The investment accounts I use to build wealth

My problem has never been investing. I am great at investing. My problem has always been earning. I have struggled to earn as much money as the people around me. I still make less than a teacher here in my home state of Texas. Everyday is a work in progress to be more confident and more income.

Despite my limited earning power I have been able to create a respectable amount of wealth, because I have saved and invested wisely. Since the days of working at the Apple Store, nearly a decade ago I have contributed consistently to my 401k. I opened a stock brokerage account when I was a teenager. And have always put aside money that just came out of thin air. *That has rarely happened.

One of the values that I have had since childhood is enjoying saving more than spending. My sister is a spender. She loves traveling and experience so she will spend unlimited amount of money going on ski trips or visiting Egypt or going on an African safari. This is pre-Covid-19.

I am wired differently. I love traveling, but I have always done it one a budget and less frequently than her. I carefully plan out where I am going, what I am going to do and how I am going to pay for. I do stay in fancy hotels or expensive AirBnb’s. I usually use points for flights and fly coach and do not eat that the most expensive restaurants. But I love getting in experiences, like hiking Mt. Fuji in Japan or Taking a day trip to France from Barcelona. You can easily get creative when traveling to have a rich life and do things that very few people will ever do or experience.

But at some point in everyone’s life they come the realization that they need to invest if they ever want to get off of the employment rat race. Even my sister is more concerned now that we are entering middle age with how much she is putting away, because she wants to buy a house not have to work so hard.

Investing is not difficult. In fact is very easy. I think most people just avoid doing it, because it seems daughnting and time consuming. Or maybe they think they don’t have enough knowledge to do it. I do not know. What I do know is that the vast majority of people with wealth got through some form of investment. Most millionaires are created in the stock market.

Most workers in the economy are invested in the market whether they know it or not. Even if your receive a pension, that pension is most likely invested in the stock market.

Wealth comes down to the consistent action over time. Consistently investing small amounts from your paycheck into various accounts over time.

If you are an employee there are several accounts you can use to build maximum wealth.

I also think so people have the mindset that if they cannot invest to the maximum, then why do it at all. They believe if you do not have $100,000 to invest then it is not worth investing at all. But we all have to start right where we are. My parents never gave me a cent to invest in the market. They gave me everything else I needed to go out and invest. They paid for my education and provided me a rent free home for a long time. And taught me the value of hard work and sent me to wonderful schools. But I had to take the steps to invest. I had to make mistakes. I had to educate myself about investment vehicles. Stocks and bonds. Money mindset.

I love investing and managing money, but I am weird like that. You do not have to be. You can be a creative. You can be a scientist. But you have to be an investor.

If it were up to me I would only have one investment account and honestly only one investment, VTI – Vanguard Total Stock Market Index. But life is complicated. And so are TAXES. You need more than one account, because of taxes. Different accounts have different account ramifications.

Before you make any investment keep the end in mind. What are your goals? Why are you doing this?

  • Do you want to retire someday?
  • Do you want to own a home?
  • Do you want to have children and send them to college?
  • Buy a car?
  • Take vacations?
  • Do you want to give money to charity or tithe?

Ask yourself the important questions before you invest, because the answers to those questions will drive what accounts you need. I do not have children so I am not investing in a college fund.

Investing comes before spending.

Discretionary spending is fun. It is easy to go online shopping or swipe a credit card. Investing takes more effort in the beginning, but once you have your system in place it will happen without you even knowing about it. You should always invest first, because spending is much more tempting than investing and you will always choose to buy something awesome rather than purchase stock in Walmart or Starbucks.

The accounts that I use to build wealth

  • 401k
  • HSA – Health Savings Account
  • Taxable Brokerage Account
  • Real Estate Investment Account

These are the various accounts that I use to make my money work for me. Lets break them down.

401k – Retirement accounts. My employer funds a certain percentage, but honestly I am not sure how much. As of this writing 2020, you – the employee, can contribute up to $19,500. Not a penny more. So your goal should be to max out this account each year. I do not max this account out ye, but I am working toward getting there.This account is tax-deferred, you do not pay tax today, but you pay tax on the money you withdraw as if it were income. The money gets to “grow” tax free till you withdraw. There is also a 403b and 457 plans that are for public sector employees that are also tax-deferred.

ROTH IRA – IRA – Individual Retirement Account. The maximum you can contribute to this account in 2020 is $6,000. The goal is to max out this account. The benefit of a ROTH is that you pay tax today and the money then grows tax free. So you can withdraw anytime and not have to pay tax on this income. Because it has different tax benefits from the 401k, they work well together. You have different withdraw options when the time comes.

HSA – Health Savings Account – This account is not for everyone. If are relatively healthy then this account is for you. You get to put money every month into this account and then you are able to invest that money. You never have to pay tax on this money if you spend the money on health related expenses. The max for this account right now is $3,500. The max is likely to continue to increase over time to account for inflation. There is no other brokerage account where you can see gains and not have to pay tax on those gains. If you are someone that goes to the doctor quite often this account is not for you. It is better to go with a PPO plan, because you copay to the doctor is less and you deductible each year is likely lower. With an HSA you have be enrolled in a high deductible insurance plan. That means that you have to pay more out of pocket or out of your account balance to see the doctor. You can also use the strategy of enrolling in an HSA and then contributing the minimum to that account and pocketing the rest of the money.

Even if you do have the HSA option through your employer or feel like you cannot do it, I highly recommend having a savings account dedicated to health. Put aside a certain amount of money each money to pay for any health related issues. Everyone will need a doctor at some point, especially with COVID-19 floating around. But it just makes you feel better to have a little bit of money saved up for you to use in case of emergency.

Taxable Brokerage Account – This is your standard stock investment account. You pay tax on any dividends and capital gains you receive. Why do you need this? Because if you are like me and you invest in a 401k, you only have so many investment options to choose from – mutual funds. And mutual funds have higher fees. With a brokerage account you have the entire universe of investment options to choose from. Individual stocks as well as ETFs, which have much lower fees. You can also think of this account as an Emergency fund. Although I recommend having a cash emergency fund. What I mean is that with a Brokerage account you can quickly liquidate these funds for personal use with no penalty. See my other articles about which investments are right for you.

Real Estate Investment Account – This one is not for everyone. Your personal home is not an investment. Just like your car is not an investment. It is a utility that you use and enjoy. Real estate investing is about purchasing real estate that has tenants who pay rent. Commercial and residential. You can physically purchase rental homes or invest in a REIT. I use Fundrise as my real estate investment account. Only do this if you are interested in real estate investing, otherwise just stick with equities, because real estate can be more complicated than equities. It is a long term invest where stocks can be bought and sold in minutes. But over time real estate appreciates in value and rents increase so it can be a solid investment. Everyone needs a place to live.

Start small

The most important thing to do is start. Even if it is just $5 start putting money in today and then increase that amount over time. You build momentum and then you have options. You can dramatically increase your savings rate or you can carefully increase it over time as your income fluctuates.


Make it so that money goes straight from your checking account straight into your investment accounts and investments are purchased without you having to do anything. Because if you have to do the work each month, life will get in the way. You will forget or you will want to use that money for something else one time.

Invest in yourself

You have to believe in your power. That you are amazing and have a lot to offer the world. Sharpen your work skills. Start a new business. Become an expert in a certain field. Become an idea machine. The best investment you can make is in your talent and skills. Then you have leverage those talents and skills for more money and options.

Money is choice

These accounts are providing you with lots of options. Do you want to work or not. Do you want to leave a bad relationship or not. What kind of life do you want to provide for your family? That is what money does for you. It provides you with power to craft your life.

Start thinking about what kind of life you want to live and start building for it. Just because life looks one way today does not mean that tomorrow has to look like that. You have the power to change the world around you.

Massive change happens with tiny actions repeated over and over. Once you open these accounts and start funding the investments it will build and grow. The more money grows the easier it is for money to grow bigger. This is why the 1% are so wealthy, because it is much easier for money to grow money than for your effort to grow money.

Now stop thinking about it and go do it.

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