:key: Keys to Financial Peace

  1. Decide a budget. Understand where your money is going. Too much focus goes to investing instead of budgeting/saving.
  2. Save 20% of your salary each month.
  3. Prioritize eliminating debt vs investing.
  4. Contribute to 401K. Most employers match and there are tax advantages.
  5. Set goals for what you need (house, tuition).
  6. Invest. See our investment strategy.

:key: How to Save Subconsciously

  1. Create a monthly budget (rent, car payment, etc) and add a buffer for miscellaneous spending.
  2. Create a secondary checking account (won’t collect interest and no restrictions on transfers)
  3. Split your direct deposit paycheck. Budget goes to the main account and the rest in the other.
  4. Pay all expenses from your main account and forget about the other one.
  5. Have a big expense or emergency? Borrow from your other account.

ex. Salary $70K, paycheck after taxes and 401k: $4000

:key: Keys to Investing

  1. Decide your principles and stick with them.
  2. Keep it simple and to what you know.
  3. Long term rather than short term.

Few things matter more in investing than understanding your own time horizon and not being persuaded by the price actions caused by people with different time horizons.
- Morgan Housel, The Reasonable Formation of Unreasonable Things (a must short read)

Understanding Money

I recommend reading The Psychology of Money by Morgan Housel. It is critical to understanding the role of your behavior towards money and investing.

What should I invest in the stock market?

If you want to see what I invest in, I’ve made my portfolio public.
You can invest alongside with me. If you end up doing so, please subscribe to my investing newsletter so you get the latest updates.

My basket of stocks contains:

Technology stocks have and will continue to perform well in the next few decades. These companies are fast growing due to the digital landscape and have much better profit margins. Some of the stocks I have filtered out in QQQ have large debt or are financial companies which I prefer to avoid. This basket of stocks is halal, see more details on the sister site muslim.finance.

Should I buy individual stocks?

Index and mutual funds have historically performed better than a selected basket of stocks. It is highly recommended to invest most of your money in these types of funds.

When should I invest?

There will always be ups and downs - nobody can time the market. I recommend setting up automatic monthly contributions for majority of your investing budget.

Balancing Investments

Many focus only on the stock market when thinking about investing. Consider investing in other avenues such as real estate. Real estate forces you to be long term and there are many tax benefits. When evaluating rental homes, prioritize cash flow with some appreciation rather than just appreciation.

Bitcoin

I believe Bitcoin is important in the new digital world because the trust in government-backed currencies continues to be chipped away. The world is struggling from currency devaluation. For those in the US, buying Bitcoin serves as a good hedge against inflation. How Bitcoin materializes into a currency is still to be determined but its importance and need in the world couldn’t be stronger. I setup automatic weekly purchases with Cash App just like the stock market.

401K

A 401K is an account provided by employers for retirement that has a number of benefits and tax advantages. 401k’s are directly funded from your paycheck and many employers match contributions up to a certain threshold (typically 2-5%). Many 401k’s only allow you to choose from a handful of Vanguard funds. If this is the case, pick the most tech-heavy and equity-based fund. If you can choose any stocks, see our recommended basket of stocks.

Make sure to contribute the minimum needed for your employer to match (it’s free money!). Note there is a contribution limit of $19,500 per year for 2021 (there are exceptions if you are over 50).

Is your 401K with Fidelity?
Fidelity 401K's are more flexibile in allowing you to choose your investments depending on your employer's plan. Fidelity allows you to create a BrokerageLink account associated with your 401K allowing you to invest in mutual funds and stocks beyond the basic target funds typically offered.
401K: Traditional vs Roth
There are two types of 401k: Traditional (pre-tax contributions) and Roth (post-tax contributions). Contributions to a traditional 401k can be deducted from your gross income in that year. However, you will need pay income tax when withdrawing at retirement. With a Roth 401K, tax is deducted upfront since you are contributing post-tax dollars. Roth 401k is great for young professionals as you will probably be earning more and in a higher tax bracket.

If your employer offers both, consider splitting contributions to both.

You can also individually open a Roth IRA but there are heavy limitations in terms of contribution amounts and how much you earn ($208K married, $140K single adjusted gross income).

Education Savings Account (ESA)

ESA accounts allow you to save for your children’s education expenses. Once put in an ESA, money can grow tax-free - no taxes are paid on the gains. Contributions are limited to $2000 per year per child. You are only eligible for an ESA if your AGI (gross income after deductions) is less than: $110K for single, $220K for joint filers.

Donations

I recommend using CharityVest to streamline your donations. CharityVest also makes it easy to donate stocks which allows you to take a deduction on the full market value and avoid capital gain taxes if you were to sell it.

Wills and Estate Planning

I highly recommend to setup a will and living trust as soon as possible.

More questions or need advice?

Please email me. Note: I am not a financial advisor. Seek professional consultation as needed.

Note: Any investment is speculative.
Feedback? Built by Safeer.