INVESTING ON A BUDGET

Alot of investment advice seems to be geared toward people who make a lot of money, which can be intimidating if you’re trying to invest on a budget. For example, a common bit of advice is to max out your 401(k) as a retirement investment, but the maximum contribution to a 401(k) in 2017 is $18,000, which might be a lot to put away if you’re on a budget. Another common suggestion for the lowbudget investor is to buy mutual funds, but many require minimum investments of $2,500.

Don’t despair: Today, between technological advances and the rise of financial industry competitors, there’s never been a better time to be an investor on a budget. From investment apps to online robo-advisors, there’s a wide range of entry points. If you’re confused about what to do first, here are tips to help you get started on your investment journey.

PAY OFF HIGH-INTEREST CREDIT CARDS

Before you begin investing, you’ve got to plug the financial leaks in your life. If you’re spending more than you earn and adding debt to high-interest credit cards, you’re going to run into financial trouble. Some credit card interest rates top 20 percent, which is higher than any return rate you can expect to consistently earn in the investment world. If you put money in a savings account or other investment and keep that credit card balance, you’ll likely be paying out much more than you’re earning.

Any “investment” — which in this case means payment — you make on a credit card with a 20 percent interest rate essentially “earns” you a 20 percent return. For instance, a $100 credit card balance would turn into $120 by the end of the year, assuming you made no additional payments. If you put that $100 you have slated for an investment toward this debt instead, you’ll “make” $20 by the end of the year.

CUT EXPENSES

High earners are often quite frugal. A number of upper-income individuals understand that living below your means is one of the best ways to increase wealth. Nothing drains a wallet faster than eating out, subscribing to things you don’t need or regularly buying fancy coffee at your favorite chain — yet many people on a budget barely notice what they’re spending.

If you drink two $5 coffees each weekday and eat four $15 lunches a week, you’re spending $2,500 on coffee and $3,000 on restaurant lunches every year. Although it’s hard to shut down all extravagances, view those coffee and lunch trips as special treats instead of everyday needs. Cutting down your coffees to one per day and your lunches to two per week for a year would put $2,750 in your pocket that you could invest.

BUILD AN EMERGENCY FUND

Building an emergency fund is an important first step of any investment program. Investing for long-term goals is great, but it won’t do you much good if you have to use that money to pay for unexpected expenses.

Americans don’t typically have emergency savings. In fact, 69 percent have less than $1,000 in savings and 34 percent have nothing at all, according to a recent GOBankingRates study. You can start your emergency fund by automatically depositing a portion of your paycheck into a savings account — or even a Roth IRA — just make sure the account is completely separate from the one you use for everyday expenses so you’ll be less tempted to use it.

This strategy will grow your savings account beyond the recommended emergency cushion of three to six months of expenses, and then you can look toward investing your future savings. You don’t want to keep all of your money in an emergency fund because savings accounts typically pay low interest rates.

USE YOUR 401(k) MATCH

Although you might not earn enough to put away the maximum contribution each year, a 401(k) is a perfect investment vehicle if you’re on a budget because you can usually invest a very small amount. Additionally, your 401(k) contribution is taken out of

your paycheck automatically, which makes saving simple.

Many employers will match at least a portion of what you contribute to your 401(k), which basically provides you with free money. Twenty-five percent of employees don’t contribute enough to their plans to benefit from the full employer match, and that number jumps to 42 percent with lower-income participants, according to Financial Engines.

Many companies offer a one-for-two match, which means you’re earning a 50 percent return on your contributions from the start. You should definitely take advantage of this benefit.

FIND COMMISSIONFREE ETFS

Exchange-traded funds are essentially mutual funds that trade on an exchange, like stocks. Unlike actively managed mutual funds, however, most ETFs have set portfolios. Offered by companies such as Vanguard, ETFs can track an asset group, like biotechnology stocks, or a given index, like Standard & Poor’s 500 index. Index funds in particular often carry low operating costs.

You can pay a commission and buy an ETF on the open market, but many companies offer commission-free trading on certain ETFs. For example, Charles Schwab offers more than 200 ETFs you can buy without a commission, and other brokerage firms have similar programs. If you choose your ETFs wisely, you can own a broadly diversified portfolio without having to pay a dime.

TEST-DRIVE ONLINE PLATFORMS

Online investment platforms offer a simple, direct approach to investing based on lower costs, tax efficiency and investment selection. Betterment, for example, is more than 195,000 investors strong and has assets in excess of $6 billion. The company develops a “stock allocation guide path” for you based on one of four general investment goals: retirement, safety net, general investing and major purchase. It can then invest the money in a diversified portfolio of six stock ETFs and seven bond ETFs.

Betterment has no minimum investment requirement, and it’s easy to automate small, monthly investments. The only potential downside is that you’re depending on the site’s algorithm to make your investment decisions. However, in exchange for a relatively simple diversification strategy, you get management fees that range between 0.15 percent and 0.35 percent, depending on your allocation. Some mutual funds — or advisors — charge more than 2 percent in annual fees.

USE INVESTMENT APPS

Acorns is an example of the new frontier of investment services: the investment app. When you use a linked credit or debit card to buy something, Acorns rounds up your purchase to the nearest dollar and invests the spare change for you. For example, if you buy a new shirt for $24.61, Acorns will round that amount up to $25 and automatically invest the extra 39 cents for you.

Acorns allocates these rounded-up amounts to a portfolio of ETFs based on your risk tolerance, which it computes when you sign up. Acorns charges $1 a month for accounts worth less than $5,000 and 0.25 percent of your assets for accounts worth more than $5,000.

EXPLORE ONLINE BROKERAGES

The online brokerage world is highly competitive, so shop around and look for any freebies. Some brokerage accounts offer free stock trades, whereas others have better access to free mutual fund trades, and some provide free ETF trading, so consider all your online trading options. The online brokerage Capital One Investing, for example, offers automatic investing plans, one-time stock trades and a money market account with competitive rates — with no minimum investment requirement.

Generally, you won’t get as much advice from an online broker as you would if you were paying commissions to a full-service broker, such as Merrill Lynch or UBS. However, most online brokerages have basic investment research tools available on their websites, and some even have brick-and-mortar locations where you can talk to an investment counselor.

CONSIDER AN INVESTMENT CLUB

An investment club consists of a number of investors who get together to discuss and invest in stocks or other securities. You might not have enough money to buy Apple stock on your own, but a club’s combined resources can make that possible. A club can also be a great way for a new investor to learn about the markets and share ideas.

Before you put all of your savings into an investment club, however, be mindful of the potential pitfalls. A big one is that investment clubs typically don’t have to register with the Securities and Exchange Commission, which can make it harder to monitor fraudulent activity. Also, there’s always the risk you might get shut out: Investment clubs typically decide on trades by majority vote, and if you’re constantly in the minority, you might not ever get what you really want.

ASK ABOUT AN EMPLOYEE STOCK PURCHASE PLAN

One easy way to get into the investment game at a low cost is to participate in an employee stock purchase plan, which is typically offered by large employers with publicly traded stock. This plan allows you to purchase stock in your company at a discount — in some cases up to 15 percent — and the purchases are commission-free.

You can usually set up an automated stock purchase program at work, and some employers allow you to buy fractional shares of stock - something you can’t do in the open market - which means your investment goes to work immediately. Taxes associated with ESPP stock can be complicated, so you might want to consult a tax professional, especially if you’re selling your shares.

DIVERSIFY YOUR STRATEGY

Online investment platforms, investment apps, 401(k) plans and the like all have attractive features, but you should avoid the temptation to invest all your money in one place. Most advisors recommend you diversify a portfolio among a number of different asset classes, such as large and small company stocks, foreign stocks and bonds, U.S. Treasury bonds, and even commodities, like gold or other precious metals.

The idea behind diversification is that as one asset class falls, others will rise and balance your overall portfolio. In addition, if you opt for a number of different types of investments, you’re eliminating the risk that you’ll lose all your money if one goes south.

USE INVESTMENT SOFTWARE

Keeping track of investments can be hard, especially if you’re using more than one strategy. Programs that track or manage your portfolio — like StockMarketEye and Fund Manager — can help you take charge of your investments, keep things organized and even give you free advice.

If you choose this route, you’ll have to make a second investment - time - and prepare yourself for a potentially steep learning curve, according to the American Association of Individual Investors. In addition to learning about your actual investments, you’ll have to discover the most effective way to use the software.

SEEK FREE ADVICE

You might be surprised by how many people in your network of friends and family are involved in the financial services industry. And those people might be willing to give you free advice that could be quite valuable — or you might be able to offer a service you specialize in to trade for their advice.

If you strike out there, keep your eyes open for free financial planning days that nonprofit organizations often run. The Certified Financial Planner Board of Standards, for example, hosts an annual event in October that offers clients the opportunity to meet with licensed advisors for free. Many communities offer free services, too: The San Francisco-based company EARN, for instance, provides low-income people with advice on how to save for specific goals. GOBankingRates.com is a leading portal for personal finance news and features, offering visitors the latest information on everything from interest rates to strategies on saving money, managing a budget and getting out of debt.