you contribute, and it grows tax-deferred. You'll pay taxes when you take the money out in retirement.

Roth IRA: You don't get a tax deduction now, but your money grows tax-free and you won't pay taxes when you take it out in retirement (as long as you follow the rules).

Which one is better? It depends on your situation. Generally, if you're younger and in a lower tax bracket now, a Roth IRA can make a lot of sense. If you're in a higher tax bracket and want the deduction now, a Traditional IRA might be the way to go.

The key here is to set up automatic contributions. Have money moved from your checking account to your IRA every month without you having to think about it. Even if it's just $50 or $100 a month, automation makes it happen consistently.

Out of sight, out of mind, and into your future. That's the goal.

Keep It Simple: What to Actually Invest In

Okay, so you've got an account open and you're ready to invest. Now what?

Here's where a lot of people get overwhelmed. They think they need to pick individual stocks or become some kind of market expert. Spoiler alert: you don't.

For most people just getting started, the simplest and often smartest approach is to invest in low-cost index funds or target-date funds.

Index Funds: These are funds that track a market index, like the S&P 500 (which represents 500 of the largest U.S. companies). Instead of trying to pick winners, you own a little piece of everything. It's diversification in one package.

Target-Date Funds: These funds automatically adjust their mix of stocks and bonds based on when you plan to retire. If you're retiring around 2050, you'd pick a 2050 target-date fund. It starts out more aggressive when you're young and gradually gets more conservative as you get closer to retirement.

Both options are simple, low-cost, and take the guesswork out of investing. You don't need to be a stock picker or spend hours researching companies. Just set it and (mostly) forget it.

If this sounds too simple to work, good. The best investment strategies usually are.

Time Is Your Biggest Advantage (Don't Waste It)

I mentioned compound growth earlier, but it's worth hammering home again because it's that important.

When you're young, you have something that no amount of money can buy: time. The longer your money has to grow, the more powerful compound growth becomes.

Let's say two people each want to have $500,000 saved by age 65.

• Person A starts at age 25 and invests $200 a month.
• Person B waits until age 35 and invests $400 a month.

Assuming both earn a 7% average annual return, Person A ends up with more money even though they invested less each month. Why? They had 10 extra years for their money to grow.

The takeaway? Don't wait for the "perfect" time to start. There's no such thing. Start now, even if it's small.

Common Mistakes to Avoid

Alright, let's talk about the things that trip people up when they're starting out.

Trying to Time the Market

You'll hear people say things like, "I'm waiting for the market to drop before I invest." Here's the problem: nobody knows when the market is going to drop. Not me, not the talking heads on TV, not your neighbor who swears he's got it figured out.

Trying to time the market usually means you end up sitting on the sidelines while the market goes up. Just start investing consistently and let time smooth out the ups and downs.

Letting Emotions Drive Your Decisions

The market will go down. Sometimes significantly. It's not a matter of if, it's a matter of when. When that happens, your instinct might be to sell everything and hide under the bed.

Resist that urge. The worst thing you can do is sell when the market is down, locking in your losses. History shows that the market has always recovered over the long term. Staying invested through the rough patches is how you actually build wealth.

Not Diversifying

Putting all your money into one stock or one sector is risky. What if that company goes under? What if that industry tanks? Diversification (spreading your money across different investments) helps reduce risk. This is why index funds and target-date funds can be so helpful for beginners.

Paying Too Much in Fees

Every dollar you pay in fees is a dollar that's not working for you. Look for low-cost index funds with expense ratios under 0.20%. Over decades, high fees can eat up a significant chunk of your returns.

Keep costs low, keep things simple, and stay consistent. That's the recipe.

You Don't Have to Do This Alone

Look, investing can feel overwhelming when you're just starting out. There's a lot of information out there, and not all of it is good. If you're not sure where to begin or you want someone to walk you through your options, that's what we're here for.

At Iron Eagle Advisors, we work with regular folks in Charlottesville who are building their financial futures one step at a time. We're not interested in selling you complicated products or making you feel bad about where you're starting from. We just want to help you make smart decisions with your money.

Whether you've got $50 a month to invest or $500, we can help you create a plan that makes sense for your situation. No judgment, no pressure, just straightforward guidance.

Because here's the thing: everyone starts somewhere. The people with millions in retirement accounts? They started with their first $100 too. The only difference is they got started.

Ready to Start Building Wealth on Your Budget?

Let's talk about creating an investment plan that works for you. Schedule a free consultation with Iron Eagle Advisors today.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk. 

A Roth IRA offers tax deferral on any earnings in the account. Qualified withdrawals of earnings from the account are tax-free. Withdrawals of earnings prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Limitations and restrictions may apply.

Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal.  Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax.