ACCUMULATING CAPITAL TO START INVESTING

There are countless investment plans and strategies that have the potential of making your dollars work harder and grow faster. While each program has characteristics that set it apart from the others, they all have one important thing in common. In order to participate you must have capital to invest.

For first-time investors, finding the necessary capital can become a major obstacle to investing for the future. Since most of us cannot count on winning the lottery or come into an inheritance, a systematic savings program generally represents your best chance to accumulate a beginning stake. Whether you earn $20,000 a year or $200,000, saving doesn’t just happen—you have to have a plan and stick to it. Here are a few   ways to start to build new habits that will enable you to collect cash for investment.

Start Small
Why not drop the money you would casually spend on lottery tickets or a grand latte into a cookie jar? Add the extra change in your pocket at the end of the day. Every so often, convert the change to bills at your local bank or supermarket and then deposit everything you have accumulated into a savings account. This may not be enough to build a true investment account, but it’s a start. Collecting $1,000 or $1,200 per year with one or more simple saving schemes is not out of the question—if you are committed.

Back Up Your Commitment
A critical element in developing a savings habit is to keep the money you don’t spend out of your usual spending stream. If you were a smoker at one time and quit, did you save any money? Probably not. Instead, the money you didn’t spend on cigarettes slipped into your spending stream and disappeared.

One proven approach is to isolate your savings deposit before you have a chance to change your mind. The working principle here is “if you don’t see it, you don’t spend it.” If your employer has a credit union, have a predetermined amount deducted from every paycheck and placed in your account. If you get a raise, ask the credit union to increase your payroll deduction to include the after-tax amount of the raise. Your spending habits will remain constant and your credit union balance will grow even faster.

Pay Yourself First
Paying yourself first is a cliché you have probably heard before. Nonetheless, it is an important concept that can help you protect the security of you and your family. Since your family is your top priority, it only makes sense that ensuring their long-term well-being should be at the top of your financial checklist each pay-day. For many however, the first priority is paying bills and taking care of day-to-day expenses. You promise yourself you will put whatever is left into a savings account. But at the end of the month, little, if anything, is left. Instead of you being at the top, you have relegated yourself to the bottom of your financial totem pole.

To help you break this pattern, add investing to your monthly bills. Open a mutual fund account and authorize the company to deduct a certain amount from your bank account each month. What you have left is your spendable cash. If your attitude is right, you will easily and willingly adapt your spending to the remaining total.