How to Start Investing with Little Money

There is a large number of people who understand the value of investing, maybe even want to start investing- but just don't have much in terms of "available money" to invest.  What typically happens is, these people rule out investing because they check it off as one more thing they can't afford to do, and continue struggling with the day to day living expenses.  There are numerous things individuals without a lot of cash flow can do to start investing- every little bit can help over the long term.

Keep in mind that the only way to improve your financial situation is to make consistent efforts towards reducing your expenses and increasing your income. 

8 Ways to Invest Without a lot of Money

1. Instead of using your debit card or writing checks to make all of your purchases out of your checking account, pay for things with dollar bills.  When you get change, put it in a bucket at home and at the end of each month, deposit it into a savings account.  If you've never done this before, you'll probably be surprised at how much change can accumulate.  ($20 in change each month is $240 at the end of the year; and more after interest has been added!)
2. If your company offers 401K, enroll!  Particularly if the company offers some sort of matching contribution plan- if you aren't taking advantage of this, you are literally throwing away free money.  Sure, you might notice the $10 (or whatever amount) a week you contribute at first, but after a few weeks you won't even notice that the money is being saved.
3. Enroll in a direct stock purchase plan.  These plans allow you to invest small amounts of money ($25 for example) and the plan will purchase fractional portions of stocks for you based on the amount you invest.
4. Always reinvest your dividends.  Yes, it can be fun to receive little checks in the mail every few months for your dividends, but if you set them to be reinvested, you'll be increasing your stock shares very quickly, and it will result in larger income down the road.
5. Join or start an investment club.  Pooling money with a group of people can help you build a more complete portfolio for a much smaller investment than when you invest on your own.
6. If you receive a tax refund, consider it money you don't have and immediately invest it! (Doing so will result in a deduction on your taxes, anyway so it's a sound investment in more ways than one!)
7. Reduce your debt to free up more available money each month, and use some of the additional cash flow towards an investment.
8. Start investing as early as possible.  Due to the laws of compounded interest- the earlier you put money into an investment, the better you will make out over the long term.  A 25 year old investing $2,000 will have more than the 30 year old who invests $5,000 on the same date.