Step 3: Investing


Congratulations! You’ve finally reached step 3: Investing.

Now that you have your debts all cleared and your liabilities close to zero, it’s time to take a look back at your emergency fund. You will want to work on getting 6 months worth of expenses saved up if you haven’t done so before moving on to investing.

Tax-Advantage Investing

Our first course of action in investing is to max out all of our tax-advantage accounts. We will do so in the following order:

Account Contribution Limit
401(k) $18000
IRA or Roth IRA 5500
HSA 3350

These contribution limits are different for everyone. For more information on investing in your retirement accounts:

Many employers provide a 401k as part of your retirement plan with employer matching. If you have this then this should be the first account you contribute to.

IRS limits your to $18,000 this year so max it out. You can then start investing your 401k through asset allocations provided by your employers program. If your employer provides matching then by the end of the year, you will have $18,000 PLUS whatever your employer matches.


Here’s another major rule in Investing 101: never give up free money!

Depending on your tax bracket you will also want to open up either a Traditional IRA or a Roth IRA. My general rule of thumb is if you’re in the 25% tax bracket or below and you plan on working for promotions and making more money, then that means it’s better to be investing in your Roth IRA now. Then later on once you’re making more money from pay raises and promotions, switch to a Traditional IRA.

The limit for IRA contributions is a combined total of $5,500 for 2015.

Total Retirement Contributions: $18,000 + $5,500 = $23,500 for 2015.

Non-Tax Advantage Investing

Once you’ve maxed out everything else, congratulations you’ve succeeded in Investing 101. Open an account with a brokerage account and start depositing money into it on a routine basis. I personally use TDAmeritrade and OptionsHouse as my brokerage of choice.

TD has the best investing platform out there. They also have a full service platform that covers stocks, options, futures, and Forex. Their trading platform thinkorswim is famous worldwide and number one. They also have a web-based platform called Trade Architect which is also amazing. Their mobile apps are the best out of any.

They have easy-to-use charts, a lot of analysis tools, spread trading and options risk graphs. The amount of functionality exceeds all other platforms I’ve used.

OptionsHouse I use primarily to trade options and is less suited for investing. They have the lowest commission fees and they also have an easy to use web-based platform and mobile platform. If you plan on following my options trading on here, I will be using OptionsHouse.

Once you have your account opened, it’s time to start investing your money somewhere.

You can read this post to get some ideas on investing or how you want to manage your portfolio since the possibilities are endless:

Investing: Where Do I Put My Money?

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