Skip to main content

How much should I invest?

Investing basics

One of the great things about investing is that you can invest as little or as much as you want—especially once you’ve sorted things like your emergency fund and your KiwiSaver. But this creates a bit of a dilemma: how much should you invest?

How much should I invest?

Should you put away a dollar a week (not much), a thousand dollars a day (expensive, and probably impossible), or something in between?

Here’s the main thing to think about: you want to invest an amount that is affordable and sustainable. In other words, an amount that you think you can stick to over time.

But there are a few other strategies that we know people use as well. Take a look:

When do I want to reach my goal?

We’ve talked before about how a good motivator to investing is setting goals—it’s much easier to commit to investing if you have a clear idea of what you’re investing towards. But goals aren’t just about the things you want. They’re also about when you want them. For example, you might be investing for a deposit on a house. If it takes you 40 years to reach that goal, you’re not going to have much time to enjoy your house!

So if you think about when you want to reach your goal, you can adjust your investing to match that time period. The further away your goal is, the less you have to put aside each week to reach that particular goal, and vice versa. If you want to buy a house in 10 years, you don’t need to invest as much each week as you would if you wanted to buy a house in 5 years.

Once you’ve figured this out, add a little bit on top of your investment amount per week. That way, if your investments don’t perform as well as you expected, you’ll still meet your goal—and if they perform as you expected, or better, then you might hit your goal earlier! So if it’s going to take $100 a week to meet your goal in 10 years, think about investing $110 a week. Worst case, you hit your goal on schedule, and best case, you meet your goal ahead of schedule.

How much can I afford?

When you invest, you want to choose an amount that you can sustain. It’s a balance between investing enough to meet your goals, but also not impacting your current standard of living too much—that's not very motivating.

So to figure out how much to invest, you should do some thinking about how much you want your day-to-day standard of living to change. One extreme would be investing nothing at all, while the other extreme would be living on nothing but rice and soy sauce, and investing every dollar you make. We reckon it’s better to invest a smaller affordable amount, and stick to it, rather than invest a large amount, then stop investing once you get sick of rice and soy sauce.

Some ideas

Now that we’ve covered the main things to think about, we can work through some ways to put those ideas to work.

Let’s say you make the median salary for New Zealanders: around $50,000 a year. After tax, that’s just under $800 a week. And let’s also say your goal is to have $100,000.

You can test this out using the Sorted Compound Interest Calculator. If you invested $200 a week, you’d have your $100k in 9 years—as long as you made an average return of about 7% a year. If you’re comfortable sacrificing 1/4 of your weekly income, then great! But that is a lot of money. It might be more sustainable to extend your time frame out, and invest less money each week.

If you knocked your investment down to $100 a week, it would take you 15 years to get to $100,000. And if you knocked it down to $50 a week, it would take you 25 years to get there. It’s up to you how you trade the time and standard of living off against one another to settle on an investment amount.

Fill the gaps

So let’s say you decided to invest $100 a week. So from your $800 a week salary, you’re living off $700 a week.

Now let’s say you get a new job, and your pay goes from $50,000 a year to $60,000 a year. Your weekly pay goes up as well, to $925 a week!

But you were happily living off $700 a week. Your expenses presumably haven’t changed, but your income has. So you could start investing more to fill the gaps. You could invest $225 a week, and continue to live off the leftover $700. That’s more than doubling your weekly investment, without affecting your standard of living at all!

Run with the percentages

Filling the gaps is great for increasing the amount you invest, but you might want to spend some of your money on yourself. This is completely reasonable! After all, you worked for that pay rise.

So instead of filling the gaps, you could just invest a percentage of your income.

If you decide to invest 10% of your weekly pay, and you make $800 a week, then you’ll start out by investing $80 a week. If you get that $10k pay rise, and your pay goes up to $925 a week, you’ll invest $92.50 each week. You invest more, but you also get to reward yourself when you get a pay rise. Nice.

Wrap it up

So the amount you invest each week is really up to you, but we hope some of the above strategies will help. On the one hand, you want to reach your goals, but on the other hand, you want to enjoy your day-to-day standard of living. But remember that investing is for the long term—and choosing an amount that you can afford and stick with is the key to getting those long-term gains and achieving your goals.

What kind of strategies do you use to figure out how much to invest? Let us know!

Ok, now for the legal bit

Investing involves risk. You aren’t guaranteed to make money, and you might lose the money you start with. We don’t provide personalised advice or recommendations. Any information we provide is general only and current at the time written. You should consider seeking independent legal, financial, taxation or other advice when considering whether an investment is appropriate for your objectives, financial situation or needs.

Join over 600,000 investors