You’ve worked hard to earn your money. The next step? Making smart choices about how to save and grow it. With so many options out there, it can be overwhelming to decide where to start. Here’s a step-by-step guide to help you prioritize.
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Build an Emergency Fund
Life is full of surprises, some more expensive than others. That’s why your first move should be setting aside three to six months of living expenses in an easily accessible account. This fund is your safety net for job loss, medical bills, or unexpected car repairs.
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Pay Off High-Interest Debt
Credit card balances and other high-interest loans can eat away at your financial progress faster than most investments can grow. Eliminating this debt frees you to focus on building wealth instead of losing it to interest charges.
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Maximize Your Workplace Retirement Plan
If your employer offers a retirement plan with a match, don’t leave money on the table. Contribute at least enough to capture the full match, it’s essentially free money and one of the best returns you can get. If you’re just starting out, aim to save 10% of your salary, and as income grows, gradually increase that until you reach the IRS maximum.
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Leverage a Health Savings Account (HSA)
If you’re eligible, an HSA is a powerhouse savings tool. Contributions are tax-deductible, the money grows tax-free, and withdrawals for qualified medical expenses are also tax-free. This “triple tax advantage” makes HSAs one of the most efficient accounts available.
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Open a Roth IRA
Once you’ve covered the basics, consider a Roth IRA. Contributions grow tax-free and can be withdrawn tax-free in retirement. For high earners who exceed the income limits, a Backdoor Roth strategy can provide access to the same benefits. This makes it not only a strong retirement vehicle but also a potential tool for leaving a tax-free inheritance.
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Explore an Employee Stock Purchase Plan (ESPP)
If your employer offers an ESPP, you may be able to buy company stock at a discount—an instant return on your investment. Just be mindful of diversification so you’re not overly reliant on your employer’s stock for your financial future.
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Invest in a Taxable Brokerage Account
Once you’ve checked off the essentials, consider a taxable brokerage account. While you’ll pay taxes on dividends and capital gains, you’ll also gain flexibility. These accounts allow you to access your money anytime, making them ideal for goals like buying a home, funding education, or even early retirement.
The Bottom Line
Financial success isn’t about doing everything at once; it’s about knowing the order of operations. By following this roadmap, you’ll create a strong foundation and position yourself for long-term growth.
