If you’re new to investing, you might be asking yourself how much you should invest, or if you even have enough money to invest. The truth is: you don’t have to wait until you have hundreds of thousands of dollars in the bank to start investing.
Investing can look different across demographics and tax brackets. Determining how much you should be investing starts by taking stock of your unique financial situation and then figuring out an investment strategy that works for you and your budget.
Many of the experts we spoke with suggested, as a general rule, to invest a set percentage of your after-tax income. Although that percentage can vary depending on your income, savings, and debts. “Ideally, you’ll invest somewhere around 15%–25% of your post-tax income,” says Mark Henry, founder and CEO at Alloy Wealth Management. “If you need to start smaller and work your way up to that goal, that’s fine. The important part is that you actually start.”
Some budgeting strategies account for this, such as the 50/30/20 budgeting strategy, which breaks your monthly budget into three categories: your needs (50%), wants (30%), and the remaining 20% for debt repayment, savings, and investments.
For some, investing 10% of their monthly income isn’t feasible, but that shouldn’t be a reason to not invest altogether.
According to the Pew Research Center, even among families who earn less than $35,000 per year, one-in-five have assets in the stock market. Investing is less about how much you’re investing and more about how much time your investment has to compound or appreciate in value.
“[It’s] all about balancing financial priorities,” says Jeremy Bohne, Founder at Paceline Wealth Management, LLC. “This starts with near-term cash needs [such as] large purchases [or] [an] emergency fund, and once that is achieved the priority is understanding cash flow [or] excess money that can be invested against what would be needed to achieve one’s financial goals, like retiring at a certain age.”
If investing 15% of your income sounds like more than your budget can handle, you can start with a set dollar amount and be consistent about it. Investing even a few dollars each month can sometimes be enough to see a return if you’re using the right investment strategy.
In some cases, investing even $10 can feel like you’re stretching your budget too thin if your financial house isn’t in order. Before landing on how much you want to set aside, consider these key factors:
Setting clear investment goals can help you determine if you’re investing the right amount, at the right time, and in the right mix of assets. It can help you set a timeline for yourself and give you a starting point for how much you need to start investing, and what that will translate to for your monthly or yearly budget.
Think about:
Expect that your investment strategy can and likely will change over time. It’s important to check in with yourself and your budget regularly to make sure that the amount you’re investing each month still feels reasonable. In some cases, you might decide to invest more if you see an increase in your income, or you might decide to hit pause on contributing more to your investment account if you’ve recently experienced some sort of financial hardship.
“Investments should be re-evaluated on a month to month basis. Especially now, as macro conditions change frequently,” says Wang. “Investors should take notice of how their investments are doing and might want to consider adjusting their investment strategy.”
EDITORIAL DISCLOSURE: The advice, opinions, or rankings contained in this article are solely those of the Fortune Recommends™editorial team. This content has not been reviewed or endorsed by any of our affiliate partners or other third parties.
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