Pod Insights The Personal Finance Podcast How to Invest Your First $10K About this episode Saving $10,000 is a milestone. Investing it correctly is a life changer. Here is the step-by-step plan to do it right.
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What You'll Learn in This Episode
The seven-step framework for investing your first $10,000 the right way
Why tax-advantaged accounts should always come before a brokerage account and the exact order to fund them
The Portfolio Pyramid strategy that makes choosing investments simple for any new investor
The ten most common mistakes new investors make and how to avoid every single one
Roth 401k versus traditional 401k: how to know which one is right for your situation
Whether your Roth IRA contributions count toward the 50/30/20 rule (the answer might surprise you)
What to do when your employer 401k match comes in as company stock
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Tool/s Mentioned
Compound Interest Calculator
Resource/s Mentioned
Investing For Beginners Masterclass
Episode/s Mentioned
What is the Difference Between Index Funds vs ETFs?
How to Invest in Index Funds (Step-By-Step!)
How I Break Down Index Funds for My Portfolio
The 5 BEST Dividend ETFs to Hold for LIFE
Boost Your Savings Rate to 20%+ in 5 Easy Steps
The Money Plan for Couples: How to Build Wealth as a Team (Step-by-Step)
Watch Next
The Financial Priorities That Matter Most (By Life Stage)
AI Is Coming for Your Job. Here's How to Prepare Financially
How to Reduce Your Car Insurance (And Save Thousands)
The $10K, $100K, $1M Milestones That Change Everything
How to Fix Your Finances If You Make $100,000 (and Still Feel Broke)
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Transcript 12,248 words · 2 speakers
Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
0:00 Andrew Giancola? Now, if you watch this podcast on Spotify, Apple Podcasts, or YouTube, you've probably noticed the wood slat walls behind us. We wanted this podcast set to look professional, but also not be a project that was overly complicated. And I found these slat walls on Wayfair, and it completely changed this space. And it's now basically the background that you see in every single podcast or piece of content that we record. And that's one of the things that I love about Wayfair. You can shop thousands of products across different styles and budgets, use customer photos and reviews to see how things actually look in real homes, and find something that fits your space. They also have Wayfair Verified Products that are hand vetted by product specialists using a 10-point quality inspection.
0:44 Andrew Giancola? And with more than 20 million verified 5-star reviews, you can feel a lot more confident about what you're ordering. I've used Wayfair for this studio and our home, and I absolutely recommend them for your space. So transform your space with pieces that hold up to real life. Join Wayfair Rewards today and get 5% back on every single purchase. Head to wayfair.com or shop the Wayfair app for all things home. That's W-A-Y-F-A-I-R dot com. Wayfair, every style, every home.
1:17 Speaker 01 Wayfair, every style, every home.
1:20 Andrew Giancola? When I started the Personal Finance Podcast, I had no idea how big it could become. I just knew I had something I wanted to share, so I started putting it online. And looking back, I definitely wish I would have started a decade earlier. One of the horror parts about building something online, though, is making it look professional. A website used to mean hiring a developer, figuring out design, and potentially spending thousands of dollars. In fact, on my website, I spent tens of thousands of dollars. That's what impressed me when playing around with Hostinger's AI Website Builder. I told it what kind of website I wanted, and I built the first version in minutes. No coding, no designer or developer needed. And Hostinger doesn't stop at launch.
2:04 Andrew Giancola? Their AI can help with SEO, website copy, email marketing, and more. Your domain, website, email, and marketing can all live in one account with plans starting at just $3 every single month. Hosting or build your vision step by step. Create your website today. Go to hosting.com/pfp and use code PFP for 10% off now. On this episode of the personal finance podcast, how to invest your first $10,000.
2:42 Andrew Giancola? What's up everybody and welcome to the personal finance podcast. I'm your host Andrew, founder of mastermoney.co. And today on the personal finance podcast, we're going to be diving into how to invest your first $10,000. If you guys have any questions, make sure you join the master money newsletter by going to mastermoney.co/newsletter. And don't forget to follow us on Apple Podcasts, Spotify, YouTube, or whatever podcast player you love listening to this podcast on. And if you want to help out the show, consider leaving a five star rating and review on Apple Podcasts, Spotify, or your favorite podcast player. Now, you know what separates people who build real wealth from people who just talk about it?
3:24 Andrew Giancola? It's one decision and one decision only. It's the decision to stop letting your money just sit there in a savings account and actually decide to get your dollars working for you and get those dollars invested. And there's a news flash, and I'm going to give you a news flash right now. If you do not invest your money, and if you do not get the ball rolling when it comes to investing, you will never be able to retire. In 2026 and beyond, retirement is not an option unless you invest your money. Why? Because it is actually your responsibility to make sure that you are taking care of your retirement. Now, a lot of things when it comes to money and building wealth is focusing on the things that you can control. And one of the most important
4:07 Andrew Giancola? things that you can control is putting more dollars towards your freedom. You can take your extra dollars, the difference between your income and expenses, and you can start to buy back your freedom. And that's what we're going to be talking about. Today is learning how to invest our first $10,000 because that is the first money milestone that I want you to focus on if you are not there yet because your first 10K can absolutely change your life, but it is up to you to get the ball rolling on that. Now you may be someone who is just getting started investing because you just started your first job or you're early on in your career. You may be someone who is late to the game and you have just been putting some cash aside maybe, or you've been living paycheck to paycheck for a long time and you finally
4:51 Andrew Giancola? realize the importance of investing. Or you may be someone who is in their 40s or 50s and just getting started and you feel like, hey, it feels like it's too late. Is it too late? Absolutely not. And so today I'm going to be real with you and I'm going to show you exactly how to invest your first $10,000. And no, we're not going to be looking at real estate. We're not going to be looking at options trading. We're not going to be looking at day trading or dividend stocks. We are going to go through an exact system that shows you step by step exactly what to do. And I'm going to show you when you're ready to get started investing and then when you should maybe pump the brakes first and build up your financial foundation. So today I'm cutting through all the noise. Tik Tok, Instagram, YouTube, they all have static. They all have noise that are
5:34 Andrew Giancola? sounding the alarm for all these different crazy investments. But today I'm going to walk you step by step through this, whether you're 22 or you're 52. This is going to be valuable information if you don't have your first $10,000 invested yet. And if your money's been sitting in a savings account forever, or you hide money under a mattress, or you keep money in a safe, this is going to absolutely change your life because once you start investing, your money starts to work so much harder than you ever can. And you can start putting your dollars towards building generational wealth for you and your family. And I think that's what every single person listening to this podcast wants. They want the ability to buy back their time and buy back their freedom. Money gives you the option to do that and you can get started today.
6:17 Andrew Giancola? I don't care where you started from. I don't care where you're coming from because today is the day that you take control of your money. So without further ado, that's something you're into. Let's get into it.
6:29 Andrew Giancola? So how do you get to your first $10,000? How do we accelerate our path to get to our first 10K as fast as we possibly can? Well, there are steps that you need to take and make sure that you are going in the right order first, because before a single dollar even goes into the market, you need to confirm a few different things and make sure that you are ready to invest. Now, the first thing we want to look at is making sure, A, that we do not have high interest debt. So any debt above a 6% interest rate, that is consumer debt, we want to make sure that we are getting rid of that first before we get started investing. What is high interest debt? Well, this can be something like a credit card, for example. Most credit cards right now charge you anywhere from 15% to 30% interest, and some of them,
7:13 Andrew Giancola? when they are store cards or something else, can charge even more than that on a monthly basis. And so you need to get rid of those as fast as you possibly can. This is a pants-on-fire emergency, no questions asked. That high-interest debt needs to go away. Maybe it's a personal loan. Maybe you have a high-interest car loan. You need to pay those down first before you get started investing. Why? Because if that interest rate is higher than 6%, let's say it's 7%, 8%, 9%, 10%, well, on average, the S&P 500 gets a 10% rate of return. If you adjust that down for inflation, you're looking at around 7% per year. And when we look at this, we know that we can get a guaranteed rate of return if we actually pay down our debt.
7:55 Andrew Giancola? And so we want to make sure we prioritize that first, because this is the optimal place to put our dollars. Then we can get started investing so our money can work way harder than we ever can. Right now, if you're in debt, you are working backwards. You're building wealth in the wrong direction. You need to make sure that first that debt gets gone, then you can move on from there. Secondly, though, is we need to make sure we have some cash on hand. Most investors stop investing, or they pull from their accounts too early because they don't have an emergency fund, or they don't have cash on hand. You need to make sure that you have an emergency fund in place. Why? This ensures that you do not interrupt compound interest unnecessarily. Compound interest is going to be the most amazing thing that you ever experience. And once you see this start to work,
8:40 Andrew Giancola? it is going to absolutely change your life. But first, you need to make sure that you can protect compound interest against its number one enemy, which is you, because most people, they start a 401k or they start a Roth IRA or they start their brokerage account. And then all of a sudden, life happens to them. Something happens and they have to dip into their 401k. You ever heard anybody ever say that before? I had to dip into my 401k for a kitchen remodel or I had to dip into my 401k to take care of my car that broke down, or I had to dip into my 401k because my house needed a new roof. I don't ever, ever, ever want to hear you dipping into your investment accounts because we're going to build this in the right order first. And so when you start with having cash on hand, this protects you against life.
9:23 Andrew Giancola? This makes sure that anytime an emergency pops up, you have the cash available to you. So how much cash on hand do you need to have before you get started investing? Well, we have this thing called the 136 method. So first, you save up one month of expenses. Then you move on to high interest debt, just like we talked about in number one, and make sure you get that paid off. And then you move on to three months of expenses. Three months of expenses is going to ensure that you are protected against life, where then you can get started investing. Okay, so at three months of expenses, you're saying to yourself, well, how do I figure out what that is? You figure out how much you spend every single month. So let's say you spend $5,000 per month. Well, if you spend $5,000 per month, 5,000 times three is $15,000 is what needs to be in your emergency fund.
10:08 Andrew Giancola? Okay, so you have that $15,000 set aside. And once that's set aside, then you can start investing. Now, one big question that we get a lot from people is, well, how much of this extra money do I begin investing with? Well, I'd like to start with the 50 50 rule, where you think of this as I'm going to save 50% towards my emergency fund and I am going to invest 50% towards my financial future. If you feel pretty comfortable with your three months emergency fund and you want to slowly build it up to six months, you can absolutely do that. But when you do that, just know that the ultimate goal is that we want to get to a six month emergency fund, especially in 2026. This is, I'm not going to sugarcoat it for you. All of you who are worried about AI taking your job,
10:53 Andrew Giancola? you must, and I mean must, have a six-month emergency fund. It is imperative that you have a six-month emergency fund because it is going to be detrimental to you and your finances if you lose a job and it takes you some time to go find that job. So you want to have a six-month runway to make sure that you have enough cash on hand. Now, one big thing that we talk about with our emergency fund is something called the SWAN number. It's your sleep well at night number. And your SWAN number is going to be something that is different for every single person. So some people may feel more comfortable having a nine-month emergency fund. Some people may feel more comfortable having a 12-month emergency fund. It doesn't matter what it is, whatever helps you sleep well at night, that is going to end up being your long-term target. But it takes us some time to get there
11:38 Andrew Giancola? and we don't want to lose out on valuable years of investing and valuable years of compound interest just because we want to shove cash into this account. So this is why when you get to three months, I want you to start investing. I really want you to get to three months as fast as you possibly can. If you can get rid of that high-interest debt and get to three months in your emergency fund, take extra jobs if you have to, drive for Uber Eats, but you got to figure out a way to get there as fast as possible because this is the only way to build wealth. And any one of you can do this if you really want it enough. But this is the only way to build wealth is to get your dollars going, all right? Step three is next, we need to figure out, okay, now we can get started investing. We have our three-month emergency fund at least set up in a high-yield savings account. Now we need to think through, well, what do I need to do next?
12:22 Andrew Giancola? Well, you need to open up your accounts. And so when it comes to your accounts, there's a number of different ones that are out there that you've probably heard of. The first place that I want you to look is your employer's 401K. And a lot of times, your employer offers something called a 401K match. Now, if you're in a different industry... You could have a 457 or a 403B. These are all one in the same in terms of how they operate. But when we look at a 401K, we want to say, okay, if my employer offers a match, then I want to make sure I capture that match. Why? Because it is free money. Here's the way that it works. Your employer says, hey, if you put 3% into your 401K, we'll match it and we'll also put 3% into your 401K. Well, that is absolutely incredible.
13:06 Andrew Giancola? Let's say every paycheck you put in $150, which is 3%, and then your employer puts in $150 every paycheck. That is literally like getting a $150 bonus for free every single time you get paid. I like free money. Do you like free money? Because that is the number one thing that you need to go out and get first. You cannot get a 100% rate of return or a 50% rate of return anywhere out there right now. And so we want to make sure that we are first getting our 401K match because it's free money. Number two is if you have a high deductible health plan, I want you to look into an HSA. What is an HSA? It stands for Health Savings Account. Well, Andrew, why are you telling me about a Health Savings Account when I'm trying to invest for my retirement? Because the Health Savings Account is a super retirement account.
13:51 Andrew Giancola? And this is a secret a lot of people don't know. But the Health Savings Account has triple tax advantages. So listen to how this works. Money goes in tax-free. It grows tax-free and you can pull the money out tax-free as long as you have a qualified medical expense. What's a qualified medical expense? There is now a laundry list of what you can use for your HSA. I was just on the Peloton website the other day and saw you can use your HSA to buy a Peloton. I was on the 8Sleep website the other day, which is a mattress cooling pad. And it says you can buy a mattress cooling pad with your HSA. Amazon has this cool section now that you can go to for HSA eligible items. And you'd be amazed at how many people fall under that category and how many things fall under that category. You just save your receipts. Make sure you have them in a Google Drive somewhere.
14:35 Andrew Giancola? Store those receipts in that spot. And if you keep track of this, you can start to pull money out early, even if you retire early. This is the power of having an HSA where you're not going to have to pay taxes on those dollars. And then if you don't use all the money in the HSA, by the time you turn age 65, it basically turns into a Traditional IRA if you want to use it that way. But guess what? By the time you turn age 65, you're going to have a lot of healthcare expenses popping up. The average amount that people spend in healthcare for a couple is $300,000 throughout their entire retirement. You're gonna use this money. And so the HSA is just a powerful way, A, to help you bridge if you reach early retirement. But secondly, it is going to help you take care of healthcare expenses when you need it most. So the HSA is such a powerful account because you can use it for retirement, but you can also use it for healthcare expenses.
15:20 Andrew Giancola? And you can save that triple tax advantage. Okay? Number three, a lot of you need to listen up on this one. This is a very important account that most people should be looking at opening if you don't already have one open. This is called a Roth IRA. Now, the Roth IRA is an account that you could put $7,500 per year into the Roth IRA. Now, if you have a Roth 401K at your job, this can be used interchangeably in the Roth 401K. You can get $24,500 per year in that Roth 401K. This, my friends, is a super powerful account because money goes in that's already been taxed. It's already been taxed on your paycheck, but you can put money in this account, and it can grow tax-free, and you can pull the money out tax-free. So you pay taxes now so that you don't have to worry about taxes ever again in your lifetime on those dollars.
16:04 Andrew Giancola? And you can invest those dollars. And the cool part about this is the long-term growth is going to be the majority inside of this account. And so you can make a tremendous dent on your retirement and pay $0 in taxes. I know people who have millions and millions of dollars in their Roth IRA, and they paid $0 in taxes on multi-millions of dollars. There is nowhere else that you can do that. And this is why these accounts are so powerful, because they help you save hundreds of thousands, if not millions of dollars in taxes, depending on how much money you can get into these accounts. And so I want you to try to get as much as you possibly can into these accounts because we have options when it comes to withdrawing on these early later on down the line. So the Roth IRA is a phenomenal account. Now, one thing to note, when it comes to these retirement accounts like a Roth IRA,
16:49 Andrew Giancola? is that you cannot pull the money out until age 59 and 1/2, except for your contributions. So you can pull your contributions out at any time, but after the age of 59 and 1/2 is when you can pull out the growth. Of your money. And so that's what the majority is going to be. And so when it comes to retirement accounts, you just need to note that because if you plan on retiring early, there are some other accounts that we can talk about too. The last one is to go back to your 401k. So your 401k is a wonderful account, especially if you're a high earner. This is a great account for folks who want to get a tax break in this specific given year. So for example, let's say you made a lot of money in this given year and you needed to get some tax breaks in that specific year.
17:28 Andrew Giancola? Well, the 401k is absolutely fantastic for that because you can get $24,500 this year into your 401k. And so that is going to help reduce your overall tax liability by that amount. But, and here's the big but, is that it grows, but when you pull the money out, then you get taxed when you pull the money out. Uncle Sam always wants his money. He's going to get it some way or another. And so you want to make sure that when you are pulling that money out, you understand that you will be taxed on that. Now, the 401k also has something called RMDs. These are required minimum distributions. And at some point in time down the line, right now it's at age 73, Uncle Sam says, you got to start pulling money out of this account. So I can actually get my tax dollars. And so RMDs in a 401k are ways that they have.
18:12 Andrew Giancola? You pull this money out so that you start to pay taxes and you're required to pull this money out. Now, it's later on down the line, but it is something that you need to know is part of this account because it is a big tax strategy overall. Now, the last one we'll talk about is a brokerage account. So if you plan on retiring early, if your goal is to retire before age 55, then a brokerage account is a great account to have on hand to help bridge you until you get to retirement age where you can pull from the Roth IRA or the 401k and be able to have that full flexibility. And so let's say, for example, you want to retire at age 52. Well, you want to make sure you have enough to get from age 52 to age 59 and a half. Now, there are some things like the rule of 55 that we can do to pull money out of 401ks early or other retirement accounts early.
18:56 Andrew Giancola? But we want to make sure that we're looking at this in a way that helps us plan this out if you want to retire early. So any of my early retirees, looking at a taxable brokerage account is also very helpful. And there's a lot of tax benefits to a taxable brokerage account. This is just a regular old brokerage account that you can open anywhere. That is traditionally something that most people think, oh, I got to pay a lot of the money in taxes on this. Well, you really don't. And if you look at long-term capital gains tax, it's significantly less than someone who pays traditional income tax. And so you want to make sure. That we are looking at this as a very valuable account. I think a lot of people write off the taxable brokerage account and don't realize how powerful it actually is. It's one of the best accounts out there and should be considered by every single person listening to this episode.
19:39 Andrew Giancola? All right, we're going to jump to the break and then we're going to talk about how to choose your investments.
19:46 Andrew Giancola? Now, when it comes to your first $10,000, I want you to make sure that you are making the right decisions when it comes to your investment choices. And you need to make sure that you are doing your research. If you don't know how to do your research, we have multiple episodes talking about how to research funds, index funds, ETFs, stocks, all those different types of things. Now, on the next episode, I want to make sure that you're following this podcast because on the next episode, we're actually going to be talking through exactly how to build out your portfolio properly. And so I want you to make sure that you are following or subscribe to this podcast to make sure that you don't miss that episode because it is going to be really, really important that you understand how the investment portfolio is built and how to build that out.
20:29 Andrew Giancola? And so in that episode, we're going to be talking through what I call the portfolio pyramid. Now, the portfolio pyramid is a way to kind of build out your nest egg and figure out exactly where your portfolio needs to be. But if you are under $100,000 invested, I want you to first build out the foundation of your portfolio. And so since we are trying to invest our first $10,000, you need to be invested really in very safe assets. What does that mean? Index funds and ETFs are a great option. Target date retirement funds are a great option. I like target date index funds are the option that I would look at. That's a great way if you really don't know what you're doing. It puts together a portfolio for you and it adjusts over time to your exact age. And so this is something that you can look deeper into, but choosing your investments
21:14 Andrew Giancola? is a very important part of this process. And so once you think through, well, how am I going to invest? I am a big proponent personally of index funds and ETFs. And I think building out a portfolio of index funds and ETFs, especially as part of your foundation before you have your first $100,000, $200,000, $300,000 invested is imperative for most people. Now, step five. Is you want to make sure that you are picking out your brokerage account. There's tons of great brokerages out there now. A lot of them have some great options. So some of my favorites are Vanguard and Fidelity. Those are two great places to start investing your dollars. Charles Schwab is another great place to look, but there's some great brokerages out there. If you're opening an IRA or you're opening a Roth IRA that are now doing 1% matches.
21:56 Andrew Giancola? And so if you find some of those and they make sense for your overall portfolio, you can absolutely utilize some of those brokerages and take advantage of those 1% matches. Because a 1% match can dramatically change your portfolio long-term, especially if you do this for a long period of time and you're getting a lot of dollars invested. And so I want you to make sure that you are choosing the right brokerage for you. You want to make sure that they have great index fund or ETF options. Most of them do. You can still get Vanguard ETFs inside most brokerages. And so that's a fantastic option. They make sure they have no account minimums because that's a big deal for a lot of folks. And they have solid platforms. Don't just choose some random brokerage that you've never heard of before. Make sure it is a solid company that's been around a long time.
22:38 Andrew Giancola? If you don't know who to choose, Vanguard and Fidelity are two great ones to get started with. Okay, step six is once you have your brokerage open and you know what investments you want to start investing in, now it's time to start contributing money to those accounts and let's automate this process. So every single time you get paid, I want you to take a percentage of your paycheck and I want you to automatically send it to these brokerage accounts and have them auto invest the money for you. If you do not know how to do this, I am going to put a link down below in the show notes where you can check out our Investing for Beginners Masterclass that shows you step by step exactly how to do this. It's about an hour long masterclass, shows you exactly how to do this inside Fidelity so that you can set up your money automation.
23:21 Andrew Giancola? Really, really important stuff. If you have never done this before, I walk you through it step by step. We do classes on Tuesdays and Thursdays right now in that masterclass. And so if you want to check that out, I encourage every single one of you to do so. But automation is the number one thing you need to do because it removes the number one component that most people have issues with, which is their willpower. A lot of times you forget to move your Investments over or or maybe you bought something on a whim and you decided to use that money instead of investing your dollars. No automation. Make sure that the money automatically goes into your brokerage accounts, gets out of your hands and gets invested. For a lot of people out there, I use this example. Have you ever logged into your 401k before and been like, wow, there's a lot more money in my 401k than I once thought. That's the power of automation.
24:06 Andrew Giancola? That's the power of automatically contributing money to these investment accounts is seeing that happen, seeing your money grow over time. That's what automation is going to do for you, and you can build wealth on autopilot. And then step seven, and this is something that has to be said, especially if you're a new investor, is don't touch it. Once you get your dollars invested and continuously investing every single month, I want you to just keep buying, buy every single month consistently over time, but then don't touch it. Too many new investors are like, well, actually, you know what? I'm gonna go start buying some Bitcoin, or actually, I'm gonna buy the newest new NFT, or I'm gonna start buying gold now because everybody's buying gold, or I'm gonna buy silver. Don't touch it. Stick to your investment plan, especially when you are looking at this with your first 100k. You want to make sure that
24:49 Andrew Giancola? you are building up a strong financial foundation. And the last thing I want for you is to jump from investment to an investment, or try to pull this money out because you want to buy something. No, instead, you keep these dollars invested, because if you interrupt compound interest unnecessarily, it is going to be the most detrimental thing that you ever do to your finances. You have no idea how much opportunity this money has long term if you keep these dollars invested. Okay, so I want to make sure that every single person here listening understands that you do not need to touch these dollars. Now, I'm going to give you a couple of common mistakes that a lot of new investors make. And then after we get through those common mistakes, we're going to jump into the Q and A. So common mistake number one, especially if you
25:31 Andrew Giancola? don't have your first $10,000 invested yet, is waiting for the perfect time to invest. I see this happen way too often where people say to me, hey, Andrew, what do you think about the market? It feels like it's way too high right now. Should I actually be investing? You should absolutely be investing, and you should consistently be investing every single month. I hear this way too often where people think they can time the market, or they think it's too So I'm going to wait until it comes back down again. You're going to be waiting forever if you do that. Because if you look at the long-term chart of a stock market, go look at the S and P 500, or go look at the total stock market, or go look at the NASDAQ and pull it out to the longest time horizon you can, and it is up and to the right. And so you need to make sure that you get a piece of that.
26:13 Andrew Giancola? You get your dollars invested and waiting for the perfect time is the wrong thing to do. Number two is I see way too many people say, I'm not going to get started investing because the amount feels too small. I only have $50, or I only have $100, or I only have $150, or I only have 20 bucks a month that I can invest. Let me tell you, friend, this is the most powerful seed that you can plant right now. Because it doesn't matter how small the amount of money is that you have to invest, small amounts of money over time can grow to very large amounts of money. And let me prove it to you. I'm going to pull out our old trusty compound interest calculator. So we just built a compound interest calculator. If you go to mastermoney.co/resources, I want you to check this out because this takes you step by step
26:57 Andrew Giancola? to figure out how much money can actually grow. So here's the amazing thing is $100 per month over the course of 30 years at a 10% rate of return is $226,049. That's absolutely incredible. So if you say to yourself, I don't want to invest because the amount is too small at $100 per month, or at $50 per month, or $25 per month. No, this is absolutely amazing what can happen once you get your dollars invested. Let's say you had a longer time horizon though with that $100 per month. And let's say you invested for 40 years, just 10 years longer, it would grow to $632,000 inside of this account. And this is why I want to show you that small amounts of money over time can grow to very large amounts of money.
27:41 Andrew Giancola? If you've made it $200 per month and did it for 40 years, it'd be $1.264 million. Let me tell you, friends, if you have small amounts of money, just get started now. Start planting those seeds and you can increase it over time as your income increases. But you just need to get started. Now, we want you to get to 20% of your income. That's the minimum amount that we want you to get to to get started investing. But at the very beginning, I don't care if you have 20 bucks. I want you to get started investing. Number three is panic selling during market downturns. Now, as an investor and as a new investor, you're going to see pretty quickly that the market goes up and the market goes down sometimes. Now, when the market goes down, a lot of times you're going to see new investors panic. But I want you to realize this is a very normal occurrence.
28:26 Andrew Giancola? It is normal for the market to go down. In fact, it is healthy for the market to go down. You do not want to panic sell or make a rash decision when there is a 20% pullback in the market. Instead, when you have a financial education, you realize, oh, this is a very normal part of a market cycle, and in fact, I am much better off buying more during this timeframe because I'm getting my investments on sale, whether it's socks or stocks. You want to buy things on sale. And so when a market has a pullback, I want you to think of it in a way and train your mindset to say, oh, I should be buying more right now because the market is going down. Buy low, sell high. You may have heard people say that before in the past, but most people do the opposite.
29:07 Andrew Giancola? Most people sell when an investment is at its lowest because they panic and they have fear and they don't know what to do. And then they start to buy again when investments go up because everybody else is getting in there. This is very common right now with commodities, things like gold and silver. People are buying all the way up instead of buying it when it was beat down or buying it when it was low. These are things that I want you to remember as time goes on. Another big one is to ignore fees. So when you're looking at your investment options, make sure you're not buying index funds or ETFs with high fees. Anything with an expense ratio above 30 basis points or 0.3% is something that you want to avoid. If there's an index fund or ETF that has 0.7%, for example, unless it is really outperforming
29:51 Andrew Giancola? some of its other predecessors, I want you to make sure that you are avoiding funds like that. Fees will absolutely eat in to your portfolio value. And so you want to make sure that you are avoiding funds with high fees. That is not something you want to get into whatsoever. The next one is to pick individual stocks before building that foundation. You want to make sure that first you build that foundation of good, solid index. Funds and ETFs and see that foundation grow before you start picking individual stocks. I see way too many people jumping into individual stocks or Bitcoin, or they jump into dividend stocks or all these other things just because they are a trend or a fat. You need to avoid that stuff and start first, just build up your foundation and have an
30:32 Andrew Giancola? understanding of how the market works. Then, as you start to approach your first 100K, 200K, 300K, then you can start to make the choice that you will then start to invest in some other things that you're interested in. But it's going to be a smaller percentage of your portfolio. It's not going to be the big foundation that we are talking about here. This is going to be the core of your portfolio. This is going to be the big foundation that helps you move forward. The next one is checking your portfolio every day. I do not want you checking your portfolio on a daily basis and becoming obsessed with the balance. That is an unhealthy relationship with your investments, especially as you are getting started. Most people who do that are overly emotional when it comes to their investments and they are going to make a poor decision when the market takes a dip. So I want you to make sure that you're checking
31:16 Andrew Giancola? it less frequently. You can check it on a monthly basis. You could check it on a quarterly basis, every half year or every year, and that's completely fine. But checking it every single day is not something you should be doing. And the last thing I will say is to make sure you have your plan in place. Make sure you write your investment plan down. Make sure you have the plan in place and then you begin investing. Because if you don't have that plan written down or in place, you're not going to know your why and you're going to make investment mistakes instead of ensuring that you have that plan in place and you know why you're doing what you're doing. And so all of those are really, really important. Now, if you don't know how to develop an investment plan, Master Money Academy can help you do that step by step. And you can look down below and get a seven day free trial inside Master Money Academy. We help people with
31:59 Andrew Giancola? investment plans all the time inside Master Money Academy. I think it's a really, really important place for you to be if you don't know how to come up with your own investment plan. And so that's a really, really powerful place where you can meet other community members who are like-minded, who are also working on the same plan. So check out Master Money Academy down below if you have not done so already. All right, perfect. We're going to jump to a break and then we're going to get into a bunch of listener questions.
32:24 Andrew Giancola? If you've been listening to this show for a while, you know it's not just me anymore. It takes a great team behind the scenes to make everything happen. And if I had to hire someone tomorrow, I'd want someone who could jump right in and make an impact. That's why I'd use Indeed Sponsored Jobs. When workplace chaos hits, Indeed Sponsored Jobs helps you reach qualified candidates faster. Your job gets boosted in search results, so you're spending less time searching and more time interviewing the right people. Plus, you only pay for results, which I absolutely love. Sponsored jobs posted directly on Indeed are 95% more likely to report a hire than non-sponsored posts. That's a huge advantage when you're trying to grow your business.
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36:04 Andrew Giancola? One thing I've learned from running multiple businesses is there's usually a gap between how you think work is getting done and how it's actually getting done. And we've had times where we thought we knew the bottleneck, only to realize later, the real issue was somewhere completely different. That's exactly what today's sponsor, Scribe, helps solve. Scribe is a workflow AI platform trusted by 94% of the Fortune 500. And Scribe Optimize turns real workflow data into decisions your AI strategy actually needs, automatically capturing how work happens across approved apps, surfacing inefficiency and opportunities with no interviews and no And no extra work from your team, which is the key. And the live dashboard shows where work is happening,
36:50 Andrew Giancola? how much time it's taking and where the biggest opportunities are right now. It automatically discovers workflows across multiple tools, then highlights your biggest inefficiencies and gives AI-powered recommendations with estimated time-saving. You know I love saving time. It's also built with privacy in mind. It only runs across approved business applications. User-level data is anonymous by default, and sensitive information is automatically redacted and never leaves your firewall. To see optimized action, head describe.how/pfp and mention PFP for a 30-day risk-free trial. That's S C R I B E dot H O W slash P F P. All right, so this is going to be our Q and A section of the podcast. If you guys have any questions,
37:35 Andrew Giancola? you can join the Master Money Newsletter and respond to any of those issues that come out every single Friday, and you'll have the opportunity to get your question answered on the show. Now, that is the easiest way to make sure that your question gets answered on the show. You can also shoot us a question over at the Personal Finance Podcast on Instagram. If you shoot us a DM, there is a place where we are getting a lot more DMs over there and would love to gather your questions there as well. So you can shoot us a question by joining the Master Money Newsletter, where we give you a five-minute tip every single week to learn how to better your money. Or you can send over a question on Instagram. So the first question is from Christian. Now, Christian said, "When should you use a Roth 401K through your employer versus a traditional 401K?" So first, I want to break this down.
38:20 Andrew Giancola? This is a great question, Christian, and a lot of people ask this. And so I want to break this down, the difference between a Roth 401K and a traditional 401K. So with a traditional 401K, contributions are pre-tax, so they lower your taxable income today. But you pay taxes on the withdrawals and retirement. And so when you withdraw money in a traditional 401K, you're going to be paying taxes on whatever the future taxes are going to be. Now, what is the downside to that? Well, you think through this, and we don't really know where taxes are going to land when we retire. And so it is much easier to Pay taxes now because you know what the tax rate is going to be. Now, let's look at the Roth 401k. This is where you contribute money that goes in after tax.
39:03 Andrew Giancola? So no upfront tax break whatsoever, but all the growth in withdrawals and retirement are tax free. Now, this is very powerful because if you put money into a Roth 401k, over time, you're going to see that the growth of your money is going to be the majority. And if the growth of your money is the majority, it is a very, very powerful account because you're not paying taxes on that growth. In fact, let's pull out the investment calculator that we have where you can check this out. Again, if you go to mastermoney.co/resources, you can use this investment calculator, but let's put this in right now and see exactly what this comes out. So if our contribution every single year is going to be $24,500 per year, then we want to figure out what the monthly contribution is going to be.
39:45 Andrew Giancola? So it's going to be $2,041.66. All right, so we're going to put $2,041.66 because that's the max you can put into a 401k every single year. And we'll put $2,041.66 into this investment calculator. Over the course of 30 years, at a 10% rate of return, and this is absolutely incredible, you would have $4.2 million. Now, when it comes to this, the amazing part about this is the total amount that you would contribute, and this is the cool thing about this calculator, is it shows you, is $734,998. Okay, that's how much money that you put into this and the amount of money that your money earned.
40:25 Andrew Giancola? The interest earned is $3,476,627. So you will not pay a dime in taxes on almost $3.5 million, which is why I love the Roth 401k so much. But it is not for every single situation, and we're going to talk about why right now. Okay, so that's the difference between the two. Is there's no upfront tax break for the Roth 401k, but you get this long-term upside of never having to pay taxes again. And so you get this tax-free growth on that money. Now, if you expect to be in a higher tax bracket later on down the line, or you expect being a higher tax bracket in retirement, then you want to make sure that the Roth is your number one priority.
41:08 Andrew Giancola? So if you're early in your career, you expect your income to grow. This is a great time to have the Roth. Secondly, if you're in a lower tax bracket now, and you anticipate being in a higher one later, then the Roth is also a great option. And if you want tax-free income in retirement, and you don't want to have to worry about RMDs, you don't want to have to worry about anything else out there, then the Roth is a wonderful place to look at this. Because Roth 401ks reduce your overall RMD stress, and I think that's very, very important for a lot of people. Now, if you're having a really high income year, if you're having a year, Christian, where you're just sitting there, and you're saying, man, I am making tons of money right now. I am paying out the wazoo in taxes. Well, then a traditional 401k could be a better option for you, because you get that tax deduction in this given year.
41:53 Andrew Giancola? Or if you expect being a lower tax bracket later on down the line, then maybe the traditional 401k could also be a great option. Or if you're closer to retirement, and you have less time for this money to grow, then that is another difference there. Now, when in doubt, if you don't really know, you could split the difference between the two, if you wanted to, to diversify your tax bucket some. And this also gives you flexibility on some of these accounts, and when to pull them later on down the line. But if you're young, and you expect your income to grow over time, I would absolutely consider the Roth 401k. It is one of my favorite accounts that are out there, one of the most powerful accounts available to us, because you can get so much money into the Roth, and really, you can get that tax-free growth, which is what we want as much as we possibly can. There is nothing better than kicking the tax can down the line,
42:36 Andrew Giancola? and making sure that you get some of that tax-free growth. So, this is the way that I would look at this, and really, really great question. And congrats on looking at your 401k options. All right, the next question is from Carly. So, in the 50-30-20 rule, does the 20% savings category include my Roth IRA contributions? My Roth IRA contributions alone already make up 20% of my monthly income. Does that count? Or is the 20% supposed to be separate savings on top of that? So, this is a wonderful question. And overall, for those who don't know what the 50-30-20 rule is, this is a rule that was developed years ago, by actually, it was actually developed by Elizabeth Warren, Senator Elizabeth Warren.
43:16 Andrew Giancola? Within this rule, it's 50% go to your essential spending. 30% go towards fun spending and things that you want to do with your money. And then 20% goes towards wealth building, debt payoff, those types of things. Now, the key thing here, when it comes to the 50, 30, 20 rule is I don't love it for every single scenario because the debt payoff thing, if you have high interest debt or you have a big chunk of debt, it doesn't really compensate or cover some of those areas. But it is a great rule of thumb for a lot of people to start with. So do your Roth IRA contributions count towards the 20%? They absolutely do. So the 20%, your savings rate at 20% is really to make sure that this goes towards your investments. And so any investment account will count. And this is the starting point.
44:01 Andrew Giancola? I want you to increase this amount over time if you can. But if you start at 20%, try to get to 25 or to 30% at some point in time. But this 100% counts towards the 20% bucket. So there is no rule that says 20% must be extra savings outside of your retirement account. That's just not a rule at all. But you just want to make sure that you have this on hand and you want to make sure that this is going towards your investments overall. Now, if your Roth IRA is hitting 20% of your income, that is an absolute great sign in something where you are crushing your investment goals. And what I would do is I would consider looking at this and saying to myself, okay, well, how can I now increase my income so that over time I can get more dollars invested? Because if you're starting at that 20%, that is absolutely fantastic.
44:44 Andrew Giancola? And again, the reason why we say 20% for most people out there as the minimum amount that you want to invest is because if you look at some of our savings rate charts, for example, you'll see that if you save 20% of your income, that means you can work less than 30 years of your life and be able to retire. And so 20% is the starting point for us. And then if you want to retire earlier and earlier, then I want you to bump it up to 25, 30%. Some people go to 40, 50%. We have a lot of listeners who say 50% of their income, which is incredible. And because they're pursuing financial independence, they want to retire early. That is why they increase those savings rates. So we have a couple of episodes talking about savings rate. If you have not heard those episodes, we will link them up down below in the show notes as well. But if you drastically increase your savings rate,
45:28 Andrew Giancola? you can change your financial life going forward. So yes, this counts towards the 20% inside of your Roth IRA. And congratulations on putting 20% in your Roth, because that is absolutely fantastic. All right, so question three comes from Caroline. Can you talk about what to do when your company match in your 401k comes in the form of company stock? What should you do with this? So this is a really, really good question. And for those of you out there that don't know this, some companies will offer your employer match as company stock instead of it being something that is linked directly to just dollars. And so when they do this, a lot of times, the amount or the concentration of that specific stock position can grow more and more and more over time. And so you need to decide exactly what to do with this.
46:12 Andrew Giancola? Now, number one, the first thing I want to consider is, is this a company I believe in? You know better than anybody else on how well the company is doing. And so when you look at your company, and if you have access to the financials and things like that, you can actually take a look at some of this stuff and make sure that you understand how well the company is doing. For example, I know there are people out there who work for companies and they've looked at the company before in the past. And they said, hey, I don't really want to own this company long term. And there's too much of my net worth tied up in a company I don't believe in. Whereas some people work for Google or Amazon or Netflix or some of these huge companies, and they are okay getting this company stock match. And it helps them overall with their wealth building. So if it's a big blue chip company, a lot of times I'd be willing to keep dollars invested in there longer term, or at least a decent chunk of money.
46:57 Andrew Giancola? But the second thing to consider is, what percentage of your portfolio does this company stock take up? Because if it starts to balloon and it starts to take up over 10, 20% of your overall portfolio or your overall asset allocation, well, that's a pretty heavy concentration into one single company or one single stock, which you also rely on your income for. And so way too many people out there, I see this with high earners all the time. They get company stock or they'll get it as bonus or compensation. And when they get that company stock, a lot of times they keep too much of their net worth in the company stock. And if it's not vested yet, or if it's not guaranteed, that's an even bigger deal overall. So you want to make sure that when company stock comes in, you keep it as a lower percentage of your asset allocation.
47:42 Andrew Giancola? Unless it's part of your strategy where you're going out there and trying to find companies that you think have high growth potential. That is a okay. That is a different thing. But if you are working at a company that's been around a long time and you feel as though there's not a ton of growth potential and you're just getting this company stock over time. You don't want to have too many eggs in one basket. So what you can do is a number of different things. One is you can either sell those shares and then reinvest them into things that you believe in, like index funds and ETFs. That's option one. Number two is you can keep a portion of it. You can keep a percentage of it based on what your asset allocation is. So if you think through this and you say to yourself, okay, well, I'm okay having 10% of my asset allocation in this company stock. Well, that's a okay. I think that's something that you could look into and decide if it makes sense for you.
48:26 Andrew Giancola? But if you are allowed to diversify out of this company stock, I would definitely consider it if it is not a company that you believe in. So to sum this up, if your company match has pushed your balance above that 5 to 10% range of having your money in one single individual stock. I would look and see if you can reallocate some of these funds into a different portion of your portfolio or reallocate these funds to somewhere else and diversify them into either an index fund, an ETF, or whatever else you have within that 401k plan. That is going to be the best bet for most people if your concentration is getting too large. Now, again, if you are someone who is working for one of those growth companies, that's a different story. But if your concentration is getting too large in a company that you feel as though is not part of your overall plan,
49:08 Andrew Giancola? then just move on to the next thing if you are allowed to do that. So that's the best way to handle this stuff. And if you have any other questions on that, please shoot them over to me and I'd be happy to answer them. All right. The next question is from Noah. Noah says, I'm in my early twenties with low expenses, no debt, a new Roth IRA, and planning to open a high yield savings account. Well, congratulations to you, Noah. That is absolutely fantastic. Should I follow the 136 method and build my emergency fund before investing? Or can I do both at the same time? And should my emergency fund target my current low expenses or what they will be once I move out? So this is a really good question. Now for Noah, what I would say is your emergency fund really just needs to be kind of what your expenses currently are.
49:52 Andrew Giancola? So if you have minimal expenses currently and you want to just start slowly building up that emergency fund for when you have more expenses or when you move out, that is going to be the starting point. And so the way I would think about this is figure out, okay, well, what is one month, three month and six months of expenses of what I currently do? So let's say, for example, you spend a thousand dollars per month. Well, if you spend a thousand dollars per month, having a six month emergency fund right now would be a fully funded emergency fund. Now, if you know at some point in time that you're going to move out of that house, or you're going to move out and you're going to get your own place, figure out what rent costs in some of those areas and try to calculate exactly what it would be. And then very slowly start to send money over to your emergency fund. You can do this a couple hundred bucks per month if you have that delta available.
50:32 Andrew Giancola? Then the rest of the money, I want you to get those dollars invested. You're young and these dollars are so incredibly powerful. And when your expenses are low, this is the time to take advantage of this. This is the time to get as much as you possibly can shoved into these accounts so that you can watch that money grow. Because when you are younger, you have the greatest opportunity of all that most of us don't have anymore. You have the opportunity of time and time is your most valuable asset. And so when you have time available, getting dollars invested when you're living under your parents' roof, or when you're in a situation where you have low overhead is gonna be life-changing for you. So I would try to at least get some cash on hand in an emergency fund. But outside of that, then you can slowly build it up over time when it's time to move out.
51:15 Andrew Giancola? Then, once you get closer and closer to the date where you think you could be moving out or moving into a situation where you are going to be living on your own and you have higher expenses, that's when you start to accelerate the amount that you're sending to your emergency fund. But getting your dollars invested right now is one of the most powerful thing that you could do. And I really commend you for even thinking through this because it's really, really important to make sure you have that there. So my systematic take would be, hey, what's six months expenses right now? Make sure it's at least, you know, a few thousand dollars that you have in that high-yield savings account. Then from there, go ahead and start investing. Start investing in the order that you need to be investing in. And then, once you have those dollars moving and those dollars invested, just take a small percentage of the amount that you're investing and keep funding that emergency fund. Then automatic contributions to your high yield savings account every single time you get paid.
52:00 Andrew Giancola? And that's going to help that fund build up so that by the time you get to the point where you are having higher living expenses, then you'll have, you know, a head start on your emergency fund. Then you can build up the rest. Once you see what those expenses are. A lot of times it's hard to predict exactly what they're going to be. And so just building up slowly while you have low overhead is going to be very, very helpful. So congrats to you for getting started. Congrats to you for getting started so early. You are taking the most valuable step that most people don't have the opportunity or know how to take. And so that is absolutely fantastic. The last one, and this is a great one. This actually came from our Spotify comments. So feel free to leave a comment in Spotify. We may get your question answered there as well. But this is one where someone sent this in. So getting married in a year and wanted to ask,
52:43 Andrew Giancola? how soon after the wedding should things start getting combined for fully combined financials? Should we combine it little by little or do it all in one afternoon? So this is a great question. If you are planning on combining your finances, if that's overall what you guys have had a conversation about and you've decided, okay, we're going to combine our finances. The goal is going to be not to drag this out very long. So if you drag it out over the course of the next couple of months after you get married, it's just going to create confusion and it's going to make it even more difficult to start to combine everything. And so for the most part, what I would recommend, and this is what my wife and I did, is right before we got married, we opened up a joint checking account. So we went over to Chase, we opened up a joint checking account. It was about a month before we got married and had that open together.
53:27 Andrew Giancola? Once we had that account open, and you can change the names later on in the line, if you need to for last names and things like that. But once we had that account open, then it was very easy. Let's say, for example, you get married and you know, you have wedding guests that come and you get money for your wedding. Well, now you have an account where you can put those dollars into that account and you don't have to worry about, you know, whose account does this go into? And so that's the starting point that helps you get started. Then I would also open a savings account, a joint savings account that you both have, whether it's a high yield savings account somewhere. That is one of the best things that you can do together so that you have a place to put your emergency funds. And you have a place to put your down payment fund or whatever else you want to buy going forward. All of that can go. Into that high-yield savings account. But in addition, this is going to help you automate your finances.
54:11 Andrew Giancola? Couples who do not have at least one combined account have a very hard time automating your finances. These are the couples that are Venmo-ing each other back and forth and doing these ridiculously complicated things that they do not need to be doing. At the very least, most couples need to have a combined joint checking account that they pay bills out of. So you can automate your finances. That way, you can send money to your bills automatically. You can send money from your accounts automatically to investments and all these other areas. So I would recommend just doing it pretty quickly. It does not take long whatsoever. You can absolutely do it in the one-after-reun approach that you mentioned, where it'll be done pretty quickly and you don't even have to think about it anymore. And so I would start with that joint checking account, getting that high-yield savings account, starting to, you know, transfer and get your direct deposits sent over there is going to be very important.
54:56 Andrew Giancola? Changing the beneficiary names on your investment accounts to, if you want to change it to each other, that's the way you have that set up and any insurance you can change over as well. And then if you have individual accounts, you can keep those open temporarily. You can keep them open as something that you utilize going forward. And then eventually you're going to realize that, you know, once your money is combined, you don't really need to have those additional accounts unless you really want to. Maybe there's specific reasons that you have, but for the most part, you don't really need those anymore. But it's the conversation that matters most. Sitting down, having the conversation and just getting after this is one of the most important things. So congrats to you for starting that conversation and already thinking about this before you get married. Way too many people I know will get two, three years down the line when, after they get married, and then they try to combine finances and it gets a little bit more difficult.
55:39 Andrew Giancola? It's just a little bit more muddy when you try to do it that way. So if you are going to combine your money, I would highly recommend doing it, you know, right before you get married, having that account open, ready to go. So that when money comes in, you know, maybe from the wedding or maybe you get money, you know, from some other things, then you can just have the money already in that joint account and you can start your system right away on the right foot, day one. So that is the best way to do it, in my opinion. Listen, thank you guys so much for listening to this episode. What a fantastic episode. I'm so excited for each and every single one of you to get started investing and getting to your first 10K. Cause I know each and every single- One of you can absolutely do this and it is a life changing thing for most people to get started.
56:22 Andrew Giancola? Man, I had fun creating this episode. I hope you guys enjoyed listening to this episode. Fantastic questions as always. I truly appreciate each and every single one of you. And again, I would love to meet each and every single one of you inside Master Money Academy. We have a link down below where you get a free seven day trial to join Master Money Academy. I would love to see every single one of you join in there. Now, if you go behind the curtain, you go see and check out Master Money Academy for yourself. Go through the wealth builder's journey, learn the exact steps you need to get your money right. Join a group coaching call so that you can have a conversation with me inside Master Money Academy and see if it's right for you because that is the way to make sure. That's why we do that free trials to see if it's right for you. If it's not right for you, no hard feelings, but would love to have each and every single one of you try it.
57:06 Andrew Giancola? All right. Thank you so much for being here and we will see you on the next episode.
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