Investments

TL;DR: Hold cash only for emergencies. Make your money work for you!

So you did the hard part of working for some cash. Now what?

You can’t invest all your money, so if you can, budget out about 4-6 months of your expenditures and put it in a high-yield savings account for emergencies. (I use Marcus, which currently offers very competitive rates. This can’t be your only bank though – find a place to open your checkings account too! Like Chase) However, if you have more leftover, money has the potential to work and grow for you as passive income!

Step -1: Don’t Spend (above your means)

A wise person once told me this is the most sure way of immediately yielding 100% return.

This is obvious but sometimes the hardest part. Budgeting helps. How much you want to save depends on you, and whether you want to be nice to or to bully your future self.

Definitely enjoy life (within your means). So whenever you spend, take advantage of great ways to save! However, if you make more than what you need to cover your necessities, I’d highly recommend setting aside whatever you can for a rainy day and to invest in your future self.

Step 0: Be Smart About Your Investment Vehicles

If your employer offers matching programs on 401k’s, if you’ve got some extra cash to put in an IRA, or if you have reason to open a 529, take advantage of all the ways you can grow your money tax-free!

Step 1: Just Put Your Money Somewhere In the Market

With the way society is set up, everyone (think all the CEOs and executives of every company, the government, any employee of anything) is working hard to in general improve their company, or their small part of the economy. Investing your money in the economy is a good way of getting your money (or really, the hard-workers in society) to work for you.

This can mean simply putting your money in stocks of any of your favorite companies, or ETFs like in IVV (the cheap way to invest in the biggest 500 stocks in the US all at once). We’ll go over all of this (including what is an ETF) in more detail.

While the market can have ups and downs, holding a diversified portfolio in the US leads to about a 5-7% annual return on average over a long-time horizon (e.g. if you’re young, that’s from now until when you retire).

Step 2: Optimize

While it’s much more important to get the other steps right first, this is the part everyone obsesses over. What products should you invest in? What stocks should you choose? How do you think about all this?

In the following posts in this series we’ll build a framework together on how to think about all this!

More to come,

TheJKW

P.S. If you’re excited to get started, check out Robinhood (for commission-free trading) and Schwab (for a brokerage that offers a lot of products and services)