Sat Jun 22 2024, by Tyler Gardner

4 Automated Moves You Need to Make Before Your Paycheck Hits Your Bank Account

Before that paycheck hits your bank account, you need to automate the following four things. I'm Tyler, a former financial advisor and portfolio manager, and now I create financial content for free to help you make informed decisions.

1. Contribute to Retirement Accounts

10% of that paycheck needs to go directly into a 401(k) or a Roth IRA. And if you're a woman, aim for 15%, as women typically get paid less, live longer, and have less in their retirement accounts on average.

2. Save for Short-Term Goals

Next, 3% of that paycheck should go into a high-yield savings account or a money market fund. Take five minutes today to visit NerdWallet or Bankrate and look for the best money market funds and high-yield savings accounts of the year. While there are no tax advantages here, this is an excellent way to protect the purchasing power of your hard-earned dollar.

3. Invest in a Taxable Brokerage Account

Allocate another 3% of your paycheck to a taxable brokerage account. Once in that account, invest in a low-cost index fund like Vanguard's VOO or Fidelity's FXAIX. Although it's a taxable account, it still offers tax advantages as the tax on what you make from your investments is typically less than what you pay on ordinary income, so long as you hold the investments for over one year.

4. Fund a Health Savings Account (HSA)

Finally, allocate 3% of your paycheck to the only 100% tax-free account on the planet, a health savings account (HSA). This is like the gold standard of accounts—contributions are tax-deductible, you can invest the money within the account, the funds roll over from one year to the next, and the money can be spent tax-free on qualified medical expenses.

If any of this information is helpful, please like and follow, and I’ll keep trying to get you one step closer to where you need to be.

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