How to invest II – set your foundation

Set your foundation!

Here’s a sneak peak to what your finances could feel like after you learn how to invest:

• Everything is humming along nicely making money for you as you sip Mai Tais in Hawaii! 🍹🌴

We want money to feel easy, accessible, and like it’s working for you. So let’s build a foundation so you can invest and get to ‘money making money’ for you part.

Let’s start with the accounts. A great starting point is to have each of these:

• Checking account: where your income comes in and you pay your day-to-day bills from.
• High-yield savings account: where you keep your emergency fund & goal-oriented savings so it earns more than $0 in interest. Look for accounts with:
  • FDIC insured
  • No minimum balances
  • No fees
  • A good APY (as of 1/5/22, this is 0.50%)
• Tax-advantaged/retirement accounts:
  • Employer-sponsored retirement account (i.e. 401k): we try to max this account every year. As a starting point, we contribute enough to get the employer match.
  • IRA: we try to max this every year.
    • Tip: once you fund these accounts, make sure you pick your investments. Otherwise your money will only be in this account, it won’t be earning any money.
• Taxable brokerage account: if you have additional money that you’d like to invest after maxing your tax-advantaged accounts, this is where you can do it!
  • SIPC coverage
  • Commission-free trading
  • No fees or minimal fees (~0.25% or less if you’re going with a robo-advisor)

Now that we have the accounts sorted, let’s talk about how we prioritize where our money goes:

1. Contribute enough to employer-sponsored retirement account to get the employer match.
2. Calculate your “Pay Yourself First” number to figure out how much you want to save & invest every month.
3. Using your Pay Yourself First number, contribute to an Emergency Fund before you start investing.
   • This is your 🚨 for emergencies only, don’t touch 🚨 money so if something happens like a lost job or medical expense, you can use this instead of needing to go into debt or sell your investments.
   • Aim for 6 months of living expenses.
   • 3 months if you want a lower starting point.
4. If you have high-interest debt (8%+ like credit card debt), you want to pay this off as soon as possible.
   • Here’s more context on how we think about paying off debt before or alongside investing.
5. Once you have your emergency fund set up and you have a plan for your high-interest debt, use your Pay Yourself First number to contribute to your IRA and Taxable brokerage accounts.

We honestly think personal finance is about building a system you can live with and send your money to work for you! You got this!

And if you have questions, you got us! DM us on @buildwealthlikeabadass or email us at buildwealthlikeabadass@gmail.com!

This is meant to be educational content only and should not be taken as investment advice. Please invest at your own discretion and risk. Please contact licensed investment or tax professionals if you are seeking advice.