BaB

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    Table of Contents

  1. Budget & reduce monthly expenses; set realistic goals
  2. Build an emergency fund
  3. Employer-sponsored matching funds
  4. Focus on paying high/moderate debts off
  5. Save for retirement in an IRA & other higher education expenses
  6. Max out retirement savings where possible
  7. Save for other goals & advanced methods
  8. Glossary
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Build an Employer-Matched Retirement Account

If your employer does NOT offer a retirement account WITH a match, you can skip this step. Alright! You should have your bills under control at this point.

    Prerequisites

  • Optimized budget
  • 1 month emergency fund
  • All non-essential bills paid in full every month

  1. Enroll in Employer-Matched Retirement Account

    Ask your employer about the types of retirement accounts are offered and choose one to start contributing to. This could be a pension or a 401(k). The one that will be covered is the 401(k) retirement account and it comes in either a Traditional or a Roth version. A 401(k) retirement account is an account that allows you to contribute and invest money in the stock market. Any money gained through this account is considered profit.

    Generally, if you think you will be making MORE money in the future, choose a Roth account. You will have to pay taxes on your income now, but any profits will be free from income tax when you are in a higher tax bracket.

    If you think you will be making LESS money in the future, choose a traditional account. You will avoid paying taxes on your contributions now that you are in a higher tax-bracket, then pay income tax on any profits in the future when you are in a lower tax bracket.

    Both types of accounts are tax-advantaged accounts and are beneficial regardless of which one you choose. Sign up for your preferred employer-matched retirement account and ONLY contribute up to the amount needed to get the full employer match.

    Example: Your employer matches 100% of your contributions/dollar-for-dollar. They match up to a maximum of 3% of you annual income. If you make $30,000 annually, your employer will contribute up to $900 a year if you also contribute $900. This is a free $900 that your employer is giving you to invest with. Anything more than $900 will not be matched. To make things simple, you just need to contribute 3% of your paycheck to get maximum matching benefits. Work up to this amount every paycheck. ?

    After sucessfully enrolling in your desired employer-matched retirement account, you will be able to invest in the stock market with your contributions. The value of this account will change depending on the stock market. If you don't know anything about the stock market and want to safely invest, look into low cost index funds like: total market index fund or S&P 500. ?

Opening a retirement account is a big decision, so take your time and discuss your options with your friends and family before deciding on one. We will not be going too in-depth with the stock market. There are many ways to invest in the stock market, but this guide will only be focusing on the "safest" methods via index funds. To make this strategy work we must believe that the market will always tend to grow. We do not care about immediate changes, but the changes in the long run.