SECURE THE BAG: How To Invest and Save When You Are Broke

The first time someone told me to start thinking seriously about investments, my housemates and I were eating ramen noodles for dinner for the third time in a week and I was just waiting for the day my direct deposit would hit my account. Most of us in the room were thinking the same thing: “we’re too broke to save, let alone invest.” The second dilemma was that we did not know anything about how to invest our own money. Fast forward to four years after college, and even the Economics majors didn’t know how to invest whatever change they had. College taught us how to make more money for people who already have money or how to get a job and live paycheck to paycheck, but no one taught the broke students how to invest or save properly. We all thought you needed to work very hard, somehow get rich along the way, then invest. Since we’re all trying to live on a banjo (read here for term reference), I spoke to some people on how they were able to transform their finances from “mandatory cup ramen to investment” budget, and how we can all do the same. Even if you’re not on the “obligatory ramen for dinner everyday” level of  broke, these are some gems that would help you too.

• TIME IS NOT MONEY: Your active time is not going to give you enough money. If you rely on the amount of time that you spend at work to get you enough income to survive, you will be working for the rest of your life and you will always be dependent on your paycheck for survival. You need a source of Passive Income: an outlet that can yield income for you with minimal active energy and regardless of the time of the day. The main sources of passive income are investments and savings. You need to start thinking about how to turn a portion of your active income (paycheck from active labor) into passive income. 
• GET INTO THE MINDSET: If your mind isn’t right, your money won’t be right. If you keep thinking that you’re too broke to save/invest, but you’re buying VIP tickets to see Beyoncé, you will never get into the mindset to save/invest (she’s great, but your finances aren’t). You have to start thinking about how you can reduce your expenses in order to earn passive income. Once you are able to train your mind to separate need from desires, you can start allocating less of your income to desires and start saving. 
• BECOME NOSEY: Since no one teaches us how to invest, our only teachers are experience and resources. The weird thing about people is that no one wants to talk about money unless you ask them. The best part about being young is that everyone thinks we are airheads, so they are always willing to give both solicited and unsolicited advice about everything. If there is someone you admire, ask if and how they are investing/saving. If no one around you has a seemingly stable financial life, the internet and the library are going to be your best friends. For every question that you have, there is either a book for it or someone on the internet talking and writing about it.
• DON’T DO THE SAME THING AND EXPECT A DIFFERENT RESULT: When you receive advice about money, analyze the source of the information. If the person talking to you is living the life that you want to live, emulate them. If their finances are not where you want your finances to be, you need to change some things about their advice in order to achieve your financial goal. That is why you need different sources of information, so that you can have a diversified pool of advice to choose from.
• DON’T PLAY WITH WHAT YOU NEED: The greatest mistake about investments and savings is not doing either. The second mistake is thinking that it’ll work like magic. Investments take time to give any meaningful yield. However, if you invest all your savings, you’ll have nothing to use for a rainy day. When the rainy day comes (it will definitely come), you are forced to either sell your investments at a loss or accrue debt. Always have a substantial amount of cash for rainy days in your savings, then you can invest a portion of your savings for passive income. The more you save, the more you will be able to have extra cash to invest. As long as you have a steady source of income (allowance, financial aid, a job, anything that brings in money), you are not too broke to save.
• LEARN FROM EXPERIENCE: For most of us, no one ever told us about investments growing up because they didn’t know about it. We have to learn from experience. Invest a little in stocks that you are interested in, watch how it moves in relation to the market, use that little investment as your experiment to learn, and then decide if you have the risk tolerance to invest more or less in this type of investment. Whatever you do, don’t stop learning about investments until you find one that suits you.
  

  

DISCLAIMER: The following resources are not endorsed or sponsored or recommended. These are simply suggestions made by the interviewees. It is up to you to do your research on each resource and you are fully responsible for the outcome of your decision.

1. Read:Rich Dad, Poor Dad by Robert Kiyosaki; Thinking Fast and Slow by Daniel Kahneman; The Richest Man in Babylon by George S. Classon; Who Moved My Cheese by Spencer Johnson. 
2. Listen: Podcasts- Planet Money, How I Built This, The Dave Ramsey Show.
3. Learn: Nerd Wallet: A website on everything finance for those of us who have no idea what we’re doing with our money. 
   • Coursera: A free app that has online courses on different subjects, from over 140 universities around the world, including Ivy League Universities. 
4. Search: These are some of the platforms that the interviewees use to invest and save: Charles Schwab, Robinhood, Robotic Advisors, TD Ameritrade, Roth IRA.

Let’s hear it: What has been your greatest challenge in saving/investing? If you are already investing/saving, how did you learn?