3 Crucial Investments Every Guy MUST Have

If You Don’t Have (Or Know) What A 401(k) Is…

If you still don’t know what a 401(k) is or why it’s useful, you DEFINITELY need to read this.

You see, understanding the basics of investing isn't just for the Wall Street types.

These tools exist to help you cover your own ass later in life with a nice nest egg of cash, so you need to learn them.

I’ll break down three simple wealth strategies that you can start using today.

No jargon, no complications, just straight-up advice on how to get your money working for you.

1. Your 401(k)

A 401(k) is probably something you’ve heard of but might not fully understand.

It’s like a gateway to the investment world for most young professionals, and here's why.

A 401(k) is essentially a retirement savings plan that’s sponsored by your employer.

It lets you save and invest a piece of your paycheck before taxes are taken out.

Plus, a lot of companies will actually match what you contribute, up to a certain percentage.

That’s free money that you could otherwise be leaving on the table.

First up, check if your job offers a 401(k) plan. If they do, sign up and start contributing, especially if there’s employer matching.

The typical advice is to at least contribute enough to get the full match; it’s like an instant 100% return on your investment.

Here's a quick breakdown of how it works:

- Choose Your Contribution Amount: Decide how much of your salary you want to set aside each pay period. Even a small percentage is a solid start.

- Pick Your Investments: Most plans offer a range of investment options, usually mutual funds. When you’re starting out, it’s wise to go for a mix that matches your risk tolerance and time until retirement.

- Automatic Deductions: Your contributions are automatically deducted from your paycheck, making it an easy set-it-and-forget-it way to save.

Remember, the goal here is to grow this fund over time.

The money you stash away in your 401(k) benefits from what’s called tax-deferred growth, which means you won’t pay taxes on it until you withdraw it in retirement.

By starting in your mid-20s, you give your money a ton of time to increase through the magic of compound interest.

2. Your IRA

The Individual Retirement Account, or IRA for short, is another heavyweight champ in the ring of retirement savings.

It’s especially clutch if you’re hustling freelance or your job doesn’t offer a 401(k).

An IRA is a type of savings account that offers significant tax breaks, making it an ideal place to stash your cash for the golden years.

There are two main types of IRAs, Traditional and Roth, and choosing between them depends on your current and future financial outlook.

Traditional IRA: Here’s how it works. The money you put in may qualify for a tax deduction, reducing your taxable income for the year.

You’ll pay taxes on it later when you withdraw the money in retirement, ideally when you might be in a lower tax bracket.

Roth IRA: You pay taxes on the money you put in now, but when you withdraw at retirement, every penny is yours tax-free. That’s a big deal if you think you’ll be in a higher tax bracket down the line.

Why Consider an IRA?

- Tax Advantages: Both types offer compelling tax benefits that can help grow your savings more efficiently.

- Flexibility: You’ve got more control over where your money’s invested compared to a 401(k). Stocks, bonds, ETFs…you name it.

- Accessibility: A Roth IRA comes with the bonus feature of being able to withdraw your contributions (but not your earnings) without penalty, which is handy if you ever find yourself in a financial bind.

Setting One Up is Simple:

1. Choose a Provider: Look for banks and brokers that offer IRA accounts. Pretty much all of them do.

2. Open Your Account: You can usually set this up online in no time.

3. Make Contributions: Decide how much you want to contribute and make regular deposits. For 2023, you could have contributed up to $6,500 per year, or $7,500 if you’re 50 or older.

So let’s say you put in $5,000 a year, after 30 years at 7% return that would already be $472,000.

Whether you’re freelancing, running your own business, or just want to supplement your 401(k), an IRA is a powerful tool to consider for securing your financial future.

It’s also a really smart choice for any one of my online training students who manage their own business, because it puts more power into their hands on how their business income gets taxed.

3. Index Funds

Now, let's talk about something that might sound complex but is actually one of the simplest and most effective ways to invest your money…index funds.

These bad boys are your ticket to playing the stock market without needing to become the next Warren Buffett.

What’s an Index Fund?

An index fund is a type of mutual fund or exchange-traded fund (ETF) designed to follow the components of a market index, like the S&P 500 or NASDAQ.

Basically, when you invest in an index fund, you're buying a small piece of all the companies in that index.

This spreads out your risk because your money isn’t tied to the success or failure of just one company.

Why Index Funds?

They offer automatic diversification, making them less risky compared to picking individual stocks.

Plus, index funds typically come with lower fees than actively managed funds because they aim to match the market’s performance, not beat it.

This approach not only reduces management costs but also minimizes trading, keeping expenses low.

Index funds have also shown consistently strong performance over time, earning them favor among passive investors who prefer a "set it and forget it" strategy.

How to Invest in Index Funds:

1. Pick Your Platform: You can buy index funds through a brokerage account, so if you’ve set up an IRA or have a 401(k), you can likely buy index funds there.

2. Choose Your Index: Decide which market index you want to invest in. Popular choices include the S&P 500, Total Stock Market Index, or International Stock Index.

3. Regular Investments: You can set up automatic contributions to steadily build your investment over time. This is called dollar-cost averaging, and it can help reduce the impact of market volatility.

A Tip for Beginners: When you're just starting out, it might be a good idea to focus on broad market indexes. They offer exposure to a wide array of sectors and are less volatile than niche indexes.

Investing in index funds is one of the most straightforward strategies for getting into the stock market. It’s like putting your savings on autopilot while you focus on your career, hobbies, or other investments.

So don't sleep on this opportunity…get some skin in the game and let the market do its thing while you reap the rewards over the long haul.

The BMM Takeaway

So, where should you start if you want to build wealth?

If you’re employed, start by checking your workplace benefits to see if a 401(k) plan is available and what kind of match they offer.

If one is available, sign up and contribute enough to get the full match…it's like free money.

If a 401(k) isn't an option or you want more control over your investments, choose a provider and open an IRA.

For those early in their careers, a Roth IRA is a great choice because the tax-free withdrawals can pay off big later.

As for the index funds, you can do this through a brokerage account like Fidelity, and starting with a simple S&P 500 index fund is a solid choice.

Set up automatic monthly contributions even a small amount can grow significantly over time due to the power of compound interest.

Remember, the goal is to start now…the earlier you begin, the better your financial future can look.

Disclaimer: The information contained in this article is not intended and shall not be understood or construed as financial advice. The team at Big Money Methods have done our best to ensure the information provided in our articles is accurate and valuable information. Regardless of anything to the contrary, nothing through this website should be understood as recommendation that you should not consult with a financial professional to address your particular information.