You don’t need a six-figure salary to start investing, but the amount you earn can affect which investments make the most sense for you. Someone earning a modest income may need to prioritise financial stability and accessible investments, while someone earning significantly more may have more room to diversify.
Many beginners make the mistake of copying an investment strategy simply because it worked for someone else. Your income, expenses, debt, financial goals, emergency savings, and risk tolerance all influence how much you should invest and where your money should go.
In this blog post, we’ll look at the best investments for different income levels and explain how to decide what makes sense for your situation. You’ll also learn how to determine how much of your income to invest, what to prioritise before investing, and how your investment strategy can change as your income grows.
Why Your Income Matters When Choosing an Investment
Your income doesn’t automatically determine which investment is best for you, but it affects how much financial flexibility you have. A person earning ₦100,000 per month with high expenses has a very different financial situation from someone earning ₦500,000 with similar living costs.
This is why the best investment for one person may be completely unsuitable for another. Investing should fit into your overall financial situation rather than forcing your finances to fit around an investment.
Your income also affects how much risk you can reasonably take. If you have very little money left after paying your essential expenses, losing a large portion of your investment could create serious financial problems.
Before Investing, Build Your Financial Foundation
Before deciding where to invest your money, make sure your basic financial needs are being handled. Having a working budget and some emergency savings can prevent you from selling investments whenever an unexpected expense appears.
High-interest debt also deserves attention because the interest you’re paying can work against your investment returns. If you’re paying extremely high interest on debt while hoping your investments will outperform it, you’re taking on unnecessary financial pressure.
This doesn’t mean you need to have everything figured out before investing. You can start with a small amount while improving your financial foundation at the same time.
If you are still working on your budget, our blog post on How To Create A Budget And Stick To It – 5 Simple Steps would be a useful next step.
If You Earn a Low Income
When your income is relatively low, your first investment may not necessarily be a stock or mutual fund. Your priority should be building financial stability while gradually developing the habit of investing.
For someone earning ₦100,000 per month, for example, investing ₦5,000 or ₦10,000 consistently may be more realistic than trying to invest ₦30,000 and struggling to pay for basic expenses. The goal at this stage is to create a sustainable system rather than investing an impressive amount for one month and stopping afterwards.
Low-cost diversified investments can be useful once you have money available for investing. Depending on the investment options available to you, this could include mutual funds, index funds, ETFs, or other regulated investment products that match your risk tolerance.
You can also invest in yourself at this stage by developing skills that can increase your future earning potential. Learning a valuable skill, improving your qualifications, or building a small side income can sometimes have a bigger impact on your financial future than trying to squeeze a little extra return from a very small investment portfolio.
If you’re starting with a small amount of money, read our blog post on How to Start Investing With Little Money for practical ideas.
If You Earn a Moderate Income
As your income increases, you have more room to balance your financial priorities. You can maintain an emergency fund, manage your regular expenses, invest consistently, and potentially allocate money toward different investment categories.
For example, someone earning ₦300,000 per month might decide to invest a fixed percentage of their income each month rather than waiting until the end of the month to see what is left. This creates a more consistent investing habit and makes it easier to increase contributions when your income rises.
Diversified funds can be particularly useful for investors at this stage because they provide exposure to multiple investments without requiring you to research and manage every individual asset. Depending on your goals, you might also consider fixed-income investments or other assets that provide a different balance of risk and return.
The key is not to invest everything simply because you can afford to invest more. Increasing your income should give you more financial flexibility, not encourage you to take unnecessary risks.
If You Earn a High Income
A higher income gives you more opportunities, but it doesn’t automatically make you a better investor. In fact, higher earners can still make serious financial mistakes if they increase their spending as quickly as their income increases.
At this stage, diversification becomes increasingly important because you may have enough capital to spread your money across different asset classes. Your portfolio could potentially include a combination of stocks, funds, bonds, real estate, cash or other suitable investments depending on your goals and risk tolerance.
High earners may also have more complex financial goals, such as buying property, funding retirement, supporting family members, or building a business. This means their investment strategy should become more intentional rather than simply putting more money into whichever investment happens to be popular.
Tax considerations, investment fees, liquidity, and risk management can also become increasingly important as your portfolio grows. If your finances become complicated enough, getting professional financial advice may be worth considering.
The Best Investment May Change as Your Income Grows
Your investment strategy shouldn’t remain the same throughout your life. As your income increases, your financial goals, risk tolerance, and ability to diversify may also change.
When you’re earning less, you may focus more heavily on building an emergency fund and investing small amounts consistently. As your income grows, you may have more opportunities to invest across different asset classes and pursue larger financial goals.
This is one reason you shouldn’t become obsessed with finding the perfect investment. The investment strategy that works for you today may need to change five or ten years from now.
Don’t Forget to Invest in Yourself
Investing doesn’t always mean buying financial assets. For someone early in their career, spending money to develop a skill that increases their earning potential can produce a significant long-term return.
For example, learning programming, data analysis, digital marketing, design, sales, or another valuable skill could help you qualify for better-paying opportunities. The return from increasing your income can sometimes be greater than the return you could reasonably expect from a small investment portfolio.
This doesn’t mean you should ignore financial investing. Ideally, you can gradually invest in both your financial future and your ability to earn more money.
Common Mistakes to Avoid
- Investing Too Much Too Soon: One of the biggest mistakes beginners make is investing an amount they cannot comfortably afford. If you have to withdraw your investments every time you face an unexpected expense, you may be better off strengthening your emergency savings first.
- Choosing Investments Based on Income Alone: Your income is important, but it isn’t the only factor that matters. Your expenses, debt, financial goals, investment timeframe, and risk tolerance should all influence your investment decisions.
- Copying Someone Else’s Portfolio: A portfolio that works for a high-income investor with millions in assets may not make sense for someone who is just starting. Learn from other investors, but build a strategy around your own circumstances.
- Chasing High Returns: Investments promising unusually high returns often come with unusually high risks. Don’t let the desire to grow your money quickly push you into investments you don’t understand.
- Increasing Your Lifestyle Every Time Your Income Increases: A higher income can improve your life, but increasing your spending at the same rate can prevent you from building wealth. Try increasing your investment contributions whenever your income rises instead of allowing all of the additional money to disappear into lifestyle expenses.
Frequently Asked Questions
There is no single best investment for every income level because your expenses, goals, risk tolerance, and timeframe also matter. Lower-income investors may prioritise financial stability and accessible diversified investments, while higher-income investors may have more room to diversify across several asset classes.
There is no universal percentage that works for everyone. Starting with a manageable percentage such as 5% and increasing it as your income and financial stability improve can be more sustainable than investing an amount you cannot maintain.
Both saving and investing have important roles in personal finance. Emergency savings are generally better suited for unexpected short-term expenses, while investments are usually more appropriate for money you can leave untouched for longer periods.
Increasing your investment contributions when your income rises can be an effective way to build wealth faster. You can increase your contribution gradually while still allowing yourself some additional money for lifestyle improvements and other financial goals.
Conclusion
The best investment for you isn’t determined by your income alone. Your financial foundation, goals, expenses, risk tolerance, and investment timeframe are equally important when deciding where your money should go.
If you’re earning a smaller income, focus on building stability and developing the habit of investing consistently. As your income grows, you can gradually increase your contributions and diversify your portfolio rather than simply taking bigger risks.
The most important thing is to start with a strategy you can actually maintain.
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