Cut your spending so you have a few hundred extra per month. Invest it in SPY (an index stock for the S&P 500). Over time, you'll build up passive income.
One reasonable way to cut spending is to sell your car if you have financed it, and buy a car you can afford to pay cash for. Financing is a huge drain on your cash.
This isn't a good strategy. First of all the timing factor alone can hammer your principle (particularly with stocks sitting at all time highs).
If you have a skill that is valuable, you're far better off leveraging into that, for the returns are massive by comparison to the puny returns in stock indices. If you can earn just 10% every year in stocks, you're a wizard that should be working on Wall Street earning millions.
It's radically easier to invest $100 into hosting ($10 or $20 / month at digital ocean), build a service, and make $1,000 a month (a huge return on the invested capital) - than to earn a mere 10% per year in stocks.
$1,000 / month = $12,000 per year. To put together $12k per year from stocks, at a 10% return (which is a great return per year historically), you'd need $120,000 in capital to begin with.
Scenario 1) you need $120k in cash to put to work in stocks to yield just $1,000 per month average in new capital, assuming a great historical return (and assuming you don't get demolished by a market down turn). And if you're riding dividends, you're going to be hard pressed to consistently yield 10% every year even from the best dividend investments (such as public trusts, real estate vehicles etc).
Scenario 2) invest $20 per month into a hosting account at digital ocean and build a service that yields $1k per month in income.
>It's radically easier to invest $100 into hosting ($10 or $20 / month at digital ocean), build a service, and make $1,000 a month (a huge return on the invested capital) - than to earn a mere 10% per year in stocks.
But the stocks can happen with no effort from my side. Just invest in some fund and let it ride. Building a service that will make $1k/mo isn't "racially easier", it would take many hours of work to accomplish which means I can't be using that valuable time for something else more interesting.
You can say it's silly, but I know many people who live below their income and invest the difference in stocks. Over 20-30 years, yes they do build up enough to generate significant passive income, and many of them have become millionaires in the process.
It's not a quick way to wealth, but it works, and does not require any particular cleverness nor much of any work.
That really depends on the overall situation. Financing a car that you could afford in cash might well be less risky than having too little cash on hand for emergencies.
One reasonable way to cut spending is to sell your car if you have financed it, and buy a car you can afford to pay cash for. Financing is a huge drain on your cash.