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Financial Planning


min read

September 15th, 2020

Start getting your life in order with our list of best accounts for those building their financial household

Simplicity is key.  

There are pros and cons to every option, but the vast majority will have all their bases covered if they have the following accounts: checking, savings, Roth IRA, a Traditional IRA, a brokerage account, and if they have the option...a 401(k).

Your standard checking and savings accounts should be used in combination for your day-to-day and short-term expenses.  Both accounts will have very low interest rates, but your savings account should offer a slightly higher rate which is enticing for small emergency funds or savings to put towards a short- term goal. Your checking account will most likely not earn interest or will do so at a very low rate but will have less restrictions on the number of transfers or checks you can write from the account in comparison to your savings account.  Checking accounts also typically offer debit cards to allow for quick daily expenses. The FDIC insures most accounts up to $250,000.

On the saving and investing side, every adult should have a Roth IRA, a Traditional IRA, a 401(k) if they are given the option, and a brokerage account.  

When you hear someone talking about buying a stock, bond, mutual, fund, or ETF, they are most likely doing so in one of these accounts.  If you want to invest, you need an account with a brokerage firm.  

Roth IRAs, Traditional IRAs, and 401(k)s are tax-advantaged retirement accounts as the government gives tax breaks on income deposits into these accounts to incentivize people to save for retirement.  

Roth IRAs require the money deposited to already have been taxed, but offer several advantages down the road. Vice versa, the Traditional IRA allows you to invest money pre-tax and delay the taxes until you withdraw the funds.

401(k) accounts offer tax breaks immediately and allow you to invest money pre-tax directly from your paycheck. Some employers will even match the contribution you make to your account.  (This is FREE money, take advantage of it!)

Traditional brokerage accounts are also called “taxable accounts” as there is no tax break for investing in these accounts.  However, these accounts hold your savings beyond what is invested in your retirement accounts. Also, there is no penalty for early withdrawal which makes these funds attractive for large, pre-retirement expenses.

Just like anything else built for a lifetime, a strong foundation is what leads to success. Financially a strong foundation helps you take advantage of numerous tax incentives and puts you on the path to long-term success.

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