My Favorite Investing Accounts (And How to Maximize Your Returns)

Let's talk investing!

Investing isn't a one-size-fits-all deal, and it's crucial to find an investment that matches your financial goals and risk tolerance. As someone who's been investing for a while now, I've tried and tested various investment accounts and found my favorites based on ease of use, low fees, and a track record of success.

So, in this episode, I'll be sharing my knowledge on where to put your money first, how to allocate it, and the different investment accounts that you can consider on your journey to financial freedom. I'm going to walk you through six different accounts that you can consider. We'll cover things like how easy it is to access your money, what tax benefits you might get, and what kind of risk you're exposing yourself to.

As you start exploring these six investments, keep in mind that investing takes time and patience, but the rewards can be life-changing. So go ahead, take the plunge, and start investing in your future today!

IN TODAY’S EPISODE, I DISCUSS: 

• Six investment accounts to consider on your path to financial freedom
• The pros and cons of savings accounts, IRS, and other investment vehicles
• Finding the right balance for your investment portfolio

RECOMMENDED EPISODES FOR YOU
If you liked this episode, you'll love these ones:

• How the Top 1% Earners Accelerate Their Wealth (It's Not By Getting a Raise)
• How a CFO Can Transform Your Profits & Wealth with Michael King
• How One Client Saved $24k on Their Taxes by Becoming an S Corporation
• Creating Wealth & Freedom Through Acquisitions ft. Nick Bradley

OTHER RESOURCES:
7-Day Money Plan Workshop: https://www.TheMoneyPlanWorkshop.com
Affluent Entrepreneurs Private Facebook Group https://www.melabraham.com/group/

CONNECT WITH ME:
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Transcript

Mel Abraham  0:00  
What accounts do you need to have as you're building your wealth and on your path to financial freedom? This is a question I get all the time. Where should I put my money? What are your favorite accounts melt? What are the kinds of investment accounts? Well, in this episode of the afternoon Entrepreneur Show, I'm gonna break down the six accounts that you might be looking at. And we'll walk you through the exact flow of how I would fund those accounts, and how you can start to build your path to financial freedom. So I'll see you in the episode. Welcome to the affluent entrepreneurship. This is the Affluent Entrepreneur Show for entrepreneurs that want to operate at a high level and achieve financial liberation. I'm your host, Mel Abraham, and I'll be sharing with you what it takes to create success beyond wealth. So you can have a richer, more fulfilling lifestyle. In this show, you'll learn how business and money intersect. So you can scale your business, scale your money, and scale your life, while creating a deeper impact and living with complete freedom. Because that's what it really means to be an affluent entrepreneur.

Mel Abraham  1:05  
Welcome this episode, the Affluent Entrepreneur Show this one, we're going to talk about what to do with your money. Where do you put it? Maybe we got banks failing, we've got, you know, takeovers, and selling of banks, and you're going, is my money safe? Well, let's just talk about it. Because here's the thing, most people will come to me and they they'll say, I don't I don't know, what do I just put it in a savings account? Or should I use an IRA? Or should I use a 401k? Why do I do with all these things? It's the thing that I call the account jumble. We're going to answer that question. In this episode, we're going to talk about where you should put your money first, how do you allocate it? What are the different accounts and we'll walk you through six accounts that you might consider on your path to financial freedom. And there are six accounts that I consider many of them, I use some of them, I don't I'll explain exactly why I don't use them. But in the first place, I want to just start to talk about what do you do with your next dollar? This is something that we talk about. In the affluence blueprint, it's called the wealth priority letter, it's core to how we allocate our money as it's coming in. Listen, here's the thing. Wealth Creation is a behavior, it is not about money, it is a behavior. It's about your habits, your decisions, your choices that you make with your money, as as you move through it, there is there are statistics out there that show that most of the people that are millionaires, 80%, almost 80% are, you know, first generation millionaires, meaning that, that they made it they didn't inherit it, they didn't get it gifted? They didn't. They didn't win it in the lottery. They created it. And, and so how do they create it? Well, it's, it's through this process is through, they have a process and a system to follow where they know, when the dollars come in, they make investing a priority. Okay. And based on that priority, if they do that do certain things. It's behavioral, it's habits, they can build well, and you can too, the same study talked about, talked about the fact that the majority of the millionaires that were studying there was 10,000, millionaires studied. Debt never made more than $150,000 a year, so. So you're talking about something where you don't have to make big sums of money to become a millionaire, you just have to do the right things with your money at the right time in the right way, we're going to walk through some of that we're going to talk about the account. So here's the deal, I'm going to jump to my iPad, because I want to walk you through the wealth priority ladder, I did it in another episode in more detail. I'll make sure that we hook it up in the show notes here. But at the same time, I'm going to walk you through kind of quickly what it is and how how we look at what do you do with your next dollar. And there's a graphic associated with I'm going to jump to the iPad. If you're listening and you're not watching totally fine, we'll make sure you can get access to the graphic in the show notes. But at the same time, I want to make sure that you could always go to my YouTube channel and make sure that you watch the video so you can see me build the graphic for you. So let's jump to it. Let's talk about the world priority ladder and make it happen. So one of the first things I want people to do is this. I want them to be in a position where they they are not going to have to dig a hole if something unexpected comes up. There's statistics out there that show that people are not prepared to pay a an unexpected expense of four $600. Meaning that meaning that they don't have the money to cover that expense, meaning that they ultimately have to go into debt, put it on a credit card, borrow from a friend borrow from family or or let some other bills go so they can take care of this emergency expense, this unexpected expense. I don't want that to happen. So the very first thing that we do in the wealth priority letters, is what we call the comfort And this is going to give you comfort that if something unexpected happens, nothing is going to derail you. And and the way we look at it is I want you to have a minimum of $1,500 or one month's expenses in that account, okay? This would be able to cover most things, transmission goes out something like that you have a medical case medical thing, and you have to pay a deductible, you have damage on the home, and you got to pay a deductible, it should cover most of those things in and what it's meant to do. It's not, it's not an emergency fund, it's not anything like that it is simply to give you some breathing room, so you don't choke is something unexpected comes up. The second thing that we do is, is we get to phase two in this and phase two, we start to look at both, what we call a peace of mind fund, which is other people will call it emergency fund. I like it as a peace of mind fund because it's telling you that I just want to give you peace of mind. You're good, you're good, okay. And we attack consumer debt, we attacked the destructive debt. So these two pieces are the next phase. So when I talk about destructive debt, I am not one of those people that believe that all debt is the devil. All right, there is productive debt and there is destructive debt. Now, I know that some people will, will argue with me about this, but I'm okay. Because if you use that smart, and you don't over leverage yourself, good Deb dis productive debt will help you increase your cash flows or increase your net worth. If it is not increasing your cash flows, or not increasing your net worth, then it is destructive debt, it's typically for consumables is to buy the big screen TVs is to buy the technology, the luxury vehicles is to buy all those things that are lifestyle stop. But they don't increase your net worth. And they don't increase your cash flow. Therefore it's destructive debt. Typically, I want to avoid that. And if you have any of that, I want you to get rid of it, I want you to to get it paid down, I want you to be on a debt payment plan to make that that happen. If you are carrying balances, right now, with credit cards, let's face it, we're in a rising interest rate market, those payments are going to get more and more expensive, because credit card payments, interest rates are going into the 20s and close to 30%. You know, at some point, it's going to take you decades to try and get this thing paid off. And then you're going to pay the when you add up all the interest, you know, 810 times whatever you originally the original purchase prices. So I want you to get rid of destructive debt. Okay, so the next dollars and go to get rid of destructive debt. But here's another thing that I depart from the normal commentary around this is there are those out there that say you got to get rid of all your debt before you start investing. I don't believe that's the case. I think that your debt management muscle is a different muscle group than your wealth creation muscle. And if wealth creation is built on habits, so as debt management, and so habits and muscles need to be developed over time, I want you to develop your wealth creation muscle at the same time, that means that what I'm going to do if you don't have an emergency fund, if you don't have a peace of mind fund in place, then what I'm going to do is I'm going to take whatever dollars I have, and I'm going to split it, I'm literally going to take care of the peace of mind or emergency fund. At the same time, I'm going to try and take care of my destructive or consumer debt. Now I get it, that means that the debt is going to hang around longer. But it also means that you get in the investing savings habit quicker and sooner. And so this is the thing that that we want to do. At the beginning, what I'll tell people to do it depends on your your nature, you may split it 5050 If I have 1000 extra dollars at the end of the month 500 goes towards debt 500 goes towards my peace of mind fund. And and if you're more aggressive, you may say I'm willing to put more towards the debt, you'll put 700 to the debt and 300 to the peace of mind fund or vice versa. Those things are going to be personal choices because here's the thing I know about debt, no matter whether it's destructive, or productive. All debt has seen care to two characteristics no matter whether it's destructive or productive, all debt costs. There's an interest charge to it. 

Mel Abraham  9:51  
So all that costs no matter what the purpose of the debt is and all dead stresses. It stresses psychology and it's Stress is financially, so doesn't matter productive or destructive debt, it's going to stress and it's going to cost. So in some senses at some point, I want you to completely debt free. And I certainly want you out of consumer destructive debt into it now. So if we get you on a debt payment plan, you know that you're paying down the debt, and you systematically do that, and then the rest will go towards the peace of mind fun. If you want to get on a debt payment plan and you're unsure about what to do, I want you to go to Mel abraham.com, forward slash, no debt. There is a free training a free tool, a free downloadable template that you can put all your debt in all your payments and and you can sit back and look at do I want to do this on a snowball method? Or do I want to do it on an Avalanche method, one will reduce the total amount of interest. And the other one will get you paying off the smaller balances. First, it's a choice that you want to make, okay? And then you don't want to stick to the choice. But if you need help with it, go to there. There's some training there. And you get the tool, totally free, Mel abraham.com forward slash no debt, we'll put it in the show notes to make that happen. Now, let's talk about this peace of mind fund or the emergency fund is others we'll call it, some people will say three to six months. For years, I've been saying three to six months is not enough. The pandemic prove me right. Even Mark Cuban started talking God, we need more than three to six months in an emergency. Yeah, I think that you need nine to 18 months, especially if you're an entrepreneur, especially if you're the sole breadwinner of your family. Now, you might see that's a lot, I get it. And then you're going to hear a whole bunch of people say but now if I'm just putting that money aside, I'm losing money to inflation, there are certain dollars that are meant to create wealth, there are certain dollars that are meant to create liquidity and there are certain dollars to give you a peace, some peace of mind. Every dollar has a job description. And we just got to know what it's meant to do. Not every dollar is meant to grow your wealth. And this the peace of mind fund is meant to give you peace of mind, give you liquidity and make sure that you're safe. And and in good shape as something goes wrong. So we say nine to 18 months, average call it 12 months. But I want you to start building that up now. So you're going to take the money, you're going to pay off your destructive debt, while you're building the peace of mind fund when you get the peace of mind fund fully funded. Now you or you get the debt fully paid off, you can go to the next piece, the next phase, which is really about your freedom fund. This is where you start investing, I want 20 to 25% of your income, your household income 20 to 25% of that household income going to investing now you may not know what the investments are right now. So at the very beginning, all you're gonna do, all you're gonna do at the very beginning, is put it in a high yield cash account, we'll talk about those when we get to the accounts, okay? You'll put it into a high yield cash account, just park it there temporarily until you decide where it's really going to go. But I want it out of sight out of mind. Next, you're going to, you're going to when I know that I'm putting 20 to 25% of my income away, and I'm fully funding that, then I can turn around and look at my my mortgage and say should I accelerate the payments on my mortgage, and now do it. I wouldn't accelerate it until I know that I am fully funding my investments. And at that rate, and then the next piece would be college. Now I have a very, very unique perspective, not very unique, but a different perspective on college. Here's thing, I don't think that you have a responsibility to put your kids through college. I know that's going to rub people the wrong way. It's a desire, I get it. It's a good desire, I get it. I did for my son, okay? However, if it's going to cost you your financial future, then you don't do it. Because the best gift you can give your children is to make sure that you aren't knocking on their door at 60 years old saying I ain't got nothing because I paid for your college so I need to sleep on your couch, okay, or that they watch you on welfare or they watch you on government assistance. So what we know is this, your financial future is coming. We want to take care of that first. Once we know that that is funding and everything is taken care of there then we can look at paying for college, but we don't forsake your financial future which we know is a certainty to pay for their college because that's an uncertainty. We don't know if your kids are going to go to college. We don't know if they're going to finish college. There's other ways to pay for college they can get they can get grants, they can get scholarships, they can do work programs, they can do all kinds of things to pay for college. But when you get to your financial future to your retirement, you don't have access to other things. So I want to take care of that first. Hopefully that makes sense. And then the last stage of the wealth priority ladder is affluence. This is where you're living out your affluence vision. This is where, where you are giving generously, and you're creating a generational machine, a financial machine that is going to create legacy for you. Well, beyond your time here, Robert, this is the wealth priority letter. This is the process we go through I did it quickly, we go into much more detail on the athletes blueprint and why I'm working with my elite clients and everything like that. But I want you to get a perspective of where your next dollar goes, before we start to talk about well, what accounts should we use. So let's transition, let's look at the accounts we should use. And how this could play out. This is something that I call the account jumble. Because there's so many accounts you're gonna go, I don't even know what's going on. We're gonna take a look at the different accounts that you can use, but we're gonna look at it through two, three different sets of eyes, three different filters, the first is to look at and say, Is it liquid? Can I get access to the money? Okay. The second is, are there tax benefits? And the third is, what are the risks associated? Now those risks can be risks of investments, but it also could be risk of is there any insurance on the money, just like we saw with some of the banking stuff that goes on? So I'm going to primarily talk about six accounts that you may have in your stable of accounts, you may use all six, you may use some of the six? I'll tell you the ones that I use? And why I'll tell you the ones that I don't use, and why not? And we'll tell you we'll walk through, are they liquid other tax benefits? And is there and what's the risk exposure there, and then we'll walk through how your money should flow into those accounts. All right. So let's jump in. So the first account that we're going to talk about is something that we all are used to checking your savings account, this is your traditional bank checking or savings account. It is liquid, we can we can get at the money, I'm writing checks on it every day, I'm pulling money out every day I saw it, so I have no problems getting getting at the money. Okay, so it's fully liquid, there are no tax benefits, you're just putting money in, you don't get a tax deduction for the money going in, you don't get any benefits taking it out. If you make any kind of interest on a savings account is going to be very little you're going to you're going to pay tax on that there's no tax advantage to these these accounts. Typically, there's very low risk with these accounts. Most of that most of the the banks and credit unions are insured up to $250,000, there's some things you can do to magnify that insurance to 500 or 750,000. And there are some banks that we'll talk about in a moment that you can get as much as $3 million of insurance on your deposits. So if the bank goes under, just like what we recently experienced, your money isn't at risk, okay, your deposits aren't at risk, okay? So that's the first type of account. It's something that many of us are used to many of us use, we use it in our business, and we use in our personal lives, okay. So I'm betting you have that item, then the second account, the second type of account, is what we call CD or money market accounts. These are accounts typically with credit unions and banks again, where if you want to get a higher return on the money, then you go into a CD or you go into a money market account. It's liquid, but there are limits, because in order to get the higher return on the investment to order to get the the higher interest rate, they're going to lock you in to a term. So you're going to be in a six month CD or a one year CD, so you can get a higher interest rate than their savings account. 

Mel Abraham  19:22 
So it's liquid, but there's limits. That means that if you want to take out the money before the term is up, you're going to pay penalty. Right? In fact, I just recently did that on an account, but I was willing to pay the penalty because I could get a better return somewhere else that would have paid the penalty back and more within the first six weeks. So it didn't make sense to leave it there locked up. But CDs and money markets a lot of people will put them in there because they know it's safe. They falls under the guarantee. And it's not volatile with the stock market. And it's easy. It's If and I know that if they say I'm getting 2% 1% 4%, that's what I'm getting, I can depend on it, I can bank on it, if you will. All right, there are typically no tax benefits to this, you don't get a deduction going in, you don't get any benefits coming out the interest you earn, you're gonna pay tax on. Okay? Very low risk, very low risk. Now, the next account, and this is an account that I'm going to tell you how we use it, and how I want you to consider it is something called a high yield cash account. These are cat, these are accounts that have come into play with the whole robo advisor, online banking, they don't have the overhead of some other banks. And you can get four to four and a half percent on these accounts right now, by putting your money in there. Now here's the key, there are some things that I want to make sure exist, if you're going to use a high yield cash account. One, it must be 100%. Liquid. In other words, when you need the money, you can get the money, within 24 hours, I can login online, have it transferred to my checking account, and no I have access to it. So it has to be 100% liquid. Number two, it needs to be 100% in shirt, that means that I don't put money at risk, it means that my deposits are insured, if the bank goes under I am taken care of I am good. And three, there can be no fees. I'm putting money in your in your bank, you're not charging me to hold my money. That's just not the way it's gonna go. So, so insured, no fees 100% liquid, here's why I think this is a cool, cool account. One, it is liquid, there are no tax benefits typically to it. And it's low when you get into insured account. Now, here's how I use this, I use this account a couple of different ways. And I have multiple ones of these accounts. And we're getting four to 4.3 to 4.5% on it fully insured. If you want to know where to find good high yield cash accounts on once you'd go to bank rate.com. And check out their list of them and look at the ones that have long term or a long term record. And that they're paying their their interest rates on an ongoing basis, because some of them will give you teaser rates, they'll pay it for six months, they'll pay for three months, I'll pay for the first 5000 Don't get in that teaser stuff because now you're bouncing money around you just what's your rate, and it's going to be an every month now, these rates on how UCaaS counts will go up and down depending on what's going on with interest rates. But the good news about interest rates rising is these counselor paying more than there are so what I do is this is where I have my peace of mind fund. This is where I park my my money that I don't want in the market, it's this is my short term money that I know I'm going to need whether it's for a down payment for a house or, or it's for improvements, it's money that I'm going to use in the next three to five years that I don't want to put in the market or in investments, lock it up or put it into a volatile situation. So I know I'm gonna get 4.3%. And I'm good. And I just leave it there. So I park my money there that is related to my safety, which is my emergency fund or peace of mind fund, my sinking funds of other things that I'm doing weddings, that kind of stuff. Also, My Tax Account is there. So I just move it out of out of sight out of mind, but My Tax Account is there, it's safe. And it's really something I will park temporary money there that is waiting to be invested. So I may have $100,000. In fact, in fact, I'm sitting on on a couple $100,000 that's waiting to be invested through my defined benefit plan. But it's sitting in a high yield cash account for a moment until I find the opportunity and the right investment to put it in. So I use this as a temporary account. Point being is this I use the high yield cash account as much as possible to maximize the returns that I that I'm getting all my cash that's sitting there and not fully invested. Okay. I think it's something that you all should be looking at. Be smart about it, you link the account so you can move the money. Like if I need money out of that account, I just jump online and I have it transferred within 24 hours, it's in my bank account, I can write a check off of it. It is insured that account my my account right now is insured up to $3 million because of the structure of the bank. So I'm fully insured, I'm fully liquid and there are no fees and I get a higher return. That's what I want you to use these things for moving forward. That moves us to this next level of account. These are your 401 K's four, three B's 457 B's IRAs. These are the tax. These are the typical Retirement accounts that you see in there, there, they give you tax. So they give you tax benefits, we'll talk about the different versions of tax benefits, but you have no liquid assets, it's a one way system for a period of time, once the money goes in, you don't get it out without penalty. Because they're giving you a tax bit of an asset, if we're going to give you a tax benefit, then you need to leave it in there. These are your retirement counselor long term money, it's long term accounts, that you're going to put it put in there. So we'll talk about how that plays out and what you want to do in there. But think about this, your IRAs, currently, you can contribute $6,500, or $7,500. If you're over 50, whether it's a Roth IRA, or a traditional IRA, you can get at the money without penalty until you're age 59 and a half. And there are limits to the Roth you cannot you cannot contribute to a Roth if your incomes too high. It's like 153,000, for someone that single and 228,000 for a married couple. So if your incomes are high income, then you don't have access to the Roth, which is which is fine. Okay, I didn't have access to a Roth, I have no Roth money, because one It wasn't in play when I was doing a lot of my investing and growing and to my income was too high to qualify, so I couldn't use it. And I didn't use a backdoor, we can talk about that another another time, because I have some some elements of my investments, that disqualified, disqualified me from doing a backdoor Roth. So you can do the IRA account at 60 507 500, depending on on your age, you can do the 401 K 401 K right now is 22,500, if you're under 50, if you're over 50, you can go up to $30,000 a year. And that's not including the if you're a company has a match, okay? If your company has a match, now, your Roth, depending on how its structured, you can put your money in and make it a traditional, I mean, your 401k you can put your money in, make it a traditional tax deduction, so you don't pay taxes on the money, you get a tax deduction for it. But you pay taxes when you take it out later. Or if they have the provision, you can put your money in like a ra. And when you take the money out down the road, there is no tax on it. So those are those are there. And when you do a Roth through a 401k, you don't have the income limitations that you would otherwise have. So this is where I would start to play is is look at your your Roth, your IRA, your 401 K, if your government or institutional employees for 403 B or 457. Beast in there to look at that now here's the deal. It's not liquid, you can get at it. Okay? You have tax benefits, you know, if it's traditional, you get a tax deduction. Now you pay tax later, if it's Roth, like, you don't get a tax deduction today, but you don't pay taxes down. Okay? If your tax rate is less than 30%, if your tax rates less than 30%, because some people will say, Well, what should I do traditional Roth, if your tax rates less than 30%, my thinking is that you're probably better off going into a Roth, because the tax benefit of getting the deduction will be outweighed by the growth and the tax free withdrawal down the road. So if your tax rate is above 30%, then you're probably going to look at more of a traditional approach take the tax deduction today. But it really depends on your situation. And it depends on what your anticipated tax rates are going to be down the road compared to where they are today becomes a math equation. Now, are they risky. And I say here, they're low to high risk. Here's why. 

Mel Abraham  29:12
When you do a contribution to a 401 K, this is something that people will get wrong. When you make a contribution to a 401 K or an IRA Roth or otherwise, you're putting cash in there from your from your company, from your checks from your salary. And then once the money is in there, you have to make an investment choice. A lot of people think that once they put it in there, it's already invested. It's not invested until you tell it to invest in so you need to make an investment choice of what you're going to do. Now most people I tell them when you're first starting out use target date, index or ETFs, low cost index and ETF funds because it's easier. All you got to do is decide how much and you got to decide what the date is. You don't have all the Different gymnastics around. Well, what do I, you know, how much should I put in this fund or that fund. As you get more and more sophisticated, then maybe you start to pick and choose more funds in there and do it that way. But when you're first starting out, make it easy. Make it friction, frictionless. And make it make it simple. So why I say that these accounts can have risk from low to high is because it depends on how you invest it. You can invest in highly risky assets inside the account. Or you can invest in more conservative assets, low risk assets. So really depends on how you're investing it on whether it's risky or not. So you need to be aware of that. Okay. The next account, the next account is what we call the HSA Health Savings Account. Alright, I love this account. I love it. But I don't use it. And I'll tell you why. All right. A health savings account is one of the only accounts that is triple or quadruple tax advantaged. We'll talk about that in a moment. And then end, it's totally focused on medical bills. So this is a an account, where you're going to put money into it, you take a tax deduction for going into it, and you can use the money tax free to pay medical bills. Now, in order to do qualify, you have to have what's called a high deductible medical plan. That means that your deductibles are going to be $1,400 If you're single, or $2,800, if you're married filing joint, so there are high deductible plans, and they need to be HSA qualified you're if you're with a company, you can see if that is possible for you. I'll call you tell you how to use this account. And then I want to tell you why I don't use the accounts to make that happen. So here's the best way to use his account, most people will take it and they'll put money in the account. And then when they have medical bills, they'll reimburse themselves from the account and call it a here's what we do with our clients. And here's what I would do, if if it were me is that I will put money in the account, say SATCOM I can put money in right now 3850, a month a year for single 7750. For married filing joint. So let's say I put $7,700 707 50 into the account, and I have a bunch of medical bills, well, I would pay my medical bills out of my pocket. In other words, I wouldn't go to the account and reimburse myself even though I put the money in some funding the account. And I would pay the medical bills out of my pocket, and I would file the medical bills away, I would literally scan them and put them in a folder by year and everything and make sure that I keep all the medical bills. And I would invest the 7750 inside the HSA. So now that account is growing in invest it. And I do that every year. So what I'm doing is I'm using the HSA account as an investment account, and then down the road after it's grown tax free. If I need to pull the money out, I go dust off those medical bills. And I pulled the reimbursement then think think about what happens. This is why this is triple tax advantage. I take a tax deduction going in. It grows I invested in it grows tax free. Now that $7,700 might be worth $20,000, because I left it in there for a decade. Okay. Now I take $5,000 of bills that I had. And I reimburse myself from the account, the $5,000 comes out of that $20,000. So I have $15,000 left, still, but the 5000 comes back to me tax free. This is the beauty behind it. Now you have to have the cash flow to be able to fund your medical bills on an ongoing basis out of your own pocket to allow the growth to make that happen. But that's the beauty with this account, when you can make it happen. Now, after 65 It actually converts to a to a typical IRA, where you can then take the money out penalty free but you will pay the tax on it if it is not used for medical, but this is the beauty behind the HSA now, why don't I use it? If it's so good, because I have high medical bills because of my cancer journey because of where I've been I know that my medical costs are going to be high so it doesn't make sense for me to use an account like this. Now you can elect in and out of this maybe one year you're deciding you're going to have a baby. You might not want to do an HSA, you might want to do a fully funded type of situation and then once once that goes past and the baby the all the the costs To the baby and everything are are done, you might go back to the age of six. But the point being is that the way to use this account is as another investment account and a tax advantage vehicle to make that happen, because it becomes a huge tax benefit. Again, risk in this is going to be low to high because it depends on how you invest it. And if you take it out for medical, it is completely tax free. That leads me to the final the sixth account, this is your typical brokerage account. So this is going to be your Schwab, your TD Ameritrade, your fidelity, any of those counts that that you see in there. It's fully liquid. Depending on what you invested in, there are no tax advantages you're you're just putting money in. And it's low to high because it depends on what you're investing in. So, so this is the typical account that you will see, there is no tax advantage, there is no retirement plan, there are no penalties, there are no old backs, there's none of that in there. And that's the final account that that you might have. So those are the six accounts, the checking savings account, the CD and money market account is number two, high yield cash cow number 340 1k, for three b 457, IRAs, those retirement account, tranches right there, then the HSA account and then your brokerage account, those are the six accounts that you might have. So how should your money flow into it, let me walk you through this. This is the way I would have my money flow into these accounts to to work through it. So whether you're a business, or you're on salary, you're going to have money coming in. If it's a business, you'll pay yourself a salary or a tool. If you're not in business, and you're taking a salary, you're gonna get a salary, and then it carries on from there from that salary, you're going to put money into a checking account. From that checking account, you will pay living expenses from that checking account, you will pay your debt plan. Okay, you're going to be down at the bottom elements of the wealth priority ladder. From that checking account, you will pay and fund your peace of mind fund. Now once you know that those things are funded, and they're doing well, that checking account will then also start funding other sinking funds. Let's say that you have a wedding coming up or a trip or a vacation or an improvement on a home or a down payment. You want some money to be allocated to those those endeavors. So you have the money set aside when it comes time to pay for it. Instead of going into debt to do it. These things just so you know, my sinking funds would be in high yield cash account. Peace of mind fund would be in a high yield cash account. The debt payment is going straight to the debt, my living expenses going to pay expenses. Okay. And then and then whatever laughter is left, I may put in to a brokerage account, okay, just by normal Schwab or fidelity brokerage account. Now you might be going oh, what about the the 401k? No, that's it. Ah, so here's what's going to happen, you're going to take a salary. And from that salary before it ever gets to this checking account stage, you're going to actually fund your 401 k 403, B 457, or your IRA, you're going to make sure that you fund it right away. This should be automatic. Just set it on automatic and forget it, just let it keep funding the percentage of of income remember, I want you up at a 20 to 25% of your income going into these investing accounts. And then the HSA Okay, so this is the way that I would play this out with your accounts. But let's just walk through exactly the priority. I'm going to give you a checklist here the four steps to make this happen. And and in so here's here's how I would do this. The first thing is is if you are an employee in which your employer is matching your contribution to a 401k or anything like that, I want you to maximize the match get the free money from the employee or into your account. Okay, so if your employee employer is going to match the first 3% Your make sure that you're the first dollars in are going to be the 3% to maximize the match. Now, depending on your tax rate again, you and if you have availability, you can put it into the Roth side of their 401k or you can put it in the traditional side, the 401k Okay, but Max the match first, second. I want it to go towards paying your debt and your peace of mind fun. Okay? One, once I know that my peace of mind fund is completed, then I can go to investing even if I'm still working on the debt number three, if you're eligible, max out the HSA remember, married right now is 7750. But you want to leave it in there and pay your medical expenses outside of it, invest the money, let it grow tax free. And then then number four, if you have money leftover that you're trying to fund or trying to get to that 20 25%, then you're going to put it into the British Council, this is the pecking order the order that I would do this in to make that happen. All right, so this is the account flow sequencing, this is the way we do it, swear Do it with my clients, and and make it happen from there. So I hope that this helps, I hope that you start to go and say wait a second, I now know from the wealth priority ladder, what I do with my next dough, I now know from the account jumble and the account flow where I should put it and and continue from there. Because now you can then start to build. And remember, wealth creation is more about behaviors, habits and decisions that you're making. And so if we can build this into a process, so it becomes a behavior and a habit, and then you automate as much of it as possible. In fact, almost all of it should be automated. So you don't have to think about it. There's no effort, it just happens in the background, you make money, it goes to the 401k. It goes even my bills on auto pay, it pays my bills it moves into pays my debts down, it pays my into into the peace of mind fund or it goes into the brokerage fund, it's fully invested, and it keeps going. And now what's happening is you get this money and momentum because things are happening without your effort. Without your thinking. We'll always check on it, we will always verify that we're doing the right things. You know, I have my clients checking, checking their numbers, at least quarterly and sometimes monthly, depending on how much they have, and the complexity that they're working with. But this is the key to making this happen in your life. So this is your pathway with your cash, and with your accounts. How you can make sure that you maximize your returns. You build the path to financial freedom, and you do it in a safe and proper way. I hope that you found this a value. If you have questions if you have things that come up, do me a favor, reach out to me go to ask Mel now.com Let me know. We'll bring it on the show. We'll make sure that we get it answered. I want to make sure that you're supported on your financial journey. This isn't about me selling you investments or insurance or anything like this. It's about me, selling you on a bigger dream and your financial freedom which by believes is your birth till we get a chance to see each other or talk on the road or on another episode. As I always say always, always strive to live a life that lives you see in the next episode. Cheers. Thank you for listening to the affluent entrepreneur show with me your host Mel Abraham. If you want to achieve financial liberation to create an affluent lifestyle, join me in the Affluent Entrepreneur Facebook group now by going to melabraham.com/group and I'll see you there.