How much should you be investing? Here’s what experts have to say (2024)

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.

How much should you invest?

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.

Consider the current state of your finances

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:

  1. Your income: Take a close look at your monthly income and consider how much money you have leftover after you’ve covered your non-negotiable expenses. If you’re struggling to make ends meet, you may want to prioritize putting extra funds into an emergency savings account or toward a debt payment.
  2. Your debt balances: Debt, especially high-interest debt, can become very difficult to manage if you don’t have a plan in place to pay those balances down. Take a look at how much you owe and the corresponding interest rates. Determine how much you can comfortably afford to invest, while still making at least the minimum payments on your debts. As you pay down your debt, you can revisit how much you’re investing each month and increase it accordingly.
  3. Your emergency savings: According to the latest data from the Consumer Finance Protection Bureau, 24% of consumers have no savings set aside for emergencies, and 39 percent have less than a month of income saved for emergencies. Having an emergency fund is crucial if you hope to avoid taking on debt when the unexpected happens. If you’re still working on building up three to six months’ worth of essential expenses, consider investing a smaller amount of your available income while you work to hit that benchmark.

Settle on your investing goals

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:

  • What you’re investing for: Perhaps you’re investing for retirement, or maybe your end goal is to purchase a home or fund your child’s education. Deciding what your end goal is can help you set a realistic timeline for reaching your goal and make it easier to land on how aggressively you should be investing to make those goals a reality.
  • What your timeline looks like: Your timeline will look different depending on what your goal is. If your end goal is retirement, depending on when you start investing, you could have decades to invest and grow your retirement fund. You have the flexibility to start small and gradually increase those contributions over time as your income increases. This timeline could look different if you’re investing for a shorter-term goal like purchasing a home or retiring early.
  • Your risk tolerance: Investing will always involve some level of risk, regardless of the kind of asset you’re investing in. Ask yourself how comfortable you feel with assuming that risk. “Beginner investors should think carefully through the mix of investments they’d like to have in their portfolio, as it’s good to have diversity,” says Michael Wang, CEO and founder at Prometheus Alternative Investments. “Traditionally high risk-high reward investments, like cryptocurrency or growth-focused stocks, offer more volatility for investors. For those looking to take less risk in their portfolios, traditionally safer investments include treasury bonds, money market funds, and “blue chip” stocks that pay dividends to investors.”

Reevaluate periodically

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.”

How much should you be investing? Here’s what experts have to say (2024)

FAQs

How much should you be investing? Here’s what experts have to say? ›

Generally, experts recommend investing around 10-20% of your income. But the more realistic answer might be whatever amount you can afford. If you're wondering, “how much should I be investing this year?”, the answer is to invest whatever amount you can afford!

How much should you be investing? ›

Calculating How Much to Invest

A common rule of thumb is the 50-30-20 rule, which suggests allocating 50% of your after-tax income to essentials, 30% to discretionary spending and 20% to savings and investments. Within that 20% allocation, the portion designated for stocks depends on your risk tolerance.

How much of your income do experts say you should save? ›

At least 20% of your income should go towards savings. Meanwhile, another 50% (maximum) should go toward necessities, while 30% goes toward discretionary items. This is called the 50/30/20 rule of thumb, and it provides a quick and easy way for you to budget your money.

How much does Dave Ramsey say you need to retire? ›

Some folks will need $10 million to have the kind of retirement lifestyle they've always dreamed about. Others can comfortably live out their golden years with a $1 million nest egg. There's no right or wrong answer here—it all depends on how you want to live in retirement!

How much investment should be done? ›

It suggests dividing your after-tax income into three categories: 50% for necessities, 30% for discretionary expenditure, and 20% for savings and investments. By allocating at least 20% of your salary to investments, you ensure a significant portion of your income is reserved for long-term financial growth.

How much should I be investing by age? ›

Fidelity's guideline: Aim to save at least 1x your salary by 30, 3x by 40, 6x by 50, 8x by 60, and 10x by 67. Factors that will impact your personal savings goal include the age you plan to retire and the lifestyle you hope to have in retirement.

Is $100 too little to invest? ›

Investing just $100 a month can actually do a whole lot to help you grow rich over time. In fact, the table below shows how much your $100 monthly investment could turn into over time, assuming you earn a 10% average annual return.

What is the $1000 a month rule for retirement? ›

Understanding the $1,000-a-Month Rule: The $1,000-a-month rule is a simplified formula designed to help individuals calculate the amount they need to save for retirement. According to this rule, one should aim to save $240,000 for every $1,000 of monthly income they anticipate requiring during retirement.

How much do I need to retire at 60? ›

And by age 60, you should have six to 11 times your salary saved in order to be considered on track for retirement. For example, a 35-year-old earning $60,000 would be on track if she's saved about $60,000 to $90,000.

How much is $100 a month from 25 to 65? ›

Dave Ramsey on X: "$100 a month invested from age 25 to 65 is $1,176,000.

How much do you get for Social Security at age 65? ›

If you start collecting your benefits at age 65 you could receive approximately $33,773 per year or $2,814 per month.

What is the best investment to get monthly income? ›

You can likely find something to fit your needs from this list of the best monthly income investments:
  • Savings Accounts. ...
  • Certificates of Deposit (CD) ...
  • Dividend-Paying Stocks. ...
  • Bonds. ...
  • Annuities. ...
  • Rental Real Estate. ...
  • Real Estate Investment Trusts (REITs) ...
  • Business Ownership.
Mar 1, 2024

How much money do I need to invest to make $1000 a month? ›

Reinvest Your Payments

The truth is that most investors won't have the money to generate $1,000 per month in dividends; not at first, anyway. Even if you find a market-beating series of investments that average 3% annual yield, you would still need $400,000 in up-front capital to hit your targets. And that's okay.

What is the 70 30 rule in investing? ›

What Is a 70/30 Portfolio? A 70/30 portfolio is an investment portfolio where 70% of investment capital is allocated to stocks and 30% to fixed-income securities, primarily bonds.

Is investing $1,000 a month a lot? ›

Investing $1,000 a month may seem like a big task, as it's a total of $12,000 per year. But the average full-time worker earned $59,540 in the last quarter of 2022. So, investing $12,000 a year would mean putting away about 20% of your annual income if you earn around the average salary.

Is $5,000 enough to start investing? ›

With $5,000 at your disposal, you can navigate a middle path between broad index fund investing and the more targeted approach of stock picking through sector ETFs.

Is investing $200 a month enough? ›

Key Points. The Vanguard Growth ETF is one of many great growth-oriented funds that can deliver market-beating returns. If you can invest $200 per month for 30 years, thanks to the power of compounding, you could end up with a portfolio of more than $1 million.

Top Articles
Latest Posts
Recommended Articles
Article information

Author: Fredrick Kertzmann

Last Updated:

Views: 5877

Rating: 4.6 / 5 (46 voted)

Reviews: 85% of readers found this page helpful

Author information

Name: Fredrick Kertzmann

Birthday: 2000-04-29

Address: Apt. 203 613 Huels Gateway, Ralphtown, LA 40204

Phone: +2135150832870

Job: Regional Design Producer

Hobby: Nordic skating, Lacemaking, Mountain biking, Rowing, Gardening, Water sports, role-playing games

Introduction: My name is Fredrick Kertzmann, I am a gleaming, encouraging, inexpensive, thankful, tender, quaint, precious person who loves writing and wants to share my knowledge and understanding with you.