How To Invest Even if You’re Treading Water Financially


By William Cowie of

A 20-something acquaintance of ours recently received an inheritance of a few tens of thousands of dollars from an aunt unexpectedly. Naturally, all of us were very happy for her, and it wasn’t long before I asked what for me was the obvious question: “So, are you going to invest the money?”

She looked at me as if I wanted her to bet on the frog from Calaveras County: “What? And lose it all?”

It’s not easy to shock an old man, and I’m certain she didn’t mean to set my head to spinning. But her reaction left me pondering — why do people equate investing with devastation? She is not the only one.

Excuses — the reasons not to invest

She doesn’t strike me as the literary type, so I doubt that she’s ever heard Mark Twain’s famous quote about investing: “OCTOBER: This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August, and February.”

It’s surprising how many people who have never heard of Mark Twain say the same thing about investing in general. Those that have often cite the quote to justify their choice not to invest, frequently adding (with a sage nod of the head) that Twain went bankrupt in his late 60s … because of bad investments.

Others don’t invest for reasons more basic, such as not having enough left over at the end of the month to invest. I used to proclaim that as my excuse too. In my case, that is all it was (an excuse) because we had more than enough money considering that I was the CFO of a successful company at the time.

For others, especially in today’s economy where well-paying jobs seem to have disappeared with California’s water, it is more true than it is an excuse. A cynic may scoff and say it’s because Starbucks and smartphones are getting more expensive; but when you’re a single parent faced with rising food prices and no raises, the issue is very real.

Investing despite limited resources

When you are treading water financially, it is the most valid of questions: How do I get started investing when I have so little to invest?

1. Realize and accept.
When I turned 50, I realized my folly and (as documented elsewhere) sprang into major catch-up mode. And that, I discovered, is the first and most important step to long-term financial success — realizing that none of us have any choice. You will have no long-term financial security if you don’t invest.


This is a mindset and nothing more. I have seen people making half a million dollars not get by. (Warren Sapp, Hall of Fame football player, filed for bankruptcy recently, despite that he was making $45,000 a month.) I have also seen people making little more than minimum wage save and invest.

Some may remark, “Well, it’s easy for you to say; you don’t know my circumstances,” but that is still an opinion. In reality, it is possible for anyone to invest no matter their income. It doesn’t need to be fancy. Investing can start with a humble savings account.

It might not be easy, or anything resembling easy, but it is always possible to invest — it’s a mindset.

2. Spend less.
When you are treading water, chances are there already are many things you feel you need just to get by, and to hear someone say “spend less” can feel a lot like a drowning person being thrown a jug of water to drink: “Here, drink. You need this.” I know, because there was a time I needed to hear it too — and I didn’t want to either.

Nobody is saying spending less is easy, but that doesn’t make it impossible. What did it for me was a friend who went to Mozambique to start a ministry among the poorest of the poor.

I was unemployed at the time and feeling a bit sorry for myself. However, when I heard how little those people have to get by on every day, it opened my eyes and forced me to admit that, no matter how much I complain, I still am way better off than those folks, and I still have a lot I can cut before I get there.

Unless you get unexpected windfalls, like an inheritance, the hard truth is that spending less is probably the only way to free up some money to invest.

3. Don’t despise small beginnings.
The first steps in any endeavor are humble. Gustave Eiffel, famous today for his tower in Paris and the Statue of Liberty, started as an unpaid assistant in a foundry. Setting aside $10 a month might feel meaningless: “What difference can that ever make?” That’s wrong. It makes a difference in many ways:

  • It breaks the ice. You’ll never again wrestle with the question: Should I start?
  • It forms a base: It is easier to add a dollar to an existing savings account than it is to start with just one dollar.
  • It creates a habit.
  • And best of all, it sets in motion the power of compound interest.

4. Form good habits.
Mahatma Ghandi said:Your words become your actions. Your actions become your habits. Your habits become … your destiny.”

Scientists argue over how long it takes for something to become an automatic habit, but what they all agree on is that we can pretty much make anything a habit if we are committed to it. Once you do good things without having to wrestle with the question every time, your life becomes better. Living below your means and saving the difference can become a habit. My neighbor Jim became a millionaire with good habits like those, despite never earning an over-sized income.


5. Fight lifestyle inflation.
They may be small, but most people get a raise or two somewhere along the line. And when they do, most people use that good fortune to buy better cars, bigger homes, nicer clothes, and to eat at better restaurants. After all, this is how all that hard work pays off, right?

Wrong. That is called lifestyle inflation, and one of the keys to long-term financial success is to recognize this temptation for what it is: a short-term pleasure with a long-term cost.

It may not be your current job or employer that gives you a raise; but along the way, opportunities to make more do come along. So determine now to maintain the lifestyle you have proven you can get by on and invest your raises instead of spending them.

6. Save the windfalls.
Along life’s way, we all get unexpected windfalls. They may not be as big as our friend’s example above. More likely they will be things like refunds, rebates, credit card rewards, bonuses, incentives to open certain types of accounts and that type of thing.

When the amounts are small, simply put them in a savings account. Then, on your birthday, take them all and invest them by buying an index fund or something like that. You can even put the word out that you would like to make that birthday gift to yourself as big as possible (instead of receiving another pair of socks).

Again, it’s about developing the mindset and the habit to transform life’s little windfalls into future big windfalls through the miracle of compounding.

7. Pay yourself first.
I don’t know about you; but when I had the mindset of “I’ll see what’s left over at the end of the month and maybe invest that,” there never was anything left over. Funny how that worked.

What usually happened was, around the third week of the month, a friend would crawl out of the woodwork and suggest we go to a theme park, restaurant or something like that. “Come on. Life’s too short not to do this!” We’d look in the checking account and see, “Oh, nice! There’s some money. Let’s go!” But then, come the end of the month, the account was as bare as Mother Hubbard’s cupboards.

By far the better thing to do is to make your monthly savings or investment the first or second thing you pay (after the rent). That way, when the money is gone, it’s gone — and when that spendy friend comes along, you can look in your account and say, “Hmm … maybe next time.” (Meanwhile, you are making progress toward your long-term financial goals!)

Not easy, but certainly doable

When you’re treading water, investing is not easy — let’s just state the obvious. However, that doesn’t mean that it’s impossible. Given that none of us can count on a secure, long-term future without it, the question has to be not whether to invest, but how.


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