How to start investing on minimum wage/part time job?

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How to start investing on minimum wage/part time job?

Postby mike182 » Thu Feb 07, 2013 12:06 pm

Well I'm a 21 year old who goes to school full time and works at a grocery store part time. I have recently been looking into making money because like every kid who lives with there mother, I want out. I need money to become independent and with my job i would make probably under 10,000 in a year if I don't spend a single penny which is totally unrealistic. I am aware it takes money to make money and I do have a very small amount saved that I want to use to turn into something more. To be totally honest I do not even know HOW to invest, let alone how to invest wisely. So I am looking for a lot of basic information here. I am wondering how one could take small amounts of money and make it grow (in a short time?). Like i said i know nothing about investing but i know the less money you use the lower the risk/return is.
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Re: How to start investing on minimum wage/part time job?

Postby WHL » Thu Feb 07, 2013 3:44 pm

The wiki contains all of the basic information you seek :)
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Re: How to start investing on minimum wage/part time job?

Postby drs85 » Thu Feb 07, 2013 4:49 pm

Hello mike, welcome to the board!

Here's a good start in the wiki with some information about books to read if you're interested in learning more. Your local library may have quite a few of them if you do not want (or cant) purchase them:
http://www.bogleheads.org/wiki/Getting_Started

I'm currently 27, and from the age of 16 I started saving for retirement just for fun (I was a strange kid) at $50 a month. I then slowly ramped it up every couple months until I was at a point where I couldn't contribute anymore (I believe I made it up to $200/month, but your circumstances may be different). At the time I was working at McDonalds with a similar circumstance as yourself, making between $4K and $8K in any given year. I worked there for 4 years while wrapping up High School and moving onto College, and the entire time I tried to put money away into retirement. The account I started was a Roth IRA. Looking back at it, that was the best choice I could have made. What a Roth IRA does is it allows you to take money you get from your paycheck (post-tax, meaning you already paid tax on it) and invest it into an account that collects interest tax free all the way until retirement (59.5 years old). I wouldn't plan on ever seeing that money again until you retire, but there are a few reasons why you can withdraw from the account early. For more information see this wiki page:
http://www.bogleheads.org/wiki/Roth_IRA

If you'd like to open a Roth IRA it's best to do it through a company that has low fees, such as Vanguard (most people here will sugest them) or Fidelity (who also has low fees). I currently use Vanguard, but I did once upon a time use Fidelity. If you choose to use Vanguard you're best off saving $1000 and then opening an account. The cheapest fund to buy into has a $1000 minimum. You'll want to invest in something that you'd be comfortable with as far as risk, but for your age, the minimum price of the fund, and the little bit of assets you'd have invested, you could consider something in Vanguard's Target Retirement funds, such as this:

Vanguard Target Retirement 2050 Fund (VFIFX)
https://personal.vanguard.com/us/funds/ ... IntExt=INT

Good luck!
Daniel | "Knowledge is the only thing no one can ever take away from you" - My Father
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Re: How to start investing on minimum wage/part time job?

Postby WendyW » Thu Feb 07, 2013 5:04 pm

mike182 wrote:Well I'm a 21 year old who goes to school full time and works at a grocery store part time.

For someone in your position, investing is not worthwhile.
Compounding is an amazing thing, but $1000 a year savings will not turn into a fortune in your lifetime.

The way out of your position is to focus on your studies, and on getting a proper grown-up job.
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Re: How to start investing on minimum wage/part time job?

Postby NYBoglehead » Thu Feb 07, 2013 5:07 pm

If you are in school full-time the best investment you can make right now is staying out of debt for starters. If you have absolutely no student loans you can start a Roth IRA at Vanguard for $1,000. The biggest focus for you right now should be arranging a decent paying full-time job for when you finish school, then beginning to save and invest aggressively once you get a decent amount of income under your belt.
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Re: How to start investing on minimum wage/part time job?

Postby Abe » Thu Feb 07, 2013 5:40 pm

I agree with the other posters that you should probably concentrate on getting a better paying job, staying out of debt and if possible more education. Having said that, I don't see why you shouldn't start saving some now if at all possible. The sooner the better. Even if you only saved $1,000.00 per year for 40 years and got 10% return you would amass over $442,000. Start studying personal finance and investing. A good place to start is reading the book "The Bogleheads Guide to investing". Good luck.
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Re: How to start investing on minimum wage/part time job?

Postby WendyW » Thu Feb 07, 2013 5:49 pm

Abe wrote:Even if you only saved $1,000.00 per year for 40 years and got 10% return you would amass over $442,000.

An investor is unlikely to earn a 10% return over their lifetime without very aggressive investing and a lot of luck.

Even if he does amass $442,000 in 40 years this amount will only buy about 1/3rd of what $442,000 can buy today.
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Re: How to start investing on minimum wage/part time job?

Postby Abe » Thu Feb 07, 2013 6:01 pm

WendyW wrote:
Abe wrote:Even if you only saved $1,000.00 per year for 40 years and got 10% return you would amass over $442,000.

An investor is unlikely to earn a 10% return over their lifetime without very aggressive investing and a lot of luck.

Even if he does amass $442,000 in 40 years this amount will only buy about 1/3rd of what $442,000 can buy today.


I am aware of that. Just trying to give to OP some incentive. Don't be so negative.
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Re: How to start investing on minimum wage/part time job?

Postby michaelsieg » Thu Feb 07, 2013 6:08 pm

The biggest investment for your (financial) future right now is your education - try to try to excel at your studies. I understand you want out and be independent, but the best way to get there is by doing really well in whatever field you are studying, live frugal life as a student and then take the opportunities when they arise. If you have extra savings, I agree with the previous poster that putting it into a Roth is the best choice.
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Re: How to start investing on minimum wage/part time job?

Postby WendyW » Thu Feb 07, 2013 6:13 pm

Abe wrote:I am aware of that. Just trying to give to OP some incentive. Don't be so negative.

Negative about OP investing in securities at this stage in his life, yes. But I like to think that I'm steering him in the right direction.

OP's wisest investment this year would be in a well-tailored dark-colored single-breasted 100% wool suit.
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Re: How to start investing on minimum wage/part time job?

Postby Abe » Thu Feb 07, 2013 6:19 pm

WendyW wrote:
Abe wrote:I am aware of that. Just trying to give to OP some incentive. Don't be so negative.

Negative yes, but I like to think that I'm steering OP in the right direction.

His best investment this year would be in a well-tailored dark-colored single-breasted 100% wool suit.


The other part of my post said: "I agree with the other posters that you should probably concentrate on getting a better paying job, staying out of debt and if possible more education." You left that part out.
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Re: How to start investing on minimum wage/part time job?

Postby dratkinson » Thu Feb 07, 2013 6:28 pm

Money growth depends upon the compound interest formulas you learned in high school. These formulas depend upon time. Lots and lots of time. This means nothing happens quickly.

You can not make money grow quickly (short time) without high risk. And you don't want any high-risk investments. Period.

Your #1 best investment right now is in your education. This includes learning how to invest; but not investing right now. After you graduate and get a FT job, then you can apply the investing lessons you will learn here.

Including the Wiki, you can read The Boglehead's Guide to Investing. It will give you a structured introduction to the "how to" of conservative, low-cost, do-it-yourself investing. Get it from your local library.

Another good book is The Only Investment Guide You'll Ever Need. It quickly covers a wide range of topics, other than just simple investing. (Credit cards, debt, life insurance,....)

Saving/investing now. If you have any money remaining from your current PT job, you can begin funding a small emergency fund and/or a Roth IRA. A savings account is a good choice for an EF. For a Roth IRA, a simple target retirement fund would be a good choice for now. You can easily change your choice later after you have a FT job and can look at all of your investment options (company, private) together. (You will be in the 0% fed tax bracket so there is no current tax benefit to funding a traditional IRA, but there are a lot of later tax benefits to a Roth IRA. So go with the Roth.)

See above. Saving/investing right now may be a doubly good thing as you may be able to benefit from the (1) savers tax credit and (2) low income tax credit when you file your tax return. Even if you owe no taxes, you must file a fed tax return to get the credits. These credits don't apply to me so I don't know all their ins and outs. You would be wise to read the fed tax instructions and learn them. Double-check to see if your state (tax instructions) offerers any credits that may benefit you. Do what is required this year (fed/state), then benefit next tax season. FYI: you can file 3-years of amended returns to get past year credits that you may have missed.



Best of luck.

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Re: How to start investing on minimum wage/part time job?

Postby mike182 » Fri Feb 08, 2013 4:38 pm

Abe wrote:I agree with the other posters that you should probably concentrate on getting a better paying job, staying out of debt and if possible more education. Having said that, I don't see why you shouldn't start saving some now if at all possible. The sooner the better. Even if you only saved $1,000.00 per year for 40 years and got 10% return you would amass over $442,000. Start studying personal finance and investing. A good place to start is reading the book "The Bogleheads Guide to investing". Good luck.
I completely agree with everyone as well and my focus has been school. It's not that i only have 1,000$ saved up i have a little bit more than that but I'm not looking to use all of the money I have. I am completely out of debt, and I have been selling anything that I don't truly need (video game stuff mostly) on Ebay. I have bought the Bogleheads guide to investing it is what lead me to this forum :). I have not read more than the intro at this point. I am not looking to start making a huge cash flow, I am looking for a way to become independent while I have my non grown up part time job and am still in school. Though right now I am really just seeking advice on my what my options are and I really satisfied with all the feedback I am getting here.
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Re: How to start investing on minimum wage/part time job?

Postby NYBoglehead » Fri Feb 08, 2013 4:41 pm

mike182 wrote:
Abe wrote:I agree with the other posters that you should probably concentrate on getting a better paying job, staying out of debt and if possible more education. Having said that, I don't see why you shouldn't start saving some now if at all possible. The sooner the better. Even if you only saved $1,000.00 per year for 40 years and got 10% return you would amass over $442,000. Start studying personal finance and investing. A good place to start is reading the book "The Bogleheads Guide to investing". Good luck.
I completely agree with everyone as well and my focus has been school. It's not that i only have 1,000$ saved up i have a little bit more than that but I'm not looking to use all of the money I have. I am completely out of debt, and I have been selling anything that I don't truly need (video game stuff mostly) on Ebay. I have bought the Bogleheads guide to investing it is what lead me to this forum :). I have not read more than the intro at this point. I am not looking to start making a huge cash flow, I am looking for a way to become independent while I have my non grown up part time job and am still in school. Though right now I am really just seeking advice on my what my options are and I really satisfied with all the feedback I am getting here.


You're off to a good start. Read that book carefully and develop an investment plan for yourself to execute once you get a good job after school.
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Re: How to start investing on minimum wage/part time job?

Postby justus » Fri Feb 08, 2013 5:23 pm

WendyW wrote:
Abe wrote:I am aware of that. Just trying to give to OP some incentive. Don't be so negative.

Negative about OP investing in securities at this stage in his life, yes. But I like to think that I'm steering him in the right direction.

OP's wisest investment this year would be in a well-tailored dark-colored single-breasted 100% wool suit.


I disagree. Savings a portion of your earnings is the first step to wealth at any income level. The OP would be well served to develop these habits while he is young, instead of waiting for "real money" before he starts. Many people get into the trap of never saving because they're told that it's not worth it unless it's a big amount. Describing a wage job as not a "proper grown-up job" is insulting to the millions of Americans who only earn the statutory minimum at a honest job.
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Re: How to start investing on minimum wage/part time job?

Postby Abe » Fri Feb 08, 2013 5:36 pm

justus wrote:
WendyW wrote:
Abe wrote:I am aware of that. Just trying to give to OP some incentive. Don't be so negative.

Negative about OP investing in securities at this stage in his life, yes. But I like to think that I'm steering him in the right direction.

OP's wisest investment this year would be in a well-tailored dark-colored single-breasted 100% wool suit.


I disagree. Savings a portion of your earnings is the first step to wealth at any income level. The OP would be well served to develop these habits while he is young, instead of waiting for "real money" before he starts. Many people get into the trap of never saving because they're told that it's not worth it unless it's a big amount. Describing a wage job as not a "proper grown-up job" is insulting to the millions of Americans who only earn the statutory minimum at a honest job.


Right on. Thank you justus. I don't know what a well-tailored dark-colored single-breasted 100% wool suit has to do with it.
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Re: How to start investing on minimum wage/part time job?

Postby crowd79 » Fri Feb 08, 2013 5:47 pm

Abe wrote:
justus wrote:
WendyW wrote:
Abe wrote:I am aware of that. Just trying to give to OP some incentive. Don't be so negative.

Negative about OP investing in securities at this stage in his life, yes. But I like to think that I'm steering him in the right direction.

OP's wisest investment this year would be in a well-tailored dark-colored single-breasted 100% wool suit.


I disagree. Savings a portion of your earnings is the first step to wealth at any income level. The OP would be well served to develop these habits while he is young, instead of waiting for "real money" before he starts. Many people get into the trap of never saving because they're told that it's not worth it unless it's a big amount. Describing a wage job as not a "proper grown-up job" is insulting to the millions of Americans who only earn the statutory minimum at a honest job.


Right on. Thank you justus. I don't know what a well-tailored dark-colored single-breasted 100% wool suit has to do with it.


A+++++. No one has to make a substantial amount of money in order to save and build personal wealth. Live well within your means, budget, make smart choices with your money, and live an extremely disciplined lifestyle.
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Re: How to start investing on minimum wage/part time job?

Postby hoppy08520 » Fri Feb 08, 2013 6:01 pm

Abe wrote:
WendyW wrote:
Abe wrote:Even if you only saved $1,000.00 per year for 40 years and got 10% return you would amass over $442,000.

An investor is unlikely to earn a 10% return over their lifetime without very aggressive investing and a lot of luck.

Even if he does amass $442,000 in 40 years this amount will only buy about 1/3rd of what $442,000 can buy today.


I am aware of that. Just trying to give to OP some incentive. Don't be so negative.

Agree with Abe 100%. Mike182, I think it's great that you're trying to start investing early/young. By all mean, save/invest in the Roth IRA. It's a habit to last a lifetime.
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Re: How to start investing on minimum wage/part time job?

Postby VictoriaF » Fri Feb 08, 2013 6:09 pm

michaelsieg wrote:The biggest investment for your (financial) future right now is your education - try to try to excel at your studies. I understand you want out and be independent, but the best way to get there is by doing really well in whatever field you are studying, live frugal life as a student and then take the opportunities when they arise. If you have extra savings, I agree with the previous poster that putting it into a Roth is the best choice.


Exactly.

Do well in school, get excellent grades, work with professors on special projects, take extra courses that would position you for a reputable graduate school. In your situation, extra money is probably best used to cut down the hours you work so that you could put more energy into your academic success.

Good luck,

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Re: How to start investing on minimum wage/part time job?

Postby Abe » Fri Feb 08, 2013 6:12 pm

Mike182 you are off to a good start. When you say you want to become independent, I assume you mean move out on your own. That's a good first goal. There is nothing wrong with having short term goals. Each time you reach one then set another one. But keep in mind that you need to think long term also. I have something I call the SIC formula. It stands for Save, Invest and Compound. First you need to save, then invest. When you invest, the compounding will kick in. It may not seem like much at first, but over time compounding is an amazing thing. Einstein said: “Compound interest is the eighth wonder of the world.
Don't let anyone tell you that you shouldn't start saving because you don't have the right job yet. I started out much like you. A lot of my peers back then made fun of me because I was so frugal and saved my money. Now they wish they were in my shoes. Do your own thing.
Last edited by Abe on Sun Feb 10, 2013 1:40 pm, edited 1 time in total.
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Re: How to start investing on minimum wage/part time job?

Postby WendyW » Fri Feb 08, 2013 6:43 pm

VictoriaF wrote:Do well in school, get excellent grades, work with professors on special projects, take extra courses that would position you for a reputable graduate school. In your situation, extra money is probably best used to cut down the hours you work so that you could put more energy into your academic success.

This. ^

I believe in starting to save and invest at a young age, but let's not be ridiculous.

Anybody earning below the poverty line needs to focus their money and effort on getting on the other side of that line.
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Re: How to start investing on minimum wage/part time job?

Postby VictoriaF » Fri Feb 08, 2013 7:54 pm

Abe wrote:
WendyW wrote:
Abe wrote:Even if you only saved $1,000.00 per year for 40 years and got 10% return you would amass over $442,000.

An investor is unlikely to earn a 10% return over their lifetime without very aggressive investing and a lot of luck.

Even if he does amass $442,000 in 40 years this amount will only buy about 1/3rd of what $442,000 can buy today.


I am aware of that. Just trying to give to OP some incentive. Don't be so negative.


I don't see Wendy's comment as negative. It's easy to get engrossed in the trees of the spread-sheet compounding and miss the forest of the human capital development.

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Re: How to start investing on minimum wage/part time job?

Postby Silence Dogood » Fri Feb 08, 2013 8:11 pm

WendyW wrote:
mike182 wrote:Well I'm a 21 year old who goes to school full time and works at a grocery store part time.

For someone in your position, investing is not worthwhile.
Compounding is an amazing thing, but $1000 a year savings will not turn into a fortune in your lifetime.

The way out of your position is to focus on your studies, and on getting a proper grown-up job.


I disagree. I think investing is always worthwhile, especially for someone very young.

I am in a VERY similar situation as the OP. I am 22 years old. I am going to school and working part time at a grocery store. I now have about $20,000 in my Roth IRA.

Also, I work with plenty of "grown-ups" and there is nothing improper about the work they do. They are very hard working and good people.
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Re: How to start investing on minimum wage/part time job?

Postby enc0re » Fri Feb 08, 2013 9:11 pm

You can't get it while you're still in school (where doing well and learning a lot should be your absolute priority right now), but afterwards you'll be able to get the Saver's Credit while your income is still low. Up to a 50% tax credit on your first $2,000 (Roth) IRA contribution. That's something you'll want to take advantage of if you get the chance.

http://www.irs.gov/uac/Get-Credit-for-Your-Retirement-Savings-Contributions
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Re: How to start investing on minimum wage/part time job?

Postby JuanZ » Fri Feb 08, 2013 11:24 pm

I have recently been looking into making money because like every kid who lives with there mother, I want out. I need money to become independent [...] I am wondering how one could take small amounts of money and make it grow (in a short time?).


At the very beginning, the only growth you will get is from saving as much as possible, by not spending. And the least expensive way, at least for now, may be to keep living with your parents while you go to school.
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Re: How to start investing on minimum wage/part time job?

Postby mike182 » Sat Feb 09, 2013 9:11 am

WendyW wrote:
VictoriaF wrote:Do well in school, get excellent grades, work with professors on special projects, take extra courses that would position you for a reputable graduate school. In your situation, extra money is probably best used to cut down the hours you work so that you could put more energy into your academic success.

This. ^

I believe in starting to save and invest at a young age, but let's not be ridiculous.

Anybody earning below the poverty line needs to focus their money and effort on getting on the other side of that line.
That is exactly what I am aiming to do. And I very much appreciate all of the the advice and it is clear to me that every one here is on the same page that my best bet is to do 100% in school and save as much as I can. I obviously knew these things but was still looking for advice which i have gotten even more useful advice then i was looking for. It is just difficult to be living with my mother but at this age it is my own fault that i have not focused and saved as much as i could have. I suppose instead of focusing on trying to find an easy way to get out I should tell myself that it is my own fault that I am in the position i am in(not that my position is bad, as a matter of fact I live a very lucky and rewarding life).

I suppose I am off to a good start being out of debt and even considering ways to make money, because I do know many people my age that would kill to be in my position. For now I will continue with the Mind Over Money program and reading up.
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Re: How to start investing on minimum wage/part time job?

Postby VictoriaF » Sat Feb 09, 2013 9:33 am

mike182 wrote:It is just difficult to be living with my mother but at this age it is my own fault that i have not focused and saved as much as i could have.


Americans tend to exaggerate the horror of living with one's mother. Some mothers are easier to live with than some wives.

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Re: How to start investing on minimum wage/part time job?

Postby desertbandit442 » Sat Feb 09, 2013 11:54 am

Yes, all the previous advice is true. But, I believe it is important to get in the "habit" of saving, then investing every month. If you establish this habit early in life, it makes things easier later in life. I think too many people feel they want to start saving--then investing when they get a better job or when they get a raise, but when that happens they always find something else to spend the money on. Establish the habit early, even if it is only $5 or $10 every month into a savings account until you build up enough money for the minimum in an index mutual fund account. The rule of thumb is to save/invest 10% of your income, but maybe you can only save 1% or 2% of you income until you finish college and start your career.

The point is to start the monthly habit early.
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Re: How to start investing on minimum wage/part time job?

Postby Abe » Sat Feb 09, 2013 1:42 pm

desertbandit442 wrote:Yes, all the previous advice is true. But, I believe it is important to get in the "habit" of saving, then investing every month. If you establish this habit early in life, it makes things easier later in life. I think too many people feel they want to start saving--then investing when they get a better job or when they get a raise, but when that happens they always find something else to spend the money on. Establish the habit early, even if it is only $5 or $10 every month into a savings account until you build up enough money for the minimum in an index mutual fund account. The rule of thumb is to save/invest 10% of your income, but maybe you can only save 1% or 2% of you income until you finish college and start your career.

The point is to start the monthly habit early.


You are absolutely right. The most important thing is establishing the habit, even if it's a small amount.
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