If you’re in debt, your objective is likely to pay off your debt. This requires building wealth, but alternative investing may seem too risky. What if you lose your money? Your money is better spent on paying off debt than risking it on an un-guaranteed investment; unless, of course, the investment is low-risk and low-cost, in which case the risk is worth the reward because the risk is so minimal.
The following is four alternative investments that are just that, cheap and low-risk. Each requires a time commitment and thorough research, but success in each is achievable by everyone. Use the money you earn to pay down your debt faster, and then put the rest into traditional investments to build long-term wealth.
1. Mine and Trade Bitcoin
Bitcoin can make you rich, if you’ve got the right strategy. Your ability to mine enough bitcoin (to later trade) depends on your hardware setup or what cloud-based mining software you’re subscribed to. The latter, subscribing to a cloud-based Bitcoin mining service, is the least expensive of the two. If you decide to purchase hardware, only the most expensive hardware is going to get you the amount of bitcoin you need to trade on the more prominent exchanges.
Coinbase is the most popular Bitcoin trading site, but there’s lots of different places to trade coin. Although trading Bitcoin is faster than traditional investment methods, you still need to be patient. The College Investor reports that if you mined $10 in bitcoin in 2011, it would be worth $1000 today. That’s all free money – you mined the money you needed to invest, so for a $0 investment, you’d have made $1000.
2. Peer-to-Peer Lending
Peer-to-peer lending isn’t new, but technology has improved it. There are ways to invest small or large amounts, even amounts as low as $100. You lend the money, make money on the interest, and then get paid back. It’s a good trade, and it’s something you can do that doesn’t require a significant financial investment. Look for loans that are low-risk, such as small business loans that can prove their business generates a regular profit. Also, make sure the entrepreneur lets you know how your funds will be spent.
3. Small Scale Real Estate
Real estate is a great way to build wealth. It’s a tried and true investment method, but it’s costly. If you’re in debt, you may not want to take out a second mortgage to buy a rental property. That doesn’t mean you can’t rent a room or convert a garage. If you do the work yourself, you can set up an efficiency apartment, convert your home into a bed and breakfast, or convert your garage into a small apartment. Use your rental funds to pay down your mortgage faster, or use them to pay for the renovations you need to convert more rooms in your home to rentable spaces. This small change can net you as much as $11,000 per year.
4. Become a Silent Small Business Partner
You may not have the funds to start your own business, but you may have enough to help fund someone else’s business. For a relatively small investment, you can own a percentage in someone else’s company. If you and some others each give a small amount, the business can get up and running, but you’ll never have paid for more than you could afford. You can even design this alternative investment to pay out a certain percentage for the life of the business.
When it comes to reduced-cost alternative investing, it’s all about setting your own terms. Be diligent, and seek out those opportunities that are low-risk and have the potential for high-reward. The most important thing is that you pay attention to your bottom line, and never create more debt.