The Personal Finance Podcast - How Much Should You Have Saved In Your Emergency Fund (By Financial Situation!) - Money Q&A

Episode Date: August 2, 2023

In this episode of the Personal Finance Podcast, we’re going to talk about how much money should you have saved in your emergency fund by financial situation? How Andrew Can Help You:  Join The Master Money Newsletter where you will become smarter with your money in 5 minutes or less per week Here! Learn to invest by joining  Index Fund Pro! This is Andrew’s course teaching you how to invest!  Watch The Master Money Youtube Channel!  Ask Andrew a question on Instagram or TikTok.  Learn how to get out of Debt by joining our Free Course  Leave Feedback or Episode Requests here.  Thanks to Our Amazing Sponsors for supporting The Personal Finance Podcast. Chime: Start your credit journey with Chime. Sign-up takes only two minutes and doesn’t affect your credit score. Get started at chime.com/ Shopify: Shopify makes it so easy to sell. Sign up for a one-dollar-per-month trial period at  shopify.com/pfp Policygenius: This is where I got my term life insurance. Policygenius is made so easy. To get your term policy go to policygenius.com and make sure your loved ones are safe. Factor 75: Head to factormeals.com/pfp50 and use code pfp50 to get 50% off your first box. These are amazingly easy and nutritious meals.  Links Mentioned in This Episode:  The Back Door Roth IRA (How High Earners Can Get Money Into a Roth IRA!) Connect With Andrew on Social Media:  Instagram  TikTok Twitter  Master Money Website  Master Money Youtube Channel   Free Guides:   The Stairway to Wealth: The Order of Operations for your Money  How to Negotiate Your Salary  The 75 Day Money Challenge  Get out Of Debt Fast  Take the Money Personality Quiz Learn more about your ad choices. Visit megaphone.fm/adchoices

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emergency fund by financial situation? Everybody and welcome to the personal finance podcast. I'm your host, Andrew founder of mastermoney.com and today on the Personal Finance Podcast, we're going to talk about how much emergency fund should you have saved by financial situation. And we're going to have some other questions as well on this money Q&A. If you guys have any questions, make sure to hit us up on social at Master Money Co and follow us on Spotify, Apple Podcasts, or whatever podcast player, you love listening to this podcast on it. If you want to help out the show, leave a five-star rating and review.

I cannot thank you guys enough for leaving those five-star ratings and reviews on Apple Podcast, Spotify, or your favorite podcast player. And if you want to watch this, you can watch this on the Androgen Cola YouTube channel. Now, today, we are going to be talking about how much emergency fund you should have by financial situation. What I'm going to do on that question is I'm going to go through each and every single financial situation and tell you how you should build out or how you should think about your emergency fund, your wealth protection plan. Then we're going to go through can you open a Roth IRA if your spouse does not work. And I will go through exactly how you actually can do that and a step by step process for that.

And why would you choose index funds with fees when there are index funds out there with no fees? We'll talk through that question. and there's another question about the order to invest. So this is an action-packed episode, really excited for some of the information in this episode. Without further ado, let's get into it. All right, so the first question is how much emergency fund should you have by financial situation? Now, if you don't know what an emergency fund is, it is a fund that you put together in cash to protect your wealth. It's there to protect yourself against life. If your car breaks down, guess what? You have the money there in your emergency fund to take care of it.

Stress-free. If your house has an issue, you have the money just there. Stress-free to take care of it. If you lose your job, you have the money just there to take care of your living expenses until you find another job. If your job offers you a better job across the country, you have the money just there to be able to afford the move. Your emergency fund is there to protect you against life. And it is a very powerful step in the stairway to wealth that you need to accomplish in order to have the money just there. There's power in having the money there. And your emergency fund does exactly that. It reduces your stress.

It reduces your anxiety. It allows you to have protection over your wealth. So nothing can interrupt your investment plan. Because the last thing we want to do is interrupt our investment plan unnecessarily because that means we are interrupting compound interest unnecessarily. So it's really important to make sure. that you have that emergency fund in place. So a lot of gurus out there will tell you, hey, well, you need three to six months of emergency fund. Well, we have a little bit more of a detailed plan for you when we talk about this in the Stairway to Wealth and here on the Personal Finance

podcast. And if you don't know what the Stairway to Wealth is, it is our step by step guide on what to do with your money. If you want to check that out, you can go to Mastermoney.com slash resources. The Stairway to Wealth is the pillar of a lot of things that we talk about here on this podcast. And so the size of your emergency fund is really going to depend on your financial situation, where you are in life, and it's also going to depend on the type of job that you have. Because what I want you to think about here is if you're in an industry where it is very difficult to find another job, now a lot of people think that their industry, it's going to be easy to find another job because they underestimate how long it's actually going to take them to find that job.

Instead, what you want to do is overestimate how long it's going to take you to find a new job. but if you are in an industry that you know you can find a job really, really quickly. So for example, if you are someone who works in software development or coding, those jobs are usually high demand. But if you're someone who works for a nonprofit and it's a very specific niche that you are working in, those jobs are in less demand currently. So there's a lot of things that I want you to think about when it comes to your job description. Now, when it comes to that, if you have a job where you can find a job really quickly,

you can maybe, maybe get away with three months. I almost never tell anybody to have three months of an emergency fund. I just think it's too risky. Cash is security. Having that cash available to you is going to be really, really important. But if you have a job where it's going to take you much longer than six months of living expenses is what you want to have in your emergency fund, if not more. I like to have way more than that.

A lot of other people do too because cash is security. So I like to approach closer to six, 12 months, depending on what the situation is, and have that available. Now, where do you put this emergency fund? Where's the best place for it? A high-yield savings account is the number one place I always recommend to have your emergency fund. Do not ever invest your emergency fund.

The reason for that is if there's a recession or there is a stock market decline, your emergency fund can get cut in half when you need it most. Say, for example, you were in the 2007, 2008, the Great Recession, and you had an emergency fund there. All of a sudden, the stock market gets cut in half and you had that money invested. Well, now your emergency fund is only, three months living expenses if you only had six months of living expenses. So now you have three months of living expenses, but all of a sudden, your job also lays you off. So now you have a job that

laid you off and you only have three months of living expenses. Now you've got yourself in a little bit of a pickle here because you invested the money trying to grow that money faster and instead your emergency fund gets cut in half. So this is why we want to keep it safe and secure for money that we need to utilize at some point in time. High yield savings account is the place to go. Now, if you really, really have to invest your emergency fund, what you could do is have six months of expenses in a high yield savings account. And if you wanted a year-long emergency fund, you can invest the second six months of emergency fund if you wanted to do that in something like a taxable brokerage account that you could liquidate very quickly. So that's the gist of the emergency fund, how to set it up, how to have it in place. How much should you have by financial situation?

So the first situation we're going to talk about is if you are single with no dependence, meaning if you are single and you have nobody else who depends on you, maybe you live with some roommates. in your apartment, maybe you have your own a place, and it's just you. And a caveat to this is if you have parents in the area or somebody else who could help back you up if something happened, then maybe you can get away with three months of emergency expenses. If nobody's depending on your income, if nobody needs your income to be there, and you're just renting with roommates or you're just renting a place on your own, you can probably get away with three months expenses if you wanted to. I personally would never ever do that. The reason for that is because six months of expenses is a much longer runway than three months.

Three months goes by really, really quickly. And if you're trying to find a job, well, first, maybe you get laid off. You're trying to get over, getting laid off for the first week. And you're trying to figure out, okay, how do I go out and find another job? Then the next couple of weeks, you're starting to send out your resume and sending out all these different things. Then you're going through the interview process. What if none of these interviews land and you have to go through a second round of

interviews? And all of a sudden, you've hit three months and you are now out of spending and emergency expenses. This is why I really don't recommend three months almost to, anyone ever. Instead, it's going to fly by. You need that six-month runway at least. Finding a job is a lot harder than it used to be, especially with how competitive is in a lot of different markets. So number two, if you are a single-income family, this is one of the most dangerous financial situations to be in. If you are a single-income family, all of your hedged money, all of your income is hedged into one individual in that family. So say, for example, the wife works and the

husband does not work, he stays at home with the kids. Well, in this situation, you are relying on one income. If you don't have any additional income streams, if you don't have rental properties or something like that, then you are relying on literally one single income. This is a very dangerous financial situation to be. And I want you to actually think about it that way. Because if you don't think about it that way and that income gets cut and you don't have an emergency fund in place, then you're in some trouble, my friends.

So you have to have an emergency fund in place in this situation. So if you have a stay at home parent, nothing wrong with that. I think that's amazing to stay home. with your kids, spend time with them. That's the most valuable thing that you will be able to do with them. You'll never regret that. If you stay home with your kids, spend more time with your kids, then what you have to do is ensure that you have at least six months expenses there. Honestly, I would have nine months. If there's one income alone, you have to give enough runway for that individual to go out and find another job. Now, if you're a stay-at-home parent and your kids

are young, maybe you can figure out like a side hustle to build out within those two to three hours that your kids nap if they still nap. Or maybe you can do something on nights and weekends that will be able to at least bring in an additional income to hedge against this risk just a little bit so that you can have that additional income because that is not a place you want to be in if you don't have an emergency fund. So while you're building up that emergency fund, maybe you can have a side hustle so that you can kind of build out that emergency fund and have that cash in place. Now a dual income family could have a smaller emergency fund. Why? There's two incomes coming in. And so if one person loses their job, you just need to make up enough money for that

one person until they find the next job. So having your emergency fund in place, you can do a number of different things. You can have three months of expenses for both of your incomes, or you can have six months of expenses for one person's income. Now, the risk to this is, what if you both get laid off at the same time? So you got to make sure that you are protecting yourself for all of these different situations. I see the emergency fund more so as a layoff protection, whereas the cash buffer, which we talk about in the stairway to wealth, is more so for those quick financial situations that come up, your car breaks down, your house has an issue. But if your house has a major issue, you still have the emergency fund in place to cover the rest. That's kind of how we think about

the cash buffer and the emergency fund. Now, you can have a fully funded emergency fund and no cash buffer. No problem there. That is a lot of cash to have on hand. But at the same time, I like to have the dual protection just to protect my wealth even more. Now, if you're self-employed, this is the situation where we are going to stretch this emergency fund out way more because you need a longer runway because if stuff doesn't go right, guess what? We got to have that runway available to take care of our expenses. In addition, a lot of self-employed people know this that when you are self-employed, you're going to have a lot of times where income is not the same every month. In fact, that's how it always is if you're self-employed. I've been self-employed for a long time now. And income is

never the same. So when you do this, this is something where you're going to have to have a longer runway of emergency fund. I like for sure over six months. I like to have it. I like to have it. least a year's cash if you're self-employed, maybe even up to 18 months if you want to. But having that available in a runway is going to be really important. Now, you could keep this in your business account. If your business account is doing really well, you have a lot of cash coming in. You can maybe just have a bunch of money in your cash checking account there at your business account. If you don't want to pay the taxes on that money, you can definitely do that and have that runway available there so you don't have to pay taxes on those dollars and pay yourself

a massive amount just to get that emergency fund set up. No issues there. In fact, the tax bill will be way higher than what any interest that you would make in a high-yield savings count. So I would honestly recommend doing it that way. That's how we do it with our businesses is we just have a longer cash runway inside that checking or that savings count with whatever you use at your business. And that'll just allow you to have a longer runway. And then this is just going to give you a better situation for your business, for you, so that you have that runway to solve the problem.

Whatever the problem is that's going to stop your revenue, you have that cash runway to solve that problem. Now, the last situation I want to talk about is retirees. retirees, you need to have at least one year of cash on hand. But I recommend having more so 18 months to two years of cash on hand. Why do we want to have this cash on hand if we're going to have Social Security, if we're going to have money coming in from our portfolio, maybe we got a pension. Why should we have so much cash on hand?

The reason for that is because once you have this cash on hand, if, for example, the market takes a dip. And if the market takes a dip, maybe you don't want to draw down on your portfolio when it has a 50% reduction because we're going to have to adjust how much we're withdrawing if we have a major recessionary event. So if that happens, you can live on the cash for maybe a year or 18 months and allow that portfolio to correct. That's one instance that you can use it. The second instance is maybe, for example, you have a bunch of medical issues or something major really comes up. Having that cash runway is just going to protect you against life. Life is going to happen for

the next 30, 40, 50 years, however long it is that you're retired. And you got to have that protection available in that situation. And if you're worried about this, maybe you're already retired or you're getting close to retirement age, maybe you pick up a side hustle while you are in retirement age now that will be taxable income, but maybe you pick up that side hustle and take that income and just put it towards your wealth protection plan. Just save that money aside so that you have it available to you and you don't have to worry as much in retirement. That's just going to be a really powerful thing for you. It's going to reduce your stress, reduce your anxiety significantly. And in addition, I would pay off my house, mortgage, whatever you're utilizing at that point in time, just so you have

peace of mind by that point in time. So these are the situations that we're talking about. Obviously, if you're a dual income family or a single income family with kids, everything's above six months, no matter what, you need to make sure you're protecting your family and not putting them in a bad situation. So if you have dependents or kids, always, always, always more than six months so that you can have that available at least six months in or if not more. Now, what about the situation if cash erodes away. Cash is going to erode away based on inflation. And that's the price that you pay for having your money in emergency fund. Hopefully you have it in a high yield savings account to protect yourself against cash. Inflation has reduced over the course of the last month, for example, at the time I'm recording this.

So inflation has been going down over the last couple of months, which is a good sign for some people. We don't want it to go down way too rapidly because that causes other issues, but it is steadily coming down to a point where we are looking at a better situation if we can actually get it down enough. So this is one where looking at that, hopefully you have it in that high yield savings account, so you can protect your wealth against all these other things. So that is how you set it up, keep it in a high yield savings account. You could also do a CD ladder on the Master Money newsletter. We are going to be coming out with the best places to actually keep your emergency fund, including specifics on which banks, things like that.

So make sure you're subscribed to the Master Money newsletter. If you are not subscribed to the Master Money newsletter, you get smarter with your money in five minutes every single week. this is the best place to actually interact with me as well. So if you respond to me via email, I'm going to answer you. So when you join the Master Money newsletter, I ask you a question immediately. I say, hey, what do you want to hear more content about? So you can actually give me content suggestions.

I read all of those emails. When you give me those content suggestions, I don't always respond because sometimes there's no response invoked. But I will always read those emails. I read every single one. And I actually keep them all in a folder. And I look at those when we're looking to create new content. So if you want to have a say and what content we create on this podcast, the Master Money

Newsletter is the place to be. You can respond directly to that initial email. And you'll see, I'll ask you the question in the initial email. What kind of content do you want to see? And in that newsletter, we're trying to make it funny and entertaining and a lot of other things. And we also have a book club in the Master Money newsletter. So when you are in that Master Money newsletter, there is a book club inside where it's called the high performance book club.

And I show you what book I'm reading every single week. And so we try to read a book a week. So if you're looking for the best book recommendations, which is the third, That's one of the biggest questions I get. Master Money newsletter is a place to go, and you can see exactly what I'm reading and read along every single week. So we're going to be talking about the best places for your emergency fund. Make sure you check out the Master Money newsletter as we go through this.

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if they actually learn how to use this the correct way. So there is something out there called a spousal Roth IRA. And if you prefer the IRA, maybe you're a high earner and you want to get those tax deductions up front, then you can use a spousal IRA. But the spousal Roth IRA is actually a Roth IRA where a working spouse can contribute to a non-working spouse's Roth IRA. So there are a bunch of key things to consider when it comes to this,

but this can be a great way to double up your contributions to a Roth IRA. Why do I love the Roth IRA? Most people know this, but it's because you contribute money that has already been taxed, money that's just in your paycheck, so you get your paycheck,

that money has already been taxed. So you take that money, and you just stick it in a Roth IRA, and then you invest those dollars. And when you invest those dollars inside of the Roth IRA, remember, the Roth IRA is the account, you still have to invest

the money once your money goes into the Roth IRA. Most people miss that mistake when they're new investors. So once you have that Roth IRA and you put the money into the Roth IRA, then you invest in something like an index fund, an ETF, a stock, whatever you want to invest in, then over time, that money is going to grow. The growth of your money is completely tax free. Now, this is incredibly powerful because the tax-free growth there is going to be the majority if you have a long time horizon that you're investing. So if you're investing for 30 plus years, you could have close to a million dollars in tax-free money if you would max out that Roth IRA every year. This is why it's so powerful to have a Roth IRA.

You're going to see how powerful it is in a second because I'm going to do a little math for you. We're going to have a little fun with the math problems here. And so when we go into that Roth IRA, that's how we do that. Then you pull the money out tax-free. You don't have to pay taxes on that money. Whereas as your 401K, when you pull that out in retirement, the IRS is going to say, hey, this money is income. It needs to get taxed.

I need to tax you on this money. So you're going to have to worry about taxes in something like a 401K. whereas if you're in a Roth IRA, you don't have to worry about that, which is absolutely beautiful. It doesn't reduce your social security benefits. A lot of cool things there that on the back and a lot of people don't talk about. So here's the first thing. The contribution limits. Here's the rules.

The contribution limit for the Roth IRA is $6,500 if you are below the age of 50. If you're above the age of 50, it is $7,000. So if you're above the age of 50, you can put $7,500 into the Roth IRA. Beautiful thing that you can do there if you're above the age of 50. Now, income limits. The Roth IRA has these things called income limits, meaning that if you make above a certain amount of income, you could not contribute to Roth IRA. But wait, we can do a backdoor Roth IRA.

So the way the backdoor Roth IRA works is you open a IRA and then you transfer that money to the Roth IRA. That's how the hires can get their money into a Roth IRA. We have an entire episode about the backdoor Roth IRA. If you want to check that out, we will link it up in the show notes below. But the income limits at the time recording this are $218,000 if you are married finally jointly at the time recording this. So a backdoor Roth IRA would be your best bet. You could still get your money in there. Just do it backdoor at this point in time.

Now, for the spousal IRA election, here's how this works. So you can contribute to a spousal IRA on behalf of a spouse who does not have earned income. To do so, you must have enough earned income to cover both contributions. So say, for example, you're under the age of 50 and you want to max out both Roth IRAs. You just have to make more than $13,000. per year. Most people listen to this podcast make more than $13,000 a year who are in the working class out of college, all that kind of stuff. So if you are that person, you can do that. And if you make $13,000 or more, and if you're over the age of 50, then it's $15,000. So you just got to make that amount or more in order to contribute to it. And then once you reach age 59 and a half, you can start

withdrawing on that money completely penalty free. You can always take out your contributions, but you can also withdraw on the gains once you reach age 59.5. There's a lot of other ways to get money of retirement accounts. We're going to save that for another episode, not this episode, because that is going to get deep into the weeds if you want to do that. But there are other ways to get money out of retirement accounts. Now, the backdoor, like I said, is the best option for those high earners. So definitely, definitely consider that when you go through that process. Now, here's the cool thing. I wanted to show you how powerful this is, because if you only have one Roth IRA, say, you max it out over the course of 35 years, but you only have one Roth IRA. And you get a 10% rate

of return, which historically the S&P 500 has gotten more than that. But we were just going to say a 10% rate of return. And sure, you can adjust down for inflation, do all those different things. You do whatever you want to do. But we're using a 10% rate of return for this calculation. So if we calculate this at a 10% rate of return over the course of 35 years inside of your Roth IRA, you're going to have $2.67 million. So this is something where, wow, that's really, really powerful for somebody be able to do. And a lot of that money is going to be tax free. In fact, the majority of that is going to be tax free. But let's say you opened two Roth IRAs. So say you have one for you and for your spouse. Well, if you did that, if you opened a second Roth IRA for your spouse,

all of a sudden, your retirement went from $2.67 million to $5.34 million. This is the power of having two Roth IRAs and contributing an additional $6,500 per year if you got that 10% rate of return. That is why it is so incredibly amazing to max out as much money as you possibly can into these Roth IRAs. Now, to control... attribute to a spousal Roth IRA. One caveat is that you have to file your taxes married filing jointly. And if you don't do that, you can switch it up for the next year so that you can contribute to a spouse or Roth IRA. But that is what you have to do. You can talk to your tax professional if you want to be interested in your personal situation. So that is one key. Now, another question a lot of people have is, does the money in my spousal IRA belong to me or my partner?

So once the money has been contributed to a spousal IRA, it belongs to the owner whose name is on. the account. So say, for example, something terrible happens, you have a separation or a divorce. If you, in that situation that happens, then the spousal IRA goes to the non-working spouse. It does not go to the working spouse. It goes to the non-working spouse because the spousal IRA is in their names. So here's the key takeaways is the spousal IRA is a type of savings account that allows the spouse to contribute to an individual retirement account or an IRA in the name of a non-working spouse, usually to contribute to a Roth IRA, the spouse has to have earned income, but with a spousal IRA, you do not have to have earn income. And the working spouse can

contribute to both Roth IRAs or IRAs, depending on which one you open. And other than how they are funded, the spousal IRAs literally have the same exact rules as the Roth IRA. So that is the gist of it. Hope you guys do this if you have situations where you only have one specific income in the family. And if you do this, let me know. I'd love to hear how. you're building wealth for you and your family. I think it's a really exciting thing to do you, and I'm really, really excited for a lot of you guys to learn about that. The next question. So I was wondering why some index funds have fees at all. What is the benefit of putting money into an index fund with fees when there are tons of index funds that have no fees? So this is a

great question, and it is one that I could do an entire episode on. But we'll do a quick breakdown here. Maybe we'll do a full episode later. If you like what I'm talking about here, let me know on Instagram at Master Money Co or Twitter or TikTok and we will do a full episode. But I'm going to give you an example because the most popular zero fee funds are the Fidelity Funds. And so they were the first ones to do this. And so we'll kind of talk about these zero fee funds and the differential between them. So there's a lot of different reasons on why you potentially would want to go with a zero fee fund instead of a zero fee fund. And right now, because zero fee funds are new, some of those reasons are a track record. So track record comes into play for me. Vanguard historically has had the longest

track record for a lot of different index funds. That's why I like Vanguard funds so much because they have that really, really long track record. And so I can see historically what these bad boys have been doing over the course of a long period of time. Also, they have larger fund sizes. And obviously with these larger quantities of fund sizes, a lot of times it just brings in a little extra comfort, a little de-risks the portfolio a little bit and allows you to have a couple of extra things. This also gives you additional access and customer service. And it tracks a specific index. So if an investor wanted to track a specific index and we'll talk about what I mean by that in here in a second, then there may be no zero fee option available. So what do I mean by specific indexes? Well, if you look at

Fidelity's zero fee funds, for example, the catch is that Fidelity has what they call proprietary index funds. And so what this is, say for example, you want to buy an S&P 500 index fund, Well, the Fidelity Zero Fund is not actually tracking the S&P. It's tracking its own proprietary index fund. This is one of the reasons why they can offer zero percent fees because they have to pay a fee if they want to track the S&P 500 to get that name onto their fund. The S&P 500 isn't index. So if they want to get that name onto their fund,

then they have to actually pay a fee to do so. That's part of the percentage of fees that you would pay on something like a Vanguard S&P 500 index fund. Also, if you want to reduce the fund, the fees, for example, then you can look at something like the ETF. A lot of times the Vanguard index funds might have a little bit of higher fees than the ETFs do. In fact, last time I looked, the S&P 500 index fund had a 0.04% fee if you're looking at something like the Admiral shares, but the ETF had a 0.03% expense ratio. And in some situations, depending on what you're looking at, 0.02% expense ratio on the Vanguard side. So Fidelity does have these zero fee funds. It's just you don't

have as long of a track record because these Fidelity funds have not been around for longer than 10 years. So your track record is much smaller when it comes to some of these Fidelity funds. So over the long term, this could be a great option. And you may say, hey, the fee differential is something to really, really worry about. But in reality, it's 0.04% for a longer track record that actually tracks the S&P 500 and is spot on. Now, this is nothing to say the zero fee funds that have these proprietary indexes are wrong because I still own some of them. I own FZROX, for example, at Fidelity, which is their total stock market zero fee fund. And so that one is one that I have owned for since they've started it. And so it's not something that I would avoid completely. But for me, I like

Vanguard funds the most. And the reason why I like Vanguard funds the most is because they have that long track record. And they have a lot more investors who have been in those funds for a long period of time. It just reduces the risk a little bit for me. And there's a lot of simulations and models that have been run with Vanguard funds that have not been run as much for things like Fidelity funds. So that is the reason for that. If index fund pro, we're actually going to make a video on this. If you're in index fund pro, we'll talk a little bit more about this. So if you want to check out index fund pro, you definitely, definitely can. Index fund pro is our investing for beginners course. It teaches you how to invest in index funds and ETFs. We talk about some of the stuff we talk

about just now. If that sounds like Spanish to you and you have no idea what I'm talking about, that is exactly what we talk about here. So that is another piece of this as we put this all together. So those are some of the reasons. It's just track record. It is the fact that they actually track the real index, which is the real reason for me. And it's the fact that if you trust the brokerage house, and I trust Vanguard, I trust Fidelity as well. Currently, you know who I don't trust? Robin Hood.

But anyways, that's one where it all comes together. So that's exactly why. Let's jump to the next question. All right. Last question. I actually get this question a lot. And really, this comes back to the stairway to wealth, which you talk about here. So they said, so I've literally watched all the podcast and I still can't figure out what to do.

Should I start my 401K, Roth IRA, or just. invest through Vanguard and Fidelity straight up in a taxable brokerage account into the S&P or both or all three. Thank you so much. So we have a program that's completely free called the stairway to wealth and you can download it at mastermoney.com slash resources, the stairway to wealth. And the reason why it's called the stairway to wealth, it is literally step by step exactly what to do with your money. In the stairway to wealth, we start off how to handle your finances, all these different things. Then we go into the investing portion once you're ready for that. Once you get the front end done, then we go into the investing portion. So there's phases.

to this thing. There's levels to this bad boy. And so what we're doing here with the stairway to wealth is literally giving you a step-by-step guide because what I found out early on is that people want that step-by-step guide. Now, the stairway to wealth pulls from so many different sources that I learned from very early on. Sources like Ramit Seiki, who has the wealth ladder of creation. There's sources like The Money Guy Show, who has some great stuff on their financial order of operations. The stairway to wealth pulls from so many different places. There's Dave Ramsey in his baby steps. So there's a lot of different places that I actually pulled this from to actually compile this all together. And as time goes on, I try to make it better and better.

We're actually coming out with a 3.0 version and potentially doing some other cool stuff with the stairway to wealth, which I can't really talk about yet, but I'm excited to talk about later. And so once we have this all put together, we are going to continually make this better. That's my promise to you is that we will continually make the stairway to wealth better. And so once we go through this, I want to show you exactly how. you can actually put this together. But when it comes to investing, we have an investor's checklist. And in Index Fund Pro, you can actually get this Investor's checklist that goes deeper than what I'm about to talk about now. But the Investors checklist is part of Index Fund Pro. So if you want that

check out Index Fund Pro. But inside of this, here's the order because you're looking at three different things here. So number one is your 401k match. You want to get the 401k match first because it is completely free money. If your employer does not offer a 401k match, skip the step. So if you can't get one of these things, skip the step. Number two is the, Roth IRA. So you mentioned the Roth IRA. I would go Roth IRA next, especially if your adjusted gross income or AGI is below that like 32% range roughly there. If it's above 32% you need to talk to a CPA to figure out exactly what you should do based on your financial situation, what your standard deduction is. A lot of different things factor into that. But if it's below that 32% AGI,

which most of you most likely are, then I would definitely look at the Roth IRA first or the Roth 401K, which is my favorite account, 22,500 bucks per year into a Roth IRA. Woo-wee, that really, really gets me excited over here. And then last, we have the 401K or if you're into rental properties, rental properties is your thing? You can do it at that 401K level. You can get those rental properties at that 401k level, just max out that Roth first and then go into rentals.

That's what I did early on and then decided on I want to do both once I started to increase my income. And then lastly, once you do all those, then you can go taxable brokerage or rentals. If you'd prefer to do the 401k first, then you can go taxable brokerage after that or other wealth accelerators if you want to also. So a lot of options here as we go in tandem with a lot of these pieces here. But that's the order for this situation that I would consider do some more research on.

Obviously, it's not specific financial advice. I'm just talking about what I would do in that situation. So you can do more research on that. See if that's the best option for you. Talk to your CPA. Talk to your other folks who are on your financial team. Now, listen, I hope you guys learned a ton in this episode. Really, really excited for you guys to hear this one.

If you guys have any questions, make sure to hit me up on Instagram, TikTok, Twitter, at Master Money Co. Make sure you sign out for the newsletter also, the Master Money newsletter. We want to grow that newsletter and give you as much value as possible in that newsletter. So there's some cool things we may do in there, freebies, all kinds of stuff, maybe a group coaching call for people who are actually subscribed to the newsletter. So really, really excited for that. And if you guys get value out of the show, share it with your family, share it with your friends. That is the most valuable thing that you can do for them is teach them and give them a financial education. Listen, thank you guys so much for investing in yourself because that's what you're doing

when you listen to this podcast is you are investing in yourself. I truly appreciate each and every single one of you listening and I will see you on the next episode. Rosen lasagna, medium power, 15 minutes. Sounds like Ojo time. Let's play. Feel the fun with Play Ojo, the online casino with all the latest slot and live casino games. What you win is yours to keep with no wagering requirements, instant payouts and no minimum withdraws. Hey, I just won. Woohoo! Feel the fun.

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