Living frugally means being careful with your money; investment means taking risks. So how can the two go together? Investing in practically anything on earth can backfire, and leave you worse off than when you began. All that withstanding, investing and frugal living have a surprising amount in common. Furthermore, those who follow a frugal, careful lifestyle can actually be the savviest and most well-rewarded investors in the world.
This post contains affiliate links. If you click a link and make a purchase, I may receive a small commission at no extra cost to you! Also, I am in no way a licensed financial advisor. Investing money is something you can decide for yourself what risks you’re taking.
The Similarities Between Frugality and Investing
So, how are investing and frugality similar, despite being seeming opposites?
Firstly, they are both centered around conserving and expanding your wealth. Living a frugal lifestyle ensures you have more money saved away for a rainy day, and prioritizes financial growth over a luxury lifestyle. This means living within your means and not overspending.
Investing also priorities financial gain, involving calculated decisions which enable you to further increase your wealth. Frugalism’s care, precision and innovative needs balance perfectly with that of an investor.
But, How Do I Get Money to Invest?
The answer is pretty easy: cut expenses or make more money.
I have done a lot of research on how to cut expenses – most of it from personal experience. You can read more on how to reduce expenses here >>>
- 24 Things We No Longer Buy
- How We Began to Slash Our Budget
- 6 Tips to Budget Like a Minimalist
- How to Complete a Spending Audit
Once you free up any amount of money from budget and after you’ve paid off pressing debts and established an emergency fund, then you should start investing that extra money every month.
Why wait until debt is paid down and an emergency fund is established? What if you suddenly lost your job and the stock market tanked (like early 2020)? Not only would you be out of a paycheck, but there is probably going to be a loss on your investment account, too. It’s crazy important to have enough savings to support yourself if needed and for pressing debts to be paid off.
Making more money will be more beneficial long-term when done in conjuction with reducing expenses. You could make more money by getting a second job, starting a blog (I recommend Site Ground for hosting), selling your creations on Etsy, resell thrifted clothing on eBay, or really anything!
With more money earned, you have more to invest! The more you invest (wisely), the more returns you’ll see on your account. Ultimately, what you invest and how you invest is up to you!
How Do I Start Investing?
If you want to know more about investing, contact a financial advisor or go directly through a safe trading channel online (more on these below). Ensure you conduct plenty of well-informed research before you begin investing; as a frugalist, you’ll understand the importance of taking things one step at a time – a methodical approach is best.
Once you have conducted your research and consulted an advisor, it’s time to choose your industry. Many people invest small amounts of money in stocks until they get the hang of it (like Acorns or M1).
You can also check Forex Broker.
If you wish to invest, but frugalist at heart who doesn’t like taking risks, there’s a level of calculation to be done. Of course, investing does pose a financial risk. This is particularly true if you pour a lot of money into one investment. However, smaller investments over a number of years can suit frugal people better, ensuring that no huge losses occur.
There are a great number of fancy apps in which you can invest and trade, but two really stand out: Acorns and M1.
Of course, if you are completely unfamiliar with any type of investing, you should seek guidance from a financial advisor. A consultation is normally free of charge and advisors can be found through your banking institution.
Let me start by saying this: if this would have been around while I was a college student, that’s when I would have started use Acorns. It’s that easy!
Acorns allows you to link your debit card to your portfolio. You can transfer money into your Acorns account or opt to “round up” your purchases. So if coffee is $3.40, you get $0.60 invested – a total of $4 comes from your checking account (part to the coffee shop, the other part to your Acorns account).
It’s automated enough that you don’t have to change a thing once you get started. Acorns also provides some really informational article about investing, retirement, and the like.
The “lite” version is only $1 a month (which is pretty reasonable). You get extra bonuses for shopping within the app at select retailers AND you get a $5 deposit when you use my link below to sign up! Score!
We personally use M1 for investing. The BEST thing about M1 is its “set it and forget it” automation. After initially funding our account online, we have money automatically transferred from our checking account every single month. This way we are constantly saving and investing more.
There is also no worries about buying too much of one product or stock. When starting your portfolio with M1, you delegate what percentage of funds go where. Every time money is added, it auto balances for you.
This type of investment platform is NOT for the day trader who constantly buys and sells stocks. People like us (frugal people!) who are in this for the long term – to build long term wealth – that’s who this platform is for. Of course, you can buy and sell as you see fit.
There are no fee associated with M1 when you open the most basic account (which is what we have). The upgraded version does have a fee, but we found that we simply don’t need that functionality.
The Art Of Patience
Your investments can take a long time to return. This is one thing that disappoints first-timers; if you want a get-rich-quick answer, investing is not that. Investing in a growing business is a great idea – imagine if you had invested in Amazon twenty years ago? – but your dividends may not become substantial, if at all, for many years. For those who love to live a frugal life, investing is not the big, scary risk it seems to be – as long as you see it as a long-term project, not a short-term cash grab.