How To Start Investing With Little Money

How To Start Investing With Little Money

I always imagined that having a solid investment portfolio requires a lot of capital and a very strong financial position. When I was 28 years old I had progressed in my career to a point where I was making enough money to satisfy basic needs, owned a home and was able to set aside a little bit of my income for rainy days.

At that point I still didn't think that I was ready to start investing, simply because I thought with the amount I have and I can contribute every month it would take forever to build a decent size portfolio that will actually help me build a more stable financial future.

You can start investing with little money. Investing in yourself doesn't require a lot of capital, it just takes getting started. Here's how I started investing with little money...

What happened next?

Through a casual conversation with a friend I addressed some of my concerns about investing. I then discovered that I wasn't well informed of all that is available in the market and that I should really sit down and talk to a Financial Advisor. The very next morning I booked a meeting with one. After about an hour of conversation I realized two things:

  1. I don't know what I don't know, so it is always best to share my concerns with professionals in their field and let them do what they do best. 
  2. I don't need a lot of capital (almost any) to start investing. All I need is good credit and a solid monthly financial plan.

It has been 6 years now and I am proud to share what happened since I met Andrei. I was introduced to the concept of "borrowing to invest". I'll break down the math of how everything worked out.

Please note that all of the numbers below are for illustration purposes only and that returns in the financial markets are never guaranteed.

However, this is my case:

I borrowed $200K to invest in 2012. I was servicing the interest on the loan every month at $668 (this number changed with the changes in the prime interest rate). I was not paying off any of the initial $200K I borrowed. All I did was service the interest.

In my first year I spent $8,016 in interest payments. This $8,016 was tax deductible, which in my case meant that I will get almost half of it back on my tax return. The gains I had in my first year on my investments were 12%. That is $24,000 in gains. At that point I had the option of withdrawing those $24,000 in order to service the interest. I chose not to and continued to service the interest on my own.

My investments have done well. 6 years later at an average of 11.4% return per year I now have $343K. This is without making any additional monthly contributions. If I decide to to payback the $200K back today and withdraw from my funds I'll have 143K from 6 years of investing with borrowed capital. I have spent a little over $48,000 in servicing the loan. Which leaves me with almost 100K in gains after all is said and done.

Is borrowing to invest right for you?

Depending on the type of loan, interest rate, and your personal financial goals and objectives, borrowing to invest may be a strategy worth considering. My advice to all of you is to talk to a Financial Advisor early in your life and start building a portfolio using an investment loan before you hit the age of 30. Just remember, you don't know what you don't know, so share your concerns with professionals in their field and let them do what they do best.

You can start investing with little money, you don't need a lot of capital and be in a very strong financial position. It's never too late to start building a decent size portfolio that will help you build a more stable financial future. If borrowing to invest makes sense for you, start today by contacting AWealth for more details on the program.

7 Ways to Save a Down Payment For a House

7 Ways to Save a Down Payment For a House

Saving for a down payment is one of the least exciting and most difficult parts of the home buying process for a first-time home buyer. If you have never had more than a few thousand dollars in the bank, setting aside five figures or more as a down payment may seem impossible. But, saving for a down payment for a house is not as difficult as you may think.

Here are 5 ways to save a down payment for a house:

1. Prioritize

It is all about priorities when it comes to saving a down payment for a house. Are you the type of person who goes out to eat all the time, go on expensive vacations, and buy the latest stuff? Or are you the type of person who is willing to cut down on unnecessary expenses to save for a house?

So if saving for a down payment is one of your priorities, then it’s important to identify where you can cut back. The best way to find areas to cut back is to do a budget. This will help you put more money into your savings.

2. Pay off your debts

You cannot save money if you have outstanding debts. The first thing you need to do is to plan and dedicate yourself to paying off all your debts, commonly referred to as debt consolidation. Start by paying off your debt with the highest amount and interest rate. Then you should take the minimum payment from that debt and use it to help you pay off the next small debt with the highest interest rate.

Once you have paid these off, you can use the two minimum payments that you used to pay for those smaller debts to help you pay off your next debt faster. This will pretty much cause a snowball effect because the minimum payments you are freeing up will help you to make larger and larger payments against one debt at a time.

Related Article: Should You Contribute to Your TFSA or Your RRSP?

3. Get rid of one car

Do you have a partner and do you have two cars? You should consider getting rid of one car. Getting rid of a car will help you save thousands of dollars because you will save on one car payment, gas, insurance, and maintenance every month.

You can move closer to where you work, consider taking the public transit, and even carpooling to work. However, if this does not work for you, you can park your car for a couple of months in the garage, then sell your car once you see that it is working for you.

4.  Save extra income from work

Let’s say you get a bonus, tax refunds, or even a raise. You should take that extra money and save it into a separate savings account. It might not seem much, but it’ll eventually add up.

5. Borrow from your Registered Retirement Savings Plan (RRSP)

If you already have some money invested into your RRSPs, this is a great way to come up with a down payment for your house. However, if you do not, this is a good option to save money for your RRSP because you can get a tax credit to help reduce your taxes. You should contact your financial advisor to see if this option is right for you.

6. Use a Tax Free Savings Account (TFSA)

Another good option to come up with a down payment for your house is using a TFSA account. The money you put into your TFSA will grow because you do not have to pay income tax on the money you earn. Again, you should contact your financial advisor to see if this option is right for you.

7. Look into the First-Time Home Buyers’ Plan (HBP)

You should look into the first-time Home Buyers’ Plan. This will make it easier for first-time home buyers to afford a home. The HBP is a program that allows you to withdraw up to $25,000 in a calendar year from your RRSPs to buy your home

5 Things To Do When You Retire

5 Things To Do When You Retire

Having a plan on how to spend your money after your retirement is crucial to your happiness and overall wellness. It is such a significant milestone to reach retirement after having worked actively for several years, taking care of your family, and saving for this day. A good plan allows you to have a seamless transition from the working life to your retirement.

Here are 5 things you should do when you retire:

1. Travel

Traveling to another country is a good idea now that you are no longer restricted by limited vacation time. You need to see a new environment apart from your present home where you were preoccupied with tasks such catering to your family. A getaway experience will help you refresh yourself and transition you into the phase of your retirement.

2. Volunteer

Many retirees find volunteering to be a rewarding activity. If you love staying around children, you could volunteer at mentoring programs. You can also volunteer to assist at a library or a hospital, join a local volunteer group, or even Peace Corps. However, you should consider what you enjoy doing before you choose where you would like to to volunteer.

3. Get a Hobby 

Before you eventually retire, you should get a hobby that you’re passionate about. Start the hobby while you’re still working. This may be writing, knitting, singing, dancing, quilting, gardening, painting, woodworking, gardening, and more. The list is inexhaustible so you just need to identify what gets you excited about. This will give you an idea of the hobby you could be spending quality time on when you retire.

4. Take Up a Sport

You will have a lot of time to retire that’s why it’s good to be involve in a sport in order to engage yourself by practicing, exercising and playing. Apart from using your time wisely, it will also help you to keep fit. Meanwhile, remember the you are choosing a sport for fun and not to win a major champion or anything, so be careful and don’t end up hurting yourself. You can choose from golf, tennis, boating, fishing, biking, and many more.

4. Start a Business

Although you are looking for way to spend he abundant time you’ll have when you retire. You should think about a small business to keep yourself busy. However, don’t invest too much capital in any new business. You can search for any online business that is convenient for your. Just remember to enjoy your time and try to live within your means to have great moments after retirement.