10 Ways to Invest More in the Stock Market in 2021

Investing in stocks has been a great way to build wealth over time. The big challenge, though, is that you need to have cash available to invest in order to use it to take advantage of the opportunities the market offers. If you’d like to make 2021 the year you accelerate your investments, take heart. These 10 ways to invest more in the stock market in 2021 can give you great ideas to help you contribute money toward your nest egg faster than you have been before now.

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Every dollar you’re putting toward debt service is a dollar you can’t use to pay for your current expenses or sock away for your future. Free up more of your cash by paying off the debts you currently have, helping you better make ends meet each month and find more cash to invest in the future. The most efficient way to pay off your debts is known as the “debt avalanche” method.

To use it, you line up all your debts in order from the highest interest rate to the lowest interest rate. On all your debts except the one with the highest interest rate, you pay the minimums. On the highest interest rate debt, you pay as much as you can above and beyond the minimum until it’s completely paid off. Then, you move the money you had been paying toward that debt to your new highest interest rate debt, continuing until (nearly) all your debts are paid off.

If you have a low-interest rate mortgage with an affordable payment or a similar low-interest rate, low-payment debt, it may be OK to keep that out of your “avalanche” and just keep paying as scheduled. For all other debts, paying them off is a great way to free up cash to invest in the market.

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If the COVID-19 pandemic has changed your lifestyle and priorities, now is a great time to reflect on what’s really important to you given the current reality we’re all facing. If you find yourself with bills or other expenses that don’t match with your current priorities or needs, now is a great time to cut those costs. In addition to going cold turkey on things you don’t need, now is a great time to sharpen your pencil and figure out how to cut costs on those things you’re not quite ready to give up on.

Maybe you can switch to a cheaper internet provider or cut the cable and pay only for the streaming services of the channels you really watch. Maybe you can invest in a programmable thermostat and use it to reduce your heating bills when you’re asleep or not at home. Whatever you choose to do to cut your costs, the money you free up can be used to help you invest more in the market.

Especially with the uncertainty surrounding the current economy, you may be scared to invest because you’re worried about your job or other sources of income. That’s a legitimate concern. The best way to address it is to make sure you have cash socked away in an emergency fund, just in case you find yourself without a job or otherwise in need of cash for a large, unanticipated expense.

As a general rule, you’ll want to have around three to six months’ worth of expenses socked away in your emergency fund. Don’t despair, though. If you’ve got your debt paid down and your costs reduced from the previous two points, that amount will be smaller than it otherwise would have been. Once you have that emergency fund available, it becomes easier to invest any available additional cash you might have, thanks to having the cushion at your disposal if needed.

Every year, the tax brackets get adjusted for inflation. 2021 will be no different, with both the standard deduction and the brackets shifting up slightly. This means that, all else equal, most people will see slightly larger paychecks in January 2021 than they do in December 2020. If you were making ends meet on your salary at the end of 2020, then that same salary will likely put more money in your pocket at the beginning of 2021.

That extra cash in your pocket is a great candidate to invest, as it’s money you weren’t living on before and that you can sock away with no impact to your lifestyle. It’s a great opportunity, since the money comes to you just by virtue of the calendar turning over.

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According to the IRS, through mid-October 2020, over 123 million taxpayers have received a refund during the year, with the average refund clocking in at almost $2,500. In most cases, a refund represents the return of money the taxpayer overpaid to the IRS -- money that didn’t need to be collected in the first place. If you got a refund, that’s money you earned but didn’t live on in the past, and that money can easily be put toward your investments with no impact to your lifestyle.

Not only can you invest the refund you got, but you can adjust your withholdings to shrink that refund for the future. The IRS doesn’t require you to overpay your taxes during the year. In fact, as long as you’ve paid at least 90% of what you owe for the year through withholdings or timely estimated payments, you can true up on tax day with no penalties or interest.

The money you’re not overpaying in taxes by adjusting your withholdings to reduce your refund can also be invested with no impact on your lifestyle. That combination of investing the refund you got and the money that would otherwise be your refund next year works out to about the equivalent of investing your tax refund twice.

5 Winning Stocks Under $49
We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by the Motley Fool. I’d be sitting on a gold mine!” And it’s true. And while Amazon and Netflix have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Simply click here to learn how to get your copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

If you were making ends meet on your salary before you got a raise, then getting a raise provides you with a great opportunity to increase your investments with no impact to your lifestyle. A great target is to try to invest half the value of that raise.

Why half? Well, a higher income generally means higher taxes, so you probably won’t take home all of that raise. In addition, while inflation has been modest, there still is some of it around, so you can certainly use your raise to help offset those increased costs. Plus, your raise does represent a reward for great work, and you can certainly feel free to spend some of that reward as well.

If your company offers a matching contribution for putting money into your 401(k), 403(b), Thrift Savings Plan, or other employer-sponsored retirement plan, putting money in that plan can be a great way to invest more. After all, while you have to contribute your own money to get your boss’s match, once you put your money in, your boss’s matching contribution will follow, adding to the amount invested on your behalf.

Indeed, investing in your 401(k) plan until you get enough to maximize your match is such a great idea that it’s the first investment you should make if you have such a match available. It really is a stupendous way of increasing the amount you invest as a way to build a better nest egg.

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Generally speaking, a dollar inside a Roth-type retirement account is more valuable than a dollar inside a traditional-type retirement account. This is because money invested in a Roth-style plan can generally be withdrawn tax-free once you’ve reached a standard retirement age, while money in a traditional-style plan is taxed as income when withdrawn. Still, the advantage traditional-style 401(k) plans have over Roth-style 401(k) plans is that in the traditional plan, the money you contribute is pre-tax money.

That advantage means you can contribute more to your traditional 401(k) than you can to your Roth 401(k) with the same impact on your take-home pay. For instance, assume you can put $500 per month of take-home pay aside for your investments. In a Roth 401(k), that $500 would be all you could sock away. If you’re in the 22% federal tax bracket and a 5% state tax bracket and contribute it to a traditional 401(k) instead, you can save around $684.93 each month for the same take-home impact.

If you’re paid hourly or are otherwise eligible to make more money by working extra shifts, putting in the extra time can help in several ways. For one, the extra money you earn can easily be invested, helping you improve what you’re socking away. For another, putting in the extra time may help you get noticed by your boss as a dedicated employee, opening up opportunities for future career advancement.

Whether it’s directly from the hours you’re putting in or indirectly from the potential for career advancement, the extra money you earn from additional work can be put toward your investments. That can pay off in the end, once your money really starts compounding on your behalf and doing the heavy lifting for you.

If you can’t pick up extra hours at your primary job, you may still be able to take on another job as a way to earn a few extra bucks. The money you earn from that work can directly increase the amount you sock away each pay period. In addition, you may find your side hustle can get to the point where it pays you better than your primary gig, helping boost your income and money available for investing even further.

Even if it doesn’t replace your other job, you may find that you pick up skills at your side hustle that let you improve the value you’re adding to your primary employer, earning you an above-normal raise. Either way, that’s more money in your pocket -- and more money available to invest.

5 Winning Stocks Under $49
We hear it over and over from investors, “I wish I had bought Amazon or Netflix when they were first recommended by the Motley Fool. I’d be sitting on a gold mine!” And it’s true. And while Amazon and Netflix have had a good run, we think these 5 other stocks are screaming buys. And you can buy them now for less than $49 a share! Simply click here to learn how to get your copy of “5 Growth Stocks Under $49” for FREE for a limited time only.

Each of these 10 approaches represent different ways you can get yourself in the position to invest more in 2021. A key thing they all have in common is that you need to make the decision to take advantage of the opportunities as they become available to you. For some -- like those based on the new year's tax bracket -- you will have to wait for 2021 to make use of them. For the others, there's nothing stopping you from laying the foundation or even getting started with investing more today.

The sooner you get started, the more time you can put on your side, and the harder the market's compounding can work on your behalf. Getting that compounding to work for you is the most valuable part of your investing journey, and the earlier you put it to work, the longer you can reap its benefits.

Chuck Saletta has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.