1. General Rules

    • Invest 15-20% of pre-tax income each year towards retirement

      e.g. $70,000 salary. $10,500 - $14,000 should be put into retirement, not including employer 401k contribution. Say employer matches 100% up to 4% in 401k. No HDHP so no HSA

      $2800 of your money into 401k to get $2800 from employer $6500 in Roth IRA $1200 into 401k Total: $10,500

    • Put money in tax advantaged accounts first (401k, Roth IRA, HSA)

  2. Step 1 - Emergency fund

    • Where: Savings account
    • How much: 3-6 months of emergency expenses
    • Why:
      • Loss of job
      • Car repairs
      • Home expenses
    • Notes:
      1. This is not a nest egg, not a place to save money for a vacation, and not for college tuition
    • Where: Fidelity, Vanguard, Guideline, any investment platform your company uses
    • How much: Up to whatever it takes to get the max employer contribution
    • Why:
      • This is CRAZY! It's a 100% return on your savings (free money!) which is not possible any other way in life.
      • The idea is that you're investing money pre-tax, and when you take the money out in the future to use for retirement, you'll be in a lower tax bracket since you won't be working.
    • Examples:
      • Employer sponsors a 401k plan and offers 100% match on 4%
      • If you make $70,000, and you contribute $2800, employer will match $2800

  4. Step 3 - Pay off high interest debt

    • Where: Credit card debt, student loans
    • How much: Anything remaining after matching employer contribution

  5. Step 4 - Max out Roth IRA

    • Where: Fidelity, Vanguard, Guideline, any investment platform
    • How much: How much: 7000/year
    • Why:
      • Contributions are after tax
      • Growth is tax free
      • Never have to pay taxes on it, meaning when you take money out in for retirement, it's all yours.
    • Notes:
      1. There are income barriers

  6. Step 5 - HSA

    • Where: Need a High Deductible Healthcare Plan, provided by your employer
    • How much: Often, your employer will match or contribute. E.g. They'll contribute $1000/year as long as you contribute something. It's free money!Unlike an employer funded retirement plan, the amount your employer contributes is subtracted from the total you can contribute.Do you think you'll have lots of medical expenses?
    • Why:
      • Contributions are tax deductible
      • Money grows tax deferred, meaning that as long as you use it for health purchases, you don't pay taxes on growth. Think of it like Roth IRA but the money can be used at any time on health care purchases.
      • Get free money from your employer!
      • Sticks with you through life
    • Notes:
      1. Can only be used on health purchases
      2. Kind of like retirement plans, you can invest these index funds, which will grow over time as they sit there!
    • Where: Fidelity, Vanguard, Guideline, any investment platform
    • How much: For example, up to 23000/year for a 401k. Check your employer's specific investment account.
    • Why:
      • All of the benefits of an employer sponsored retirement account

  8. Step 7 - Taxable accounts

    • Where: Fidelity, Vanguard, Guideline, any investment platform
    • How much: Whatever is left over that you want to invest to get to the 15-20% rule.
    • Why:
      • Have your money grow over time
    • Notes:
      1. These are index funds that follow a general upward trajectory. Thinking compounding interest principles.
      2. Do not to individual stocks

  9. Step 8 - Low interest debt

    • Where: Car loans, etc
    • How much: Anything after the 15-20% rule

  10. Step 9 - Home mortgage

    • Where: Mortgage lender
    • How much: Whatever extra
    • Why:
      • It's last because generally, the long term growth from taxable accounts is greater than the benefit you'd get from paying off the loan now. You'd make more money in the long run through capital gains (What are capital gains? A fancy word for profit from investing. Buy a stock at $100, sell at $110, capital gain is $10.)