Senior adult couple enjoying a morning breakfast, in the process of high fiving

This year has certainly had an impact on almost everyone’s daily lives and spending habits. In an unexpected fashion, many people are now thinking more critically about their money and prioritizing putting it toward the things that matter most — especially as certain areas of spending have slowed or stopped completely.

For some, budgeted expenses for things like traveling, dining out, or the occasional mani-pedi have been put on pause. While some may have already reallocated these funds to emergency savings or are using them to make up for lost income, others could be letting this money sit idle, unsure what to do with it. If that sounds like you, then now is a good opportunity to look at your budget to see if those extra funds could be performing smarter for you — by being invested in the market.

A Chance to Prioritize Investing

We know it can be tough to find a place for investing in your budget (beyond your retirement savings) when you’re focused on immediate priorities like building up an emergency fund, paying for day-to-day expenses, and still having some cash for the fun things. But among the disruption brought on by Covid-19, comes the small (but mighty) positive of creating room for investing.

Whether you’ve stopped paying for a daily commute to the office, your monthly ClassPass membership, or biweekly tickets to the movies, it’s all cash that can now serve a new, smart purpose. That’s because when it comes to investing, and making it a regular fixture in your budget, you don’t need to begin with a ton of money. You just need to start, even if it’s only a handful of dollars each week (perhaps what you used to spend on dry cleaning or Ubers?) — because, due to the effect of compounding returns, even a little bit of money can grow over time.

A chart that states the longer your money is invested in the market, the more opportunity it has to grow – so the sooner you can start, the better. The chart displays how much money someone could earn in the market if they were to invest $2,000 annually, with an average 8% annual return. If someone starts at age 22 and invests for 40 years, they could have $561,665.70 accumulated. If someone starts at age 32 and invests for 30 years, they could have $246,737.05 accumulated. If someone starts at age 42 and invests for 20 years, they could have $100,864.15 accumulated. If someone starts at age 52 and invests for 10 years, they could have $33,289.82 accumulated.

Find Room to Build Wealth in the Stock Market

Investing your money in the stock market is one of the ultimate ways to build wealth in the long run. While it’s important to recognize that when you invest, you incur the risk of loss, investing also presents an opportunity for gains that exceed what you may achieve through personal savings alone.

Another thing to keep in mind is that the money you invest can still be used as a sort of back-up savings if you need it. While it’s a good idea to keep your core emergency savings in an FDIC-insured savings account where it may be less affected by market ups and downs, investing surplus savings funds can help you build your total savings and your overall net worth.

Investing at Your Comfort Level

The thought of investing can be intimidating if you’ve never done it before or if you’re worried about uncertain market conditions. But you don’t have to go all-out right away. There are tons of tools and options to help you invest in a way that works best for you.

If you are a more experienced investor or want to take control of your investments, you might consider a Self-Directed Trading account to build a portfolio that reflects your personal selections and comfort level with market risk. And as your risk tolerance changes or you become more experienced in the market, you can always shift the balance of your securities to stay in line with your goals and preferences.

If you don’t feel up to building your own portfolio, you don’t have to do it alone. With an Ally Invest Managed Portfolio, all you have to do is let us know your investment goals, timeline, and risk level, and we’ll build a diversified portfolio of ETFs for you. Plus, we’ll continuously monitor and rebalance it using robo-advisor technology (combined with our human smarts) so it stays aligned with your preferences.

Finding the Bright Side of a Tough Time

This year has been full of ups and downs, and it’s affected everyone — and their finances — differently. And while many of us have seen our budgets flipped on their heads, not all the changes are necessarily bad. With the loss of many of our favorite social and recreational activities, comes an opportunity to think about money in a different way. If you’ve reevaluated your budget this year and found areas of potential “leftover” money, now is the time to consider making it work for you by investing.

Learn more about our Self-Directed Trading Accounts and Managed Portfolios to see which is best for you.

Visit Ally Invest today.