Mon Oct 21 2024, by Tyler Gardner

How I Allocate My Paycheck Before It Hits My Checking Account

I’m Tyler, a former financial advisor and portfolio manager, and I create financial content for free so you don’t have to pay for it. Here’s exactly what I do with my paycheck before it even touches my checking account.

1. SEP IRA Contributions

10% goes directly to my SEP IRA and is invested in a low-cost index fund, specifically FXAIX. I don’t care whether the markets are up or down; as a small business owner, I can put up to 20% of my net earnings into that account annually and let it grow tax-deferred for the next 30 years.

2. Taxable Brokerage Account

5% of my check goes directly into my taxable brokerage account and is invested in either FXAIX or Fidelity's money market fund (SPAXX). Right now, I can get about 4.5% return on the equivalent of a risk-free asset.

3. Reinvesting in My Business

50% of that check goes directly back into my business. Currently in a growth phase, I have to sacrifice some short-term consumption for the hope of long-term gain. Reinvesting in your business is a quick way to achieve a guaranteed 25% to 30% return in the form of a tax break.

4. Personal Expenses

The remaining 35% is used to buy a few giant sandwiches here and there at Jersey Mike's and to fill up my gas tank so I can go out in public. Only to inevitably remember that I hate going out in public—hence my walks in the woods.

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

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