How I Would Get Started with Investing in 2025

Hey, what's up everyone and welcome to the school of personal finance. In today's video, I am going to talk about how I would get started with investing here in the year 2025. So, I'm going to talk about if I was just starting out, what steps would I take to get my investments growing and working for me? And as I went through this list, I did realize that I am still doing these five things as well. So, even if you're further along in your journey, you could use this as a checklist to see, are you marking all the boxes? Are you doing what you need to do to be able to invest and grow wealth for your future? All right, I hope you find this one helpful. Let's get to it. All right, so just a reminder, my disclosure, none of this is personal investment advice. Obviously, I know nothing about you. Make sure to consult with your own financial adviser or make your own decisions when it comes to what is the right path forward for you. This is all just for educational purposes. Now, another important item is you can't even really start to think about investing if you currently have no money in the bank. you have no positive cash flow. You're drowning in credit card debt. You're living paycheck to paycheck. Those are all things that you need to solve before you could move on to the investing phase of your life. When you go ahead and you pay off credit card debt, where say you're paying 23%. That is such a win. You have to look at that like you're getting a 23% rate of return on your investment. All right. So, if I was just starting out today, the first thing that I would do is I would look at my employer retirement plan. So that could either be a 401k, a 403b, a 457 plan, and I would see, do they offer me a company match? And if the question to that is yes, then this would be priority number one as far as me getting started with investing cuz that is free money. So even though this is a retirement account and you're not going to be able to touch that money until you're 59 and a half, this is free money that you want to work and grow for you. I worked at some big corporations early on in my life and I'm so grateful that I had an employer match to really kickstart my savings. Now that I'm self-employed, I don't get that match anymore and it's painful. I'm losing out on thousands of dollars a year that I used to get from just putting money into my 401k. And I would also be contributing to a Roth 401k or the Roth 403b. The portion where you put in after tax money and then that money will grow taxfree forever and in retirement you take it out without paying any income taxes. Especially when you are young, I would go aggressive with Roth and try to build that tax-free bucket. If you're going to get an employer match, I think it's fine if that match goes into the traditional side of your 401k where your employer is putting in money. may get a tax deduction for that and that money will then grow. Then when you take it out, you will pay income taxes on that. I talk a lot about tax diversification and having some money in each of these buckets in traditional, in Roth, and then in the regular brokerage account. But when you're young and you're just starting out and you're in a low tax bracket, going heavy into Roth is a great way start paving your path for wealth in the future. And then inside of that 401k, I would invest for growth. I would typically choose like an S&P 500, a lowcost index fund that will be available to you when you're young. Going 100% equity is not a bad idea. You have a very long road ahead of you. You really don't need the bond piece of your 401k. So, an S&P 500, a total stock market index fund, you want to be cognizant of fees, of the expense ratio, and just follow the markets and let that thing grow for decades. Over the long term, the S&P 500 has averaged over 10% per year. Now, in 2025, you could contribute up to $23,500 inside of your 401k. I don't recommend doing that. I recommend investing up to the match. So, to make sure that you get 100% of the match that your employer offers. If they don't offer a match, then the 401k, it actually drops into the number two slot for me. And the first way that I would then invest is a Roth IRA. So just to be clear, if your company offers a match, then that's number one. If they don't offer a match, then number one, the Roth IRA slides in there. So with a Roth IRA in 2025, you could contribute up to $7,000 per year. Now, a Roth IRA is not tied to any employer. It's not payroll deducted. You have to set it up on your own and make contributions to it. So, some big brokerage houses that I typically recommend are going to be like Fidelity, Schwab, Vanguard. You can open up a Roth IRA and go ahead and contribute money. You can do it on a monthly basis, every 6 months, every 3 months. You can do it one time a year, and you have until the tax filing deadline of the following year to make contributions for that calendar year. So, in 2025, you have up until April 15th of 2026 to make contributions for the 2025 calendar year. And inside of a Roth IRA, you want to invest for growth. So, you're taking money that has already been taxed that is in your bank account, you're contributing it into the Roth, you are investing it for growth, and then that money will grow taxfree forever. And there are additional benefits besides that with a Roth IRA, things like having access to the money. So, with a Roth IRA, at any point, you could take out your contributions without any taxes or penalty. So, quick example, if you put in $7,000 a year for the next two years, so you put in 14 grand and let's say it grows to 16,000 and you have a life emergency or you have something that comes up or you want to buy a house, you could take out the amount that you put in at any time. So, the 14,000 that you put in, you could just take it out. You don't have to report it anywhere and you could go ahead and use that money without any taxes or penalties being due. Not saying that that is a great idea, but it does give you some flexibility where it kind of allows you to push to try to get that money into a Roth because if you overdo it and you need to take some money out, you could and it's not the end of the world. Now, personally, I think Roth IAS are the best account in the world. You should definitely focus on that, especially if you're young and you're just getting started. But not only if you're young, even if you're my age, right? I'm 47 years old. Even if you're older than me, contributing to a Roth IRA, it is a great thing to do. Having the certainty of not having to pay taxes in retirement, you are going to benefit from that later on in life. Now, you can find many lowcost growth index funds, Vanguard, Fidelity, Schwab, they all offer a different flavor of a growth index fund. All right. Now, the third thing that I would do, and I wish that I did this much earlier in life, and that is just start a regular brokerage account. So, a brokerage account is not a retirement account. There's no age restrictions. There's no limitations of how much money you can put into it. You don't get the same tax benefits that you get from retirement accounts like a Roth IRA or a 401k plan, but you have a lot of flexibility. So, you could open a brokerage account at any one of those companies that I named before. You could send money how often as you want, as little, as much, whatever you want to do that fits into your lifestyle. What you're doing is you are investing. You could choose whatever you want to invest in. I typically recommend starting out with like an S&P 500 fund where you're just following the market or a total stock market index fund. Nothing fancy, low cost, and then you know how you're doing each and every day. You could look at your iPhone app or look at CNBC and see how the market's doing and you know how that account is doing. And just your goal should be to accumulate shares no matter what is going on in the market. If it's going up, it's going down. Shouldn't have an impact on your life. All you want to do is just keep consistently investing and contributing money into there. Now, you don't want to invest money that you're going to need a year, two years down the road if you're saving for a down payment or for a car or for college education or whatever the case may be. If you have a short-term time horizon, investing in the market is a risky thing to do because you don't want to be pulling money out of the market, right? As we go into a recession and the market's down 20% and now you need the money. So, you do want to have a longer time horizon, but this is another bucket that you want to fill throughout your entire life. You want to get in the habit of just sending money in there and investing it and setting and forgetting it and not worrying about how it's doing on a day-to-day basis, knowing that over the long term, the S&P 500 is going to average somewhere around 10%. Now, nobody knows what the future's going to be, and we could go through a lost decade again like we did in the early 2000s where we might have zero growth. The markets go through cycles. But if you continue to invest in large companies in the US, we're going to continue to grow developed markets, just investing in equities, in companies that are going to grow over time. This is a surefire way to build wealth throughout your life. And then the fourth thing I would do, and this is one that most people do not do. I did start doing this at a younger age, and I'm very happy that I did, and that was saving money for down payments on rental properties. And this could be an hour-ong video about investing in real estate. I am a big believer in investing in rentals and having a rental portfolio and trying to grow that. And really, your goal should just be to educate yourself about it and get to that first house where you have enough of a down payment where you can buy a rental property that gives you positive cash flow. The market is very difficult right now and it's going to take you a while to be able to save for that first down payment, but there are markets throughout the country where houses are still inexpensive and there is a large tenant pool, people that want to rent houses. Right now, demand for rentals is very high. It's very easy to get tenants because home affordability is so out of control right now. So more and more people are renting for longer periods of time. But places like in the Midwest, like for example, Kansas City or Memphis, Tennessee, Birmingham, Alabama, these are all strong rental markets where you could buy a decent home for $1500, $200,000. So down payment, you might have to save 20% of that, somewhere in the ballpark of $30,000 plus closing costs. But it's hard right now. Interest rates are very high. It's hard to make the numbers work. And there's limited inventory. So, this one takes research. It takes time. But if you start now and say it takes you five, six, seven years to build up enough for your first down payment, hopefully at that point, interest rates will have come down. The housing market might look a little bit different and you could go ahead and jump in and buy your first rental. You also need to research property managers and how all of that works, right? Because with rental properties, you don't want to be the one getting phone calls in the middle of the night if somebody's toilet is overflowing or if they need a plumber or electrician or whatever the case is. You want to have property managers that you can rely on that will go ahead and take care of that property for you. But this is a great way to build passive income and also you build equity in the homes throughout the years as you're paying down the mortgage and the property values are going up. This could be a great source of funds for you if you want to retire early or even later on when you do retire to have a stable income. Obviously, there are a lot of risks that come with owning rental properties. You need to have adequate insurance. You need to be covered in case something happens on the property. need to be able to deal with headaches with tenants not paying. There are things that could obviously go wrong. But over the long run, investing in real estate, it has been a great way to build your wealth for many, many years now. And then the fifth and final thing that I would do if I was just getting started with investing this year, and this one doesn't cost any money, it's just a matter of your time, and that is educating yourself. There are so many free resources where you could learn about anything in the world these days. You could learn skills. You could learn how to make money online. You could learn trades. Anything that you want, you could learn online these days. And maybe the first step is just learning how to use AI to learn about new things. So, I'm using Chat GBT all day, every day. It's become my best friend. You could learn anything in the world. My daughter, I joke around with her. We're driving around. She's asking me questions that I don't know the answer to. And I'm like, "You need to ask ChatGBT. Chat knows everything. Whatever you need to know, anything that's brewing in your brain, ask the question." And I'm amazed at what answers come back. So really, right now, it is a time for learning, for education, because it's going to translate into money for you eventually. So the amount of information that's out there at our fingertips that we could learn, make sure you're taking advantage of all that stuff. All right, everyone. That is it for this one. If you'd like to join my membership community, I am just getting started with it right now. We're going to be talking about all these types of things. We're going to be doing live webinars. We're going to be doing pre-recorded courses as well. Going to have office hours where you can come in and ask me anything. We're going to have a school community where you could chat, you could talk to me, we could have different topic discussions. Go check it out. schoolofpersonalfinance.com. I will see you in the next video. Thanks.