I’m 31, make $48K/year and can only afford to invest $120 per month. Can I build real wealth in America?

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I’m 31, make $48K/year and can only afford to invest $120 per month. Can I build real wealth in America?

I’m 31, make $48K/year and can only afford to invest $120 per month. Can I even build real wealth in America with such measly contributions?

It seems as if it’s getting more difficult for the average American to know how much to invest after covering their costs of living.

However, it’s still possible to invest even if it’s just a few hundred dollars per month.

Imagine a 31-year-old named Ariel, for example, who has an annual salary of $48,000 and allocates $120 to investing into the S&P 500 per month.

Ariel doubts that her contributions will be effective in building long lasting wealth, but she’s noticed that more money is accumulating without her doing anything other than consistently investing $120 per month.

She plans to keep up with this plan for the next 10 years without changing the initial amount.

The 2022

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conducted by the Federal Reserve showed those younger than 35 years old have $68,650 invested in stocks on average, but the median stock holdings was much lower at $12,000.

The average and median stock holdings balance increases with age:

35 to 44 years old: $195,400 average; $30,000 median

45 to 54 years old: $374,810 average; $68,650 median

55 to 64 years old: $740,110 average; $111,000 median

65 to 74 years old: $838,470 average; $160,000 median

75 years old or older: $1,005,160 average; $119,500 median

This tells us that the national average of $68,650 for people under 35 years old is likely skewed higher by a small percentage of people who have more money to invest while they’re younger or are in higher-paying jobs later on in their careers.

Read more: 82% of Americans are missing out on a savings account that

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If Ariel keeps up with her investment plan of $120 per month, or $1,440 a year, until she’s 41 years old, she will have invested $14,400 without accounting for any returns.

If Ariel continues to keep up the habit of consistently investing every month but decides to increase the amount to $200 per month for the next 10 years, then she will have invested $24,000 – which is $10,000 more simply by investing an additional $80 per month.

However, there are alternative methods for Ariel or anyone else looking to build wealth if it’s impossible to increase the initial investment amount or cut back on other living expenses.

Story Continues

Regardless of how much is invested per month, the most important aspect is to be consistent enough to collect interest because compound interest earns money without an individual even touching it. Here are some tips on where and how to best invest $120 per month:

Decide how much risk to take. Although Ariel decided to invest in an exchange-traded fund, there are bonds, treasury bills, mutual funds, and treasury notes – all of these have varying interest rates, but there’s a higher chance of losing money when there’s a higher expectation on returns, as with investing in stocks.

Decide where to invest. To make the most of investing $120 per month over a longer ******* of time, Ariel can choose different avenues, like putting a quarter into bonds and the rest in the S&P 500.

Automate investments. Apps and banks such as have specific functions that automatically transfers funds and on a predetermined schedule. This helps to reduce thinking and increases accountability because a certain amount every month has to be invested.

The Federal Reserve Bank of Dallas also has a

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people can refer to when determining where they want to put their investments.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

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