Where, Other Than The Stock Market, can I invest Money? If you don’t feel that buying stocks is the route that you want to go then don’t feel lost. While I still suggest that you still put some money into the stock market, I will list a couple of other options for you to do more research on. If you find any information in this blog post helpful then consider sending it to a friend.
The first way to invest that I highly suggest is looking into is Roth IRAs. This is a retirement account that has the biggest plus over a lot of of other routes. When you reach the age that you are able to pull the money out without a penalty, it will be tax free! Yes, if you pull out 1 million dollars then all that money is actually yours.
Side note: To maximize the most you can get at retirement then it’s best to start as soon as you get a job. the earlier the better.
a big question that comes up is can I invest pre-taxed money? On Reddit someone answered that exact question.
You can’t put in pre-tax money into your roth, so ALL the money you put in there is post-tax. Your employer isn’t “handling the tax payments” on the money going into the 401k. That isn’t how that works, with a typical 401k anyway. You will pay tax on what you withdraw after age 59 1/2 (or if you withdraw they money early, you’ll pay tax then, plus a penalty).
If you contribute to a standard IRA (NOT roth), then you indicate that on your taxes so you can get that tax credit.
Below is another in-depth overview of Roth IRAs.
When you open a Traditional IRA, you contribute, say, $10,000 to it in 2018. When you file your taxes this April, you can claim a $10,000 deduction to your income because that income should have gone into the IRA tax-free. It didn’t; It got taxed in your paycheck each week (or every other week, whatever) so you get those taxes back in a refund.
When you open a Roth IRA, you contribute, say, $10,000 to it in 2018. When you file your taxes this April, you can’t claim any deductions. The government just assumes whatever income you used to fund it was already taxed before going in. Which is true, since you’re working at a job and your income gets taxed in your paycheck etc., etc., etc…
Now, we should note one other restriction on IRA’s that I’ve glossed over: Your contributions cannot exceed your earned income each year. Earned income is basically money you made at a job; it gets taxed ahead of time, withheld by your employer. They call it withholding.
So if you’ve got income that isn’t getting taxed, then you’ve got bigger, Al Capone tax evasion problems.
I should point out, if you’re a bartender or a waiter or waitress, then maybe you’re getting a significant fraction of your income under the table.
At this point I am obligated to say: You should declare that income lying is wrong!
But if you are receiving under-the-table wages of any sort, they obviously don’t count toward your total earned income for that year. So don’t go doing anything stupid like contributing more money to a retirement account than you had earned income for the year. The IRS doesn’t go after bartenders over a few thousand dollars of wages. But that’s just hanging a sign around your neck, that reads “AUDIT ME!”https://www.reddit.com/r/personalfinance/comments/adoxoy/how_does_the_government_know_your_contributions/edj1waj?utm_source=share&utm_medium=web2x&context=3
I know that it sucks that you can only invest based on income, but it is still a viable path to look into long term.
The second option that is another good path to research is investing Real Estate. I feel that I shouldn’t have to explain what it is, but you are mostly looking into buying rental properties that can bring in passive income.
Though I will say that this route does require having a good amount of money for a down payment and any renovating that needs to happen. I am not knowledgeable to go in depth enough about Real Estate but am starting to do my research.
Someone asked on Reddit how much do you need invested in Real Estate to make a passive income of $10,000 a month and below is a response from another user.
It depends. Ran some numbers, assuming 5.00% cap rate for an asset and 60% LTV, and you’ll need $2,594,595 in equity to yield $10,000/month in income (not including tax benefits of real estate).
EDIT: If you up leverage to 80% and cap rate to 7.00%, you only need $872,727 in equity to yield $10,000 per month, which is more in line with what others have experienced on this thread.https://www.reddit.com/r/realestateinvesting/comments/cdjd98/how_much_capital_would_you_need_to_generate_10k/
I know that there are probably many more ways to invest your money, but looking at a Roth IRA or Real Estate would be the path for me (even both). I still will say that you shouldn’t turn down investing in companies and stocks that pay dividend (passive income).
Whatever path you decide to choose, make sure to do the research until you understand the basics. Any path you take is not going to be an overnight success and will require a lot of working everyday to build that portfolio.
Thank you for all that are supporting The Finance Starter and don’t forget to send this blog post to someone else that could benefit from reading it. I have just hit a total of 14,000 visits to my website and I can’t thank you all enough! I read a lot about others killing faster than me, but I am playing the slow and learning game. Give me a few more months and i’ll surpass my personal goals.
This question was asked on Quora and I decided to answer it on my personal blog. I am testing the waters with this new style and hopefully it goes well (trying to expand my reach and increase visits)