Someone responded to one of my posts about investing and said ‘but Martha, where am I supposed to find the money to save, let alone invest?’ When we hear the word investing, for many of us what comes to mind is some …guy (it’s hardly ever a woman) hauling huge sums of money from the bank and going off to the investment place!
My reader’s question is valid, that’s for sure. Because when money is in short supply, investing can feel unrealistic.
But just because something is challenging doesn’t mean it is impossible!
And when it comes to investing, there is a small thing called time. Not so small actually because as an investor time is your biggest ally. The more time you invest for, the longer your investment can compound, or grow in value.
Compounding in simple terms is a process that allows your money to earn interest not only on the original amount you invested but also on the interest that accumulates. Benjamin Franklin defined compounding as: “Money makes money. And the money that money makes, makes money.”
This is why someone who starts early with small amounts can end up with more than someone who starts later with larger amounts, simply because they gave their money more time to grow.
Many people delay investing because they believe they are not ready and think they will be ready when they are making more money first.
But waiting has a cost. Every year you delay is a year your money is not compounding and giving room to inflation to reduce the value of your money. Inflation is a rise in prices over time; it causes the cost of everything from food and housing to fuel and even services to rise. Investing even small amounts helps your money keep up with and with or ahead of inflation.
Mindset matters
Research shows that how you think about money shapes what you do with it.
If you believe wealth is possible for you, you’re more likely to take positive action. But if you believe financial success is out of reach, you’re less likely to even try.
Your mindset can be your greatest asset or your biggest barrier, financial psychologist Klontz explains. “If you believe that the system is rigged against you specifically, you’ll self-sabotage. If you believe money is freedom, you’ll find ways to grow it,” he says in an article for the Epoch times.
If you believe you don’t have enough you delay to take action, and in so doing you lose time.
All in the timing
This is why the idea that you need a big starting amount is misleading. What you actually need is time in the market, not perfect timing or a perfect amount. Investing a large sum to begin with does not necessarily make investing more worthwhile. The key to building wealth is instead consistent, regular investing of whatever sum you can manage.
As the saying goes:
“Time in the market beats timing the market.
Martha vs. Ritah, time vs amount
Let’s explore that with this example below.
Meet two Ugandan ladies:
Martha decides to invest UGX 100,000 every month consistently for 10 years.
Ritah invests UGX 500,000, but only occasionally and only for 3 years when she feels she “has extra money.”
Assume an average annual return of about 10%.
- After 10 years, Martha has invested a total of UGX 12 million. Because she is consistent, her money compounds; as a result, her investment grows to roughly UGX 21 million.
- Ritah , on the other hand, invests a total of about UGX 18 million over those three years. But because she stops early and doesn’t stay invested, her money grows to about UGX 24 million by year 10. Slightly higher than Martha’s overall sum but not by that much.
The insight here is that while Ritah put in more money, the two ladies end up with almost the same amount simply because Martha gave her money more time to grow.
So start small, but start early.
Every UGX 5,000 you invest today has something powerful behind it. As one of my favourite money personalities Ramit Sethi says: you don’t need a lot of money to invest, investing is how you grow rich.
But what does “starting small” actually look like in practical terms and why is it important?
1. You learn as you go
Starting small gives you space to understand investing without overwhelming yourself. It allows you to learn how investing works, how markets fluctuate and what kinds of returns to expect. And because you’ve started early, you have time to improve. No one is born knowing how to invest, we all learn on the job!
2. You limit your losses
You’re likely to make a few mistakes when starting out; it’s part of the process. By starting small, any missteps are less costly, giving you room to learn and adjust your strategy.
3. You build consistency
Investing UGX 10,000 every month may not feel like much. But over time, consistency matters more than occasional big amounts. This is known as dollar-cost averaging;investing regularly regardless of market ups and downs. It builds discipline and keeps you invested long enough for compounding to do its work.
4. Teaches discipline and patience
Investing is a long-term game. Starting small trains you to focus on your goals and stay patient even when your investments temporarily drop in value because of market dynamics.
Where to find the money to invest?
If your budget already feels stretched, the advice to “just start investing” can sound unrealistic. But there is always a way.
The first step is to track your expenses. By tracking your spending and expenses, you can easily see what categories you’re spending in and where you could cut back. For most of us there is always that one or more areas where we are spending money more than we should. For me one of those is buying cute little things for my little girl. Anyone relate? Nothing wrong with that but let’s be honest, mums, sometimes we overdo it. At least I know I’m guilty of that. How about the money we spend eating out? Again nothing wrong with it but does it have to be every week??
Time is the real investment
The power of compounding is one of the most valuable tools available to investors. By starting early, investing consistently, and allowing your investments to grow over time, you can build significant wealth.
By Martha Songa
miss.songa@gmail.com