Despite the best of intentions, you’ve been getting nowhere with your investment plan.

By the time you’ve paid your bills each month and covered your other expenses, there’s rarely any money left to save and invest. How can you get over that hump and get your investment program rolling on a tight budget?

There’s no simple solution, but there are some steps you can take to move forward with your investment plan:

• Determine where your money is going so you can identify spots where there’s budget wiggle room.
• Put “found money” straight into investments for best chances of long-term growth.
• Try to find ways to save first and spend second—you’ll reach your goals faster.

Figure out where your money is going

• Track your dollars. Use a spreadsheet, a notebook or an app like Mint to track spending for a few weeks. You may be surprised to discover how much you’re spending in different categories.
• List your expenses. Some of your current costs may be locked in, such as rent or mortgage payments, utilities, insurance, and transportation. But you may notice other monthly expenses you could slash to free up some cash.
• List your discretionary spending. How much are you spending to eat out? How much for entertainment or travel? What about clothing and accessories, recreational activities, music, or your tech toys? It’s nice to enjoy yourself, but if that enjoyment comes at a disproportionally high price, you could be sidetracking your long-term investment goals.
  

Find ways to cut expenses

Once you’ve identified where all your money goes, you can start trimming. Let’s say you want to invest $50 a month. Look through all your expenses – clothing, travel, hobbies, dining – and figure out what you can cut to get to $50.

That might mean going out for three dinners a month instead of four. Or maybe you cut five of your other categories by $10 a month to get to $50. Set a budget, keep track, and stick with it, and you’ll have your $50 a month.

That said, while $50 is a good start, you can build your investment account faster by going after bigger fish. Here are some of the biggest budget killers:

Average expenditures and income of U.S. consumers

Based on Average Individual or Family Income before taxes: $74,664 (2017)

Source: Bureau of Labor Statistics, Consumer Expenditures 2017, issued September 11, 2018

If you evaluate your own expenditures in these areas, you may see some good ways to cut costs. If you’re serious about building wealth, you must consider all of the potential ways to save.

Put “found money” straight into investments

From time to time, you may come across “found money.” When this happens, consider investing it.

For instance, maybe you just made the final payment on your car. Congratulations! That’s probably $200 to $400 that won’t be coming out of your pocket each month. Why not immediately set up an automatic deposit of that amount into a monthly investment plan? You’ve been getting by without that money in your budget before, so you should be able to continue to make ends meet even if you invest all of it each month.

Whether it’s a payment for a car, a washer and dryer, home equity loan, or any other monthly bill that you’ve finally cleared up, consider rechanneling that money to your investment account.

The same goes for all your other “found money.” Whether it’s a big raise, a small inheritance from your aunt, an unexpected tax refund, a winning lottery ticket, or a bonus from your company, resist the urge to spend it. Add it to your investment account and put that money to work for the long term. (See: Putting your windfall to work for the long term)

Save first, spend second

Once you’re confident that you can cut your expenses without missing your mortgage, set up a monthly investment plan in which money is automatically withdrawn from your bank account or paycheck.

There are several ways to set that up:

• Automatic investment account. You may want to set up an automatic investment plan that withdraws a set amount from your bank account each month to send to the investment of your choice. (See: Start building your nest egg with just $50 a month)
• 401(k) plan. If you work for a company that offers a 401(k) or other tax-favored retirement plan, contribute as much as possible to your plan. The money contributed to a 401(k) plan is deducted from your current gross income for tax purposes, thus typically reducing your income taxes in the years you contribute. Your investments within the plan can grow tax-deferred until you withdraw the money (typically after you retire and may be in a lower tax bracket). An added benefit at many firms is the company match, in which the company also makes an additional contribution equal to all of or part of your contribution to the plan.
• Self-employed retirement plan. If you work for yourself or own your own small business, there are other ways to start building your nest egg with a tax-deferred retirement plan, including a “Simplified Employee Pension” (SEP) IRA that may allow you to contribute a portion of your earnings each year to a tax-deferred account. If you’re self-employed, see: If you’re self-employed you can still benefit from a tax-deferred retirement plan.
• Open an IRA. You may be able to take advantage of tax-deferred investing by opening an Individual Retirement Account (IRA). You may contribute up to $6,000 per year for 2020 and 2021, depending on your earned income (or $7,000 if you’re 50 or older) to either a traditional IRA or a Roth IRA. For more, see: Don't miss the tax and savings benefits of an IRA.

Even if you’re just making ends meet, you can probably find a way to start building wealth through an investment plan. It may take discipline and sacrifice, but over the long run, you’ll be happy you started finding ways to save your money instead of finding ways to spend it. (See: What’s holding you back? Investing may be easier than you thought)