Budgeting Basics
These expenses include housing, groceries, transportation, and health care.
Essentials or needs.
This percentage of after-tax income goes toward needs.
50%
Buying one of these gives you partial ownership in a company.
Stock
This type of company acts as the middleman between you and the stock market.
Brokerage
Of stocks and bonds, this investment is generally considered lower risk.
Bonds
Electronics, travel, dining out, and streaming fall into this spending category.
Non-Essentials.
This percentage of after-tax income goes toward wants.
30%
When you buy one of these, you are lending money to the government.
Bond
Fidelity, Charles Schwab, and Vanguard are examples of these.
Brokerages
This investment bundles small pieces of many companies into one purchase.
Exchange-Traded Fund (ETF)
This simple calculation tells you how much money you have left after your expenses.
Income minus spending.
This percentage of after-tax income is split between saving and investing.
20%
Buying only one company's stock exposes you to this type of risk.
Concentration risk
This account has no early-withdrawal penalty and allows money to be withdrawn at any time.
Taxable account
This strategy involves investing a fixed amount of money on a regular schedule.
Dollar-cost averaging
Waiting 24 hours before a large purchase is one strategy recommended for this type of spender.
Impulsive spender.
With $10,000 of monthly after-tax income, this amount would go toward wants.
$3,000
Unlike owning a stock, buying a bond makes you this rather than an owner.
Lender
This retirement account involves paying taxes now in exchange for tax-free growth and withdrawals later.
Roth Individual Retirement Account (Roth IRA)
After maximizing an employer's 401(k) match, one should invest in this account next.
Roth IRA
Holding too much cash and missing investment opportunities are possible problems for this type of spender.
Conservative spender.
With $10,000 in monthly after-tax income, this amount would go toward savings under the 50/30/20 rule.
$2,000
This feature of an Exchange-Traded Fund reduces the impact of one company's poor performance.
Diversification
These three destinations form the investing order of operations (order 401(k), Roth IRA, taxable account)
401(k) match -> Roth IRA -> taxable account
This investing method puts the entire available amount into the market immediately rather than gradually.
Lump-sum investing