The Q2 2025 weekly earnings data from the U.S. Bureau of Labor Statistics noted that full-time workers earned a median weekly income of $1,196, which is $62,192 per year. Since making $25,000 per year puts you below half that amount, you might be unsure whether investing money is realistic (or even recommended) in your tight financial situation.
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However, personal finance guru and author Ramit Sethi believes that investing is the best way to build wealth, regardless of your income. In a YouTube video, he discussed the financial challenges that low earners face, and recommended four strategies to make investing work for those earning $25,000.
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Give Yourself Breathing Room
If you use the MIT Living Wage Calculator to determine your state’s annual living wage, you’ll find that the figure is far higher than $25,000 (roughly $2,083 per month), even if you’re single without children. This low income may barely even cover your needs, leaving you with little margin for building wealth.
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Having earned a low income after finishing college, Sethi explained, “When you are truly living paycheck to paycheck, saving anything feels impossible, but this is actually exactly where smart money habits begin.”
Since you’re especially financially vulnerable to unexpected expenses, you should take an initial step for some financial security. Sethi recommended saving leftover cash each month until you have three to six months’ worth of your essential expenses. He added that slow progress is fine as you build this emergency fund.
Follow the Conscious Spending Rule
When you earn $25,000, it’s essential to monitor your spending and reduce expenses where possible. Rather than having you aggressively cut out the things you like, however, Sethi’s suggested spending plan focuses on your different priorities and leaves room to enjoy life.
He explained, “Here’s how the conscious spending plan works: 50% to 60% of your take-home pay goes to fixed costs, like rent, utilities and debt payments; 5% to 10% goes toward your savings goals, which includes your emergency fund; 10% or more to investments; and 20% to 35% goes to guilt-free spending on the things that truly make you happy.”
Sethi added that perfection is unnecessary, so adjustments based on your financial situation are OK. Maybe you have high housing costs or can’t invest money just yet. In such cases, you might lower certain targets (such as guilt-free spending) and adjust them again later.
Embrace the Power of Compound Interest
Even if your low income means you can only invest a small amount each month, the results can still be impressive, as the compound interest over time will make a big difference. The key is to be consistent with your contributions and not wait to start investing.
Sethi discussed two hypothetical investors who contributed $20 per month and got a 7% return. The first one started immediately and ended up with nearly $24,000 after 30 years, while the second one waited for 10 years and ended up with around $10,000 20 years later — that’s a $14,000 difference.
You can use a compound interest calculator to see the impact that another modest investment amount, such as $50 or $100 per month, would have over the long term, as well as experiment with different returns. When you’re ready to invest, Sethi recommended choosing low-cost index or target-date funds, which suit beginners and allow for a hands-off approach.
Boost Your Income
Sethi said, “Just because this is where you are right now does not mean your income is going to be the same a year from now, or even six months from now.”
While many people get stuck on the idea of a fixed income they can’t control, it’s possible to eventually earn more than $25,000, increase your savings and investments and have more leftover cash for enjoyable things. And like when you invest, even small additions can add up.
Sethi discussed building skills, networking and doing side gigs as potential options. On his blog, he also listed several side gig ideas to consider, such as being a virtual assistant, freelance designer, bookkeeper, tutor, delivery driver, consultant or pet sitter.
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This article originally appeared on GOBankingRates.com: Ramit Sethi’s Top 4 Investing Tips for a $25K Income