Getting Started
A step-by-step action plan to begin your investing journey.
Before You Invest
Prerequisites Checklist
Complete these before investing:
| Step | Target | Why First |
|---|---|---|
| Emergency fund | 3-6 months expenses | Avoid selling investments when you need cash |
| High-interest debt | Pay off credit cards | Guaranteed 20%+ return |
| Employer match | Contribute enough to get it | 50-100% instant return |
| Budget | Know your cash flow | Determine what you can invest |
How Much to Invest
| Priority | Amount |
|---|---|
| 401(k) to match | Whatever gets full match |
| Minimum | 10% of income |
| Better | 15-20% of income |
| Aggressive | 30%+ of income |
Start somewhere. Even $50/month builds the habit.
Choose Your Accounts
Account Priority Order
| Priority | Account | 2024 Limit | Why |
|---|---|---|---|
| 1 | 401(k) to match | Up to match | Free money |
| 2 | HSA (if eligible) | $4,150/$8,300 | Triple tax advantage |
| 3 | Roth IRA | $7,000 | Tax-free growth |
| 4 | 401(k) to max | $23,000 total | Tax-advantaged |
| 5 | Taxable brokerage | Unlimited | After maxing above |
Where to Open Accounts
Best low-cost brokerages:
| Broker | Strengths |
|---|---|
| Vanguard | Invented index funds, investor-owned |
| Fidelity | Excellent service, zero-fee funds |
| Schwab | Great all-around, good banking |
All three offer:
- No commission trades
- Low-cost index funds
- No account minimums
- Excellent reputations
Account Opening Checklist
- [ ] Choose brokerage
- [ ] Gather SSN, ID, bank info
- [ ] Open account online (15-20 minutes)
- [ ] Link bank account for transfers
- [ ] Set up automatic contributions
Choose Your Investments
The Simplest Approach
Option 1: Target-Date Fund
One fund that does everything:
- Pick fund matching retirement year (e.g., 2055 Fund)
- Invest 100% in it
- Done
Example funds:
| Brokerage | Fund | Expense Ratio |
|---|---|---|
| Vanguard | Target Retirement 2055 (VFFVX) | 0.08% |
| Fidelity | Freedom Index 2055 (FDEWX) | 0.12% |
| Schwab | Target 2055 Index (SWYJX) | 0.08% |
The Three-Fund Portfolio
More control, same simplicity:
| Fund | Allocation | Example (Vanguard) |
|---|---|---|
| US Total Stock Market | 60% | VTSAX / VTI |
| International Stock | 20% | VTIAX / VXUS |
| US Total Bond Market | 20% | VBTLX / BND |
Adjust bond allocation based on age and risk tolerance.
Which to Choose
| If You... | Choose |
|---|---|
| Want maximum simplicity | Target-date fund |
| Want slight control/lower fees | Three-fund portfolio |
| Are just starting | Target-date fund |
| Plan to learn more | Start with either, evolve later |
Set Up Automation
Why Automate
- Removes emotion and timing decisions
- Ensures consistent investing
- Dollar-cost averaging built in
- "Set and forget" simplicity
How to Automate
401(k): Already automatic via payroll
IRA/Taxable:
- Set up automatic transfer from bank (e.g., $500/month)
- Set up automatic investment in your chosen funds
- Schedule for day after payday
Example schedule:
- Paycheck deposits: 1st and 15th
- Auto-transfer to Vanguard: 2nd
- Auto-buy VTSAX: 3rd
Your First Month
Week 1: Foundation
- [ ] Review finances (income, expenses, debts)
- [ ] Calculate emergency fund status
- [ ] Check if you're getting employer match
Week 2: Accounts
- [ ] Choose brokerage
- [ ] Open IRA and/or taxable account
- [ ] Review 401(k) investment options
Week 3: Investment Selection
- [ ] Choose target-date fund or three-fund portfolio
- [ ] Set allocation
- [ ] Make first investment
Week 4: Automation
- [ ] Set up automatic contributions
- [ ] Set up automatic investment
- [ ] Schedule annual review reminder
Building Good Habits
Do This
| Habit | Frequency |
|---|---|
| Contribute consistently | Every paycheck |
| Increase contributions | Annually (or with raises) |
| Rebalance | Annually |
| Review allocation | Annually |
| Update beneficiaries | After life changes |
Don't Do This
| Bad Habit | Why |
|---|---|
| Check daily | Creates anxiety, tempts trading |
| Time the market | Doesn't work |
| Chase performance | Buy high, sell low |
| React to news | Creates poor decisions |
| Trade frequently | Costs and taxes add up |
Increasing Contributions Over Time
The Raise Strategy
When you get a raise:
- Increase contribution by half the raise
- You still get more take-home pay
- Savings rate climbs painlessly
Example:
- 5% raise ($5,000/year)
- Increase 401(k) by $2,500/year
- Take home extra $2,500/year
Milestone Targets
| Age | Target (multiple of income) |
|---|---|
| 30 | 1× annual income |
| 40 | 3× annual income |
| 50 | 6× annual income |
| 60 | 8× annual income |
| 67 | 10× annual income |
Common Beginner Questions
"Should I Pay Off Debt or Invest?"
| Debt Type | Strategy |
|---|---|
| Credit cards (15%+) | Pay off first |
| Car loans (5-8%) | Pay off, then invest |
| Student loans (5-7%) | Balance both |
| Mortgage (3-7%) | Invest after match |
Always get employer match first - it's a guaranteed 50-100% return.
"What If the Market Crashes?"
- Crashes are normal and expected
- You're buying on sale
- Don't sell
- Time in market beats timing market
- Long-term returns are very reliable
"I Don't Have Much to Start"
| Amount | What to Do |
|---|---|
| $0 | Open account, start with $25/month |
| $50/month | Target-date fund |
| $500/month | Three-fund portfolio |
| Any amount | Just start |
Starting matters more than the amount.
"What About Individual Stocks/Crypto?"
| Approach | Recommendation |
|---|---|
| Core portfolio | Index funds (90%+) |
| Speculation | Never more than 5-10% |
| Crypto | Only what you can afford to lose |
Get the boring stuff right first.
Sample First-Year Plan
Conservative Start
| Month | Action |
|---|---|
| 1 | Open Roth IRA, invest $200 in target-date fund |
| 2-6 | Auto-invest $200/month |
| 7 | Increase to $300/month |
| 8-12 | Continue $300/month |
| Year 1 Total | $3,200 invested |
Aggressive Start
| Month | Action |
|---|---|
| 1 | Open Roth IRA, invest $583/month (max $7,000/year) |
| 1 | Increase 401(k) to 15% |
| 6 | Open taxable account with extra savings |
| 12 | Review and increase |
| Year 1 Total | $20,000+ invested |
Annual Review Checklist
Every year:
- [ ] Check performance (without obsessing)
- [ ] Rebalance if needed (5%+ drift)
- [ ] Increase contribution rate
- [ ] Review beneficiary designations
- [ ] Check expense ratios
- [ ] Confirm automation is working
- [ ] Adjust allocation if life changes warrant
Resources for Continued Learning
Books
| Book | Focus |
|---|---|
| The Simple Path to Wealth (Collins) | Beginner, philosophy |
| The Bogleheads' Guide to Investing | Practical, full coverage |
| A Random Walk Down Wall Street (Malkiel) | Why indexing works |
| The Psychology of Money (Housel) | Behavioral |
Websites
| Resource | Best For |
|---|---|
| Bogleheads.org | Forum, philosophy |
| Reddit r/personalfinance | Community advice |
| Reddit r/Bogleheads | Index investing |
| Portfolio Visualizer | Backtesting |
Podcasts
- The Money Guy Show
- ChooseFI
- Afford Anything
Key Takeaways
- Start now - Time matters more than amount
- Keep it simple - Target-date or three-fund portfolio
- Automate everything - Remove decision fatigue
- Get the match - Always, it's free money
- Don't touch it - Set, forget, and let it grow
- Increase over time - Especially with raises
- Ignore the noise - Stay the course for decades