The 6 Best Ways to Invest Just $100 Per Month This Year

$100 Per Month is ideal to break bad financial habits in the new year and start some good ones. Maybe you’re utilizing a budget  $100/Month. This Year for the first time in your life, or maybe you’ve made the decision that this is the year you’ll pay off your high rate credit card debt. Whatever your objectives, you are undoubtedly aware that achieving them will need patience and persistence.

How, though, should you put your money to use? Should you possess an additional $100 monthly, there exist many strategies for accumulating wealth and ultimately achieving success.

When we asked financial advisors how they would allocate an additional $100 each month in the coming year, these are the responses we received.

Start with a High-Yield Savings Account:

If your company offers a 401(k) and you are eligible for an employer match, your workplace 401(k) is an excellent place to start, according to Colorado financial advisor Mitchell Bloom of Bloom Wealth. The closest thing to “free money” you’ll ever get at work is an employer match, so you may as well take advantage of it if you qualify for one.

If your employment plan permits, you may also be able to contribute a fixed $100 each month. Alternatively, you can try to increase the proportion of your 401(k) payments to add around $100 more to your account each month.

In any case, funds in a 401(k) plan have the potential to compound tax-free over time and rise in value. You won’t be responsible for paying taxes on withdrawals until you’re old enough to retire.

Remember that there is still hope if you do not have access to a corporate retirement plan.

You could instead want to “consider using a low-cost advisory firm like Betterment, where they will build a fully diversified globally allocated portfolio model with fractional shares so you can achieve diversification with a small investment amount,” Bloom suggests.

Invest in a Low-Cost Index Fund:

If they fulfill the eligibility requirements, investors may also want to consider saving in a Roth IRA, according to Jeff Rose of Good Financial Cents. Even though you have to invest taxable money into this kind of account, your contributions can grow tax-free and compound until you are old enough to retire. It’s nice to know that you can take funds from a Roth IRA without having to pay income taxes if you’re 59 ½ or older.

Most individuals are able to contribute a maximum of $6,000 to both a regular and Roth IRA in 2020. On the other hand, those who are 50 years of age or older can pay an extra $1,000 year, for a total of $7,000.

Income restrictions do, however, exist. For married couples filing jointly, donations to a Roth IRA are tapered out for incomes between $196,000 and $205,999, and they are prohibited from making contributions if their combined income exceeds $206,000. Contributions from single taxpayers earning more than $139,000 are prohibited, while those making between $124,000 and $138,999 will see a phase-out of their contributions. (See also: IRA vs. 401(k)? Both Are Necessary.

Explore Fractional Shares in the Stock Market:

If you haven’t already, think about setting aside money for emergencies. Experience Your Wealth financial counselor Jake Northrup recommends that you have at least three months’ worth of living costs in your emergency fund, if not more.

Your emergency money should ideally be kept in an accessible account, such a high-yield savings account. Even though you won’t get a lot of money back from your emergency fund, it can actually save your life in the event that you lose your job or are faced with an unexpected medical expenditure that you can’t afford.

Furthermore, you may prevent accruing excessive interest on credit card bills by keeping a fully filled emergency fund. (See also: 7 Simple Steps to Start a $0 Emergency Fund.)

Consider Robo-Advisors for Automated Investing:

The best place to put excess money, according to financial adviser and host of the Stay Wealthy Retirement Podcast Taylor Schulte, is into a Health Savings Account (HSA), supposing that high-interest debt has been paid off and an emergency savings fund is in place.

“The HSA is the magical unicorn of tax-advantaged investment accounts,” according to him. “Unlike any other account, they are triple tax-advantaged.”

According to Schulte, this is possible since you may invest your money annually on a tax-advantaged basis up to a specific amount, beyond which it grows tax-free. There are no taxes due at the time you draw distributions to cover eligible medical costs.

However, there are a few prerequisites to using an HSA, one of which is having a high deductible health plan. According to Healthcare.gov, a high deductible health plan for 2020 is any plan having a minimum deductible of $1,400 for an individual or $2,800 for a family, as defined by the Internal Revenue Service (IRS). Remember that the annual total out-of-pocket costs for any high deductible health plan cannot exceed $6,900 for a person or $13,800 for a family.

Financial adviser Morgan Ranstrom, of Minneapolis, Minnesota, advises investing the remaining funds in your HSA for long-term development, but you should aim to have enough cash in there to cover your insurance’s yearly deductible in case unanticipated medical expenses arise.

“With regular contributions, potential investment growth, and minimal withdrawals, you’ll have an account that may be used to fund medical expenses in retirement without tax penalty,” according to him. “How great is that?”

Tap into the Power of Dollar-Cost Averaging with ETFs:

Even while paying off debt may not seem like an investment to you, the financial gain may be comparable. Keep in mind that after you pay off debt, you won’t be charged exorbitant interest rates, which means you’ll have extra money every month to save or invest for the future.

With the average credit card APR being well over 17%, debt expert Chris Peach, who teaches customers how to pay off debt through his Awesome Money Course, advises you to find out what interest rate you’re paying on your credit cards.

“For most people, getting an 18% return on your investment every year is more like a dream come true than a reality,” according to him. Thankfully, you may reach that return by saving the money you would have to spend on interest each month while paying off high rate debt.

Say you have a $10,000 credit card debt with an 18% annual percentage rate, and you have been paying the minimum amount due on this card for years. According to Peach, if you were to pay the minimum payment of $200 each month, it would take an additional 94 months to pay off the loan, adding $8,622 to the total amount of interest paid.

However, what would happen if you could invest $100 a month as a credit card overpayment?

“Though it may not sound like a ton of money, $100 more per month will pay the balance off 47 months earlier and saves almost $4,000 in interest,” Peach explains. “Not bad for a $100 monthly investment if you ask me.”

Invest in Your Education and Skill Development:

Financial counselor Russ Thornton, a fee-only specialist in women’s retirement planning, believes investing in oneself may also provide significant returns. “This could be used to buy books, audiobooks, online courses, offline courses, professional associations, personal training sessions, or something else,”.

While learning a new talent might help you start a side business that could eventually bring in more money, gaining new or deeper information that could assist you perform your job could help you receive a greater increase or even a promotion.

According to Thornton, you may even join a networking or professional association to expand your network. “This could help with your current career or might open doors to new opportunities — both personal or professional.”