The Smartest Order To Invest Your Money in 2027 Step by Step

You want to know what's crazy? I see so many people throwing away their money into the stock market when they have so much high interest credit card debts and it just makes me wonder why are you investing and not paying off your debt first? It's kind of like them having a bucket and they're pouring water inside but there are a whole bunch of holes on the bottom and water is just leaking out and they're just wondering why is it that no matter what I do I can never fill up the bucket So in this video, I'm going to go through the smartest order to invest your money this year, which is going to help you save on taxes and a lot of money, maybe up to tens to hundreds of thousands of dollars. If you're new to my channel, hi, my name is Steve. I used to be a public school math teacher and now I teach personal finance and I help individuals catch up with investing. So if you take a look at the data out there, you'll notice that a lot of credit card interest rates are hovering around 18, 20, 22, or even around 24%. And this is so crazy because I see so many people in debt and they are trying to invest when they should be trying to pay off their debt first instead. On top of that, you'll see that around 50% of adults barely have a three-month emergency savings. Where according to Money Wise and Yahoo Finance, around 37% of Americans have less than... $500 saved, so if they were to just lose their job, they were to get laid off, they basically would just go into the red immediately. So in the next couple of minutes, I'm going to go through the seven steps of investing and basically the order of operations to invest. So step number one, just like what I said before, you want to make sure that you pay off your high interest debt. So the average stock market return is roughly around 7 to 12 percent. I know it has been a little bit higher in the last couple of years, but generally it's been between around 7 to 12 percent. However, if you take a look at a lot of these credit card interest rates, they are incredibly high, around 20, 22, 24 percent. So if you're someone with a lot of credit card debt and you're trying to figure out, well, should I invest the money or should I pay off the debt? You mathematically want to pay off the debt first. And the reason why you want to do this is because if you were to pay off your debt first, you're essentially going to get a 100% guaranteed 24% ROI or a return on investment. So sometimes I get invited back to my old high school to do a speaking event. And when I talk to young 17, 18 year olds, they know that yes, debt is bad because you have to pay back the money that you borrow. But what they don't know is that with the debt that they borrow, there is interest being accrued. So not only are they paying off the money that they owe, they also pay the interest on top of that and that interest actually compounds over time. And if you watch a lot of my live streams in the past, you know that I talk about exponential growth in your net worth where basically your money, your net worth grows in a J curve upwards like this. However, when you're in debt, the opposite is true where your money, your net worth actually drops or exponentially decays over time. So if you take a look at my study guide, the general rule is if you have high interest debt, credit card debt that is above 8, 9, 10%, you generally want to pay that off first. And if you have debt that's around 20, 22, 24%, I'm telling you as a friend right now, you want to make sure that you pay that off immediately. So you can see that credit card interest is around 24-25%, personal loans around 12-13%, auto loans around 7%, 30-year mortgages like mine. I actually got around a 2.7% interest rates back in 2020 and 2021, but right now it's around 7% and federal student loans are around 6.5%. So if you have any of the two that you see on top, you generally want to pay those off first. The second step is to build your cash reserve and I know that this sounds so So boring, but I meet so many people where they want to start investing in individual stocks or meme stocks or cryptocurrencies or whatever it is that's in hype right now. And they barely have any money in their savings account. And if you're someone like me, I'm currently 39 and maybe you're in your 40s or maybe you're 35 or 45 years old. We're in this stage where a lot of people rely on us. Maybe we have kids or maybe we have parents that we take care of. And it's very important and responsible for us to make sure that we always have a cash reserve just in case there are any unexpected expenses. So the first thing that I would do, and I would say that this This is the lowest hanging fruit is to move my savings into a high yield. yields account. For those of you who use larger banks like maybe Chase, Wells Fargo, or Bank of America, they usually give you around 0.01% interest on the money that you have in their bank accounts. However, right now, there are so many better bank accounts that you can open up that give you much higher interest rates, anywhere from 3% or 4%. So this means that instead of getting like $1 of interest per month, you could be getting anywhere from $300 or $330 or $400 each month So what are some of these accounts? Well, you can open up a high-yield savings account or a HISA or a money market fund, or maybe you can put some of your cash into T-bills or CDs. So generally, if I wanted to keep my money as liquid as possible and I'm able to take out my money whenever I want, I would stay away from CDs or T-bills and focus more on high-yield savings accounts and money market funds. So there are a lot of great high-yield savings accounts out there. Like I've used Wealthfront, CIT Bank, Ally Bank. They have the little bucket system. There's also Capital One, American Express. But honestly, all of them pretty much do and function the same way. They give you a high yield interest of around three, 3.3, or maybe even 4%. And in terms of money market funds, a lot of you know that I use Fidelity. So I keep some of my money in SPAXX. But if you use say Vanguard or Schwab, they also have equivalent money market funds with them too. In the end, none of this is financial advice. You can choose or do whatever it is that you want. I just want to give you some options so you can see what best fits you. Now, in terms of, well, Steve, how much money should I keep in my high-yield savings or in my money market fund? Well, it really depends on... What your paychecks are like and what your lifestyle is like. So I'm a big believer of taking baby steps because it makes it more attainable for us. So I would say the very first step that you probably want to achieve is to build a $5,000 starter buffer. Now, if you're someone with a steady paycheck, like for me, I used to be a public school teacher. I was paid every single month. Then you can start building a three to six month emergency fund. So this means that if you have around $4,000 a month of expenses, you generally want to have around $12,000 to $24,000 in your high-yield savings account or in your money market fund. Now, for those of you who are business owners, entrepreneurs, I used to be a tutor, so I had a tutoring business. Then you can actually shift this up to around a 9 to 12-month emergency savings. I like to have a little bit more cushion in my high-yield savings account, especially as an entrepreneur, because anything can happen, and I just want to make sure that I'm able to protect myself in the future. So now that you have your foundation, you paid off your high interest debt, and you have an emergency fund built, the next natural step is step number three, where you want to capture the employer 401k match. I would say this is one of my favorite steps because this is essentially where a lot of people with jobs that provide a 401k you're able to essentially double your money. So if you're someone who can say put in $5,000 into your 401k and your employer can match that with another $5,000, well now you have $10,000. And generally for me, I would only contribute up to the company match, which means that if you were to put in say $10,000 and your company is only able to match you $5,000, then you kind of exceeded that amount. So instead, I would put in only $5,000 and get that full $5,000 match so that I have that one-to-one ratio. The reason why I don't like 401ks as much is because whenever our coaches and I work with our students, we notice that a lot of 401ks are very limited with options and not a lot of people can invest in whatever it is that they want to. On top of that, a lot of 401k options have these high fees associated with them, which again, I don't really like. But if you can get that company match and say that You're investing around, say, $200 a month. That's what you're putting into the stock market with an average 10% return. Then over the next 30 years, you grow your 401k to around $452,000. But what's crazy about that is that you actually only put in $72,000 of your own money. And the rest right here is all free money from Compound Growth. Now, after you got your contribution match from your 401k, the next logical step is to open up an IRA or specifically a Roth IRA. So Roth IRAs are one of my favorite accounts and basically an IRA stands for an individual retirement account. And Roth IRAs are so powerful because once you contribute and invest your money and let it compound over time, by the time you are 59 and a half years old, all of your money is going to be taxed and penalty free. And I just know that by the time I'm 59, 60, 62 years old, the last thing that I want to think about are taxes. Now the Roth IRA is so powerful that the IRS actually limits you on how much money you can contribute each year because they know that there are going to be a lot of rich people who will take advantage of this account, put a whole bunch of money inside and make all of their money tax and penalty free in the next say 10, 20, 30 years or so. So what are these contribution limits? Well for 2026, you can contribute up to $7,500 if you're under 50 or up to $8,600 if you're over 50. I know a lot of you who follow me, you're between 30, 40, or maybe even 50 years old. So the IRS actually allows you to play a little bit of catch up if you're over 50 years old. But there's also one important note that I want to make is that not everyone is allowed to open up a Roth IRA immediately. You actually I actually have to make less than a certain amount each year. So for your taxes and your filing single, your modified adjusted gross income needs to be less than $153,000 for you to contribute the full amount of the $7,500 or $8,600. Now if you are married and you are filing jointly, then both you and your spouse need to make sure that you both make less than $242,000 as a sum. If you make anywhere between these two ranges, then you can We can contribute some of that. that money into a Roth IRA. Not all. And if you make way more than this, then that means that you cannot contribute directly into a Roth IRA. What you can do instead is use this thing called a backdoor Roth IRA method. And essentially with a backdoor Roth IRA method, you are opening up a traditional IRA, putting money inside, and then you can convert it into a Roth IRA. There are some small complexities like some forms that you need to fill out and the pro rata rule that you need to be aware of So it's very important that you consult with a tax professional if you are going to do this. So how much money would you actually have if you were to say max out your Roth IRA in the next 20 or 30 years? Well, again, with average annual returns of around 10%, I know that it's been a little bit higher over the last couple of years, but we'll just use 10% as a nice round number. Your portfolio can grow up to around $1.4 million. And again, if you take a look at how much money you actually put in yourself, this is only around $225,000. The difference between The difference between this number right here and $1.4 million is, again, free money because of the compound growth. Now, once you max out your Roth IRA, the fifth step is to open up an HSA or health savings account if and only if you have a high deductible health plan or an HDHP. If you don't have one, you can skip the step down below, or if you do, then this is actually going to be amazing for you. Because with a health savings account, it is one of those rare accounts where you get triple tax advantage. Essentially, the money that you contribute is going to be tax-free. The growth when you're investing is also going to be tax-free. And when you withdraw your money during retirement or when you're using it for qualified medical expenses, that is also tax-free. So basically, your contributions are going to be tax-free in, and then the growth is also going to be tax-free. And when you pull out your money for qualified medical expenses, that is also tax-free. So these These are the triple tax advantage. ages So for 2026, again, there are limits just like a Roth IRA. You can contribute up to $4,400 as an individual or up to $8,750 if you have a family. And again, there's also a $1,000 catch-up if you're older than 55 years old. So if you were to max out your HSA over the next 30 years or so, then that means that you can grow your account to around $828,000 with average annual returns where you You only put in, again, 100 $132,000 of your own money. Now, the fifth thing to invest in, and I would say that this is more on the optional side, is to max out or still contribute and invest into your 401k. If you're someone who wants to get more of those tax advantages in the present and not in the future, then this is an option that you can take. Or if you have a 401k, you don't see that there are that many high fees, there are actually a lot of options that you can invest in, then you can potentially go down this route. But for 2026, the limit that you can contribute up to is $24,500 if you're under 50. $32,500 if you're over 50 and up to $35,750 if you're between 60 to 63 years old. Again, I would most likely skip this step if my company didn't provide some sort of company match or the expenses are really high or there were very limited options. But I just know from experience back when I was a teacher, I had a 403B and I remember that I had very limited options and the expenses were just off the charts where I just really did not like investing in my 403B. Which leads me to the seventh item here, which is the taxable brokerage account, or sometimes people will call it the individual brokerage account. So if you research all of the accounts that I talked about earlier, you probably noticed that there's only a certain amount that you can contribute into this account each year. Or even if you want to access your money, there's, Usually some sort of penalty that's incurred if you were to take it before a certain age limit. However, with a taxable brokerage account, that solves the problem. You can actually contribute as much money as you want and take out as much money as you want. The only downside is that there are no tax benefits, which is why it's called a taxable brokerage account. It's written in the name. But again, I really like this account because there is no limit on how much money you can put in, how much you can take out, and it's very, very flexible. And for those of you who are asking, Steve, can I have multiple accounts? The answer is yes, you can have a Roth IRA, an HSA, and a taxable brokerage account. You can have all three or all four or whatever it is that you want to do. And the reason why I like having multiple accounts is because you can get the best of both worlds. So if you want flexibility, you can get that from a taxable brokerage account. And if you want the tax advantages, then you can get that from a Roth IRA. The main thing that I like to teach people is to not have this, this or that type of mindset You can certainly have a little bit of both, okay? It's like going to Chipotle. You can have a little bit of rice, have a little bit of beans, have a little bit of chicken, have a little bit of everything. It's okay. Now, after going through all of these accounts, the next natural question, of course, is, well, Steve, what can I actually invest in? Because I see all these finance creators, all these books talk about investing, but I don't know what to actually invest in. Now, even though I can't tell you what to invest in because none of this is financial advice, I can give you a couple of options that you can look into, research, and you can see if this fits your own portfolio. So if you're a beginner investor, I generally would want to stay away from individual stocks, meme stocks, penny stocks, IPOs, these crazy cryptocurrencies, or even the hype nowadays with Kalshi and Polymarket because that is not investing. Instead, I would focus on diversifying and making sure that I'm investing in low-cost products. Broad-based index funds. One of the best and easiest ways to invest in low-cost broad-based index funds, in my opinion, is to invest in ETFs or exchange-traded funds. So if you want to invest in ETFs that allow you to diversify over, say, 500 or 5,000 companies all at once, you can start off with something like a backbone ETF. Some of these ETFs include like VOO if you want to invest in the S&P 500 or the top 500 companies in the United States, or maybe VTI. SPY, VT, there's also SPYM, and this is what I invest in, doesn't mean that you need to invest in it too, you can invest in whatever you want, but these are some examples. And in terms of fees, I generally want to look for fees that are under 0.50%, and you can see that everything here ranges from 0.02%, which is the lowest for SPYM, and it goes All the way up to around 0.09% for SPY. On top of that, you can see the dividend yield here and the 10-year average return. And you can see that we've been getting around 15% on average per year over the last 10 years, which is... Pretty amazing. Now, if you're someone who wants to speed up your portfolio, maybe you're on the younger side, or maybe you are someone who doesn't mind the stock market volatility, you can invest in some of these options here. There are ETFs like QQQM, VUG, SCHG, VGT, and these are all popular ETFs in my community. Or if you're someone who wants to take a steadier approach, you don't like the volatility, you just want some cash flow that comes in every month, every quarter, then you can focus your portfolio in dividend income ETFs like SCHD, which is what I invest in. Doesn't mean that you should invest in it too. There's also VYM and SPYD. Now, if you're taking a look at my study guides and you want a copy of it yourself, you can always download it down below in my $1 million investing roadmap. All you need to do is fill out this form here. You're going to get access to my entire Google Drive. And once you open up the study guides, you're going to click on file and click on make a copy. And then you can make a copy of all these study guides for yourself. So you can type in your own notes. And if you're someone who wants to see everything in order, punch in your own specific numbers, you can also get this spreadsheet here. This is the $1 million investing roadmap sheet. And basically, I take you through this entire financial journey step by step. You see step one, this is the introduction. It's committing to take action. Step number two, you can watch these videos here and figure out how you can become a millionaire yourself on a low salary or how you can change your finances in the next six months. And once you move down here, you can learn how to pay off your debt. And then all the way towards the bottom, you can figure out which accounts to open up in which order and what to invest in. And as you go through this entire checklist, you can check it off to make sure that you are On the right track, because again, I used to be a public school teacher. I like to keep things as simple and easy as possible. But in terms of all of the accounts that we talked about today, this is a visual representation of how much you can contribute on an annual basis, starting from the ones with the highest contribution limits. So this is going to be your 401k's depending on what age you are. Then it comes down to your HSA if you have a family. Then it comes down to your Roth IRA or your traditional IRA. Then down to your HSA, if you're filing as an individual. So I want to ask you, what is your action plan? Because I know a lot of you are down this YouTube rabbit hole. You're watching all these videos, but at the end of the day, you're just still confused on what you need to do, or you don't take any actionable steps. So you continue to stay stuck where you are. So here's a little bit of homework that you can potentially take, especially if you have a spouse, a husband, a wife, you can plan this out yourself later tonight. So the first step is to download the $1 million investing roadmap if you think that that's The second is to list out your debt and its APR, the interest rate, and again, you want to focus on the highest interest rates first, generally the ones that are around 8, 9, 10 plus percent. Then you want to open up a high-yield savings account or a money market fund, and you want to start off with doing something attainable, building up a $5,000 emergency fund, and then start to shift towards a 3 to 12-month emergency fund, depending on how stable your paycheck is. Next, you're going to check your 401k Okay, and see if there is a company match. Next, you're going to see if you qualify for a Roth IRA. You can contribute money into it. You can watch my other YouTube video on Roth IRAs and figure out the details of it and you can start investing in one. Then you can open up an HSA if you have a high deductible health plan. You can watch my other YouTube video where I talk about HSAs and you can start investing in that too. Next, and again, this is optional. You can see if you want to contribute more into your 401k. And then lastly, you can send whatever leftover money you have into a taxable brokerage account. I really hope the roadmap, study guides, spreadsheets, and this video helped. If it did, I highly encourage you to watch this video here, or if you sign up for my next investing class within the roadmap, I will see you very soon. See you in the next one.