Should you invest if money is tight?

That’s a really honest question, and I think people are feeling this more than you might realize.

If you feel like all of your money is already spoken for, the first thing I want you to know is that you are not doing something wrong. For a lot of households right now, the cost of housing, groceries, childcare, and insurance has increased significantly over the past several years. Data from the U.S. Bureau of Labor Statistics Consumer Price Index shows overall prices rose roughly 19% between 2020 and early 2024, which means many families are simply working with less purchasing power than they were before.

Because of that reality, investing cannot come before financial stability. And this is where a lot of advice online gets the order wrong.

Investing is important for long-term wealth, but it is not the first step in building a strong financial foundation. If your basic expenses are already stretching your paycheck, your focus should be on creating stability first.

And I know that can also create another feeling for a lot of people. When you see everyone talking about investing, retirement accounts, and building wealth, it can make you feel like you are falling behind. Like you should already be doing more. Like you might not have enough you don’t start right now.

But financial progress does not happen all at once. It happens in stages. And the first stage is stability.

That usually means working through a few priorities in order.

1️⃣ First, make sure you understand your cash flow clearly. Many people feel like every dollar is spoken for, but when they actually map out their inflow and expenses, they start to see patterns. Sometimes it confirms that the cost of living is the real issue. Other times it reveals small adjustments that can create breathing room.

Understanding your cash flow also shows you exactly how much money you actually have available after your necessary expenses are covered. That leftover discretionary money is what eventually becomes the money you can invest. Over time, your goal is to increase that margin so investing can happen comfortably instead of feeling forced.

And it is important to remember that investing should only come from money you can afford to put at risk. If losing that money would create financial stress or make it harder to pay your bills, then that money should not be invested yet.

2️⃣ Second, build some level of financial cushion. Even a small emergency fund can make a huge difference in reducing financial stress. Without that cushion, any unexpected expense often turns into new debt, which makes it even harder to think about investing.

3️⃣ Third, look for ways to strengthen the foundation of your finances before worrying about maximizing investments. That could mean reducing high-interest debt, renegotiating certain expenses, or exploring ways to increase income over time.

Only after those pieces start to feel more stable does investing become the next step.

And when people reach that point, it often starts much smaller than they expected. For many households, investing does not begin with hundreds of dollars each month. Sometimes it starts with contributing enough to get an employer retirement match, if one is available, because that match is essentially additional compensation.

According to the Investment Company Institute, about 60% of U.S. households participate in some form of retirement account, most commonly through workplace plans like a 401(k). What most people do not see online is that many of those contributions start small and increase gradually over time.

The reality is that investing is not something you have to rush into before your finances are ready. The goal is not to force investing into a situation where money is already tight. The goal is to build a financial foundation strong enough that investing eventually becomes possible.

If you feel like all of your money is already spoken for right now, your focus should not be on trying to keep up with what people online are doing. Your focus should be on stabilizing your finances and creating breathing room.

For many people, that is the most important step on the path to investing.

A gentle reminder that I wanted to share with you this week.

I’m a big believer that if you have money sitting in savings, it might as well be earning something for you. If you have an emergency fund or a savings goal where you don’t need constant access to the money, a high-yield savings account is something I always recommend looking into.

Personally, I keep a large portion of our savings in a high yield savings account. Right now about 75% of our emergency fund sits there. It’s still completely accessible if we need it, but while it’s sitting there doing its job as a safety net, it’s also earning interest.

We also keep some of our longer term savings goals there too. One of the things Chris and I are working toward right now is saving to buy him a truck in the next couple of years. It’s been really fun to watch that goal slowly come together. Chris has been selling parts of his trading card collection (he just sold $24,000 worth of cards!) and putting that money toward the goal, and we’ve been adding to it little by little as well.

For me, that’s one of the things I love most about savings. It’s not just about emergencies. It’s also about the things you’re intentionally building toward over time.

The high yield savings account I personally use is Ally. I really like their bucket feature because I can divide the money into different goals inside the same account. So one bucket might be our emergency fund, another might be the truck fund, another might be something else we’re working toward. It helps me see where our money is going and keeps those goals organized.

That said, most high-yield savings accounts are designed to do the same thing. The goal is simply to earn more interest than a traditional savings account.

If you’re thinking about opening one, there are a few things I always suggest checking for first.

Make sure the account is insured. If it’s a bank, it should be FDIC insured. If it’s a credit union, it should be NCUA insured. That protects deposits up to $250,000 per depositor, per institution.

I also look for accounts with no monthly fees, no difficult minimum balance requirements, and easy transfers between accounts so you can move money when you need to.

A lot of traditional savings accounts pay extremely low interest rates, so if you already have money sitting in savings, moving it to a high-yield savings account can be a really simple way to make that money work a little harder for you.

It’s one of those small financial decisions that doesn’t feel like a big change in the moment, but over time it can add up. And if you’re already saving, you deserve to earn something on that money while it’s there.

While there’s not an exact roadmap to follow for combining finances, there are several principles that can certainly make the process easier. Here’s what to consider.

In this video, I share my February spending, give a look into March, and give a spending update!

The Building Blocks of Budgeting is the complete budgeting system I created after years of trial, error, and real-life experience. This course walks you through seven core building blocks, with step-by-step lessons, worksheets, and videos, so you can create a realistic plan, pay off debt, grow your savings, and build lasting confidence with your money. It’s self-paced, includes lifetime access, and is designed to help you build a budget that honors your life, goals, and values.

A few gems from the past to check out:

Use this money checklist to ensure you remain intentional with your money in March!

Until next time,