How to Invest Your Money

So you’re feeling ready to do something… more with your money, but you’re not quite sure what that means or where to start. Before actually investing you want to start by asking yourself some questions and then I will lay out a sample savings order of operations and talk about various places to put your money based on your goals and the answers to the questions.

Questions to ask yourself when you’re ready to invest

Let’s start off with the quiz! When considering investing, it’s helpful to ask yourself several questions:

  1. Do I have money set aside for emergencies? If so, how much?
  2. Have I ever invested before? If so, how comfortable do I feel with investing?
  3. How experienced do I feel about investing in stock or bond index funds or individual stocks?
  4. Do I have a particular purpose for this money? It’s okay if the answer to this is no!
    1. If so, in how many years will I need this particular money?
      1. 1-3 years?
      2. 5-10 years?
      3. 10+ years?
  5. Over what time period will I withdraw this money?
    1. All at once, such as to buy a new car or house?
    2. Over 2-5 years, such as to fund an education goal?
    3. Over many years, such as for retirement?
  6. How important is it to have a precise amount of money for this goal on a specific timeline?
    1. If my money loses any amount of value, then I won’t be able to meet this goal.
    2. My timeline and goal amount are flexible.
  7. How important is it to align my investments toward impact in ESG issues (environmental, social, governance)? If this isn’t a priority, then a simple portfolio of index funds/ETFs is great.
Jamie's hands on a keyboard

Your 1st Investment Step: Your Cash Reserve

The first foundation of financial planning is a cash reserve. No matter your income level.

If you add up the money in all of your checking and savings accounts, how much is that in dollars? How many months of expenses does that represent? What dollar amount or number of months of expenses helps you sleep at night?

Typically, we recommend keeping 1-2 months of expenses in your checking account in order to timely pay your bills and between 3-6 months of expenses in your emergency fund or up to 12 months, depending on your preference. How do you decide how much cash reserve makes sense to you?

  • 3 months might be a fit for a dual-income household where both partners earn similar incomes, you live below your means and you rent, rather than own, your primary residence.
  • 4.5 months might be a fit for a dual-income couple with differing incomes.
  • 6 months might be a fit for a single-income household, a couple where one partner earns more than 75% of the household income, and/or when you own your home.
  • If you spend some of your Restricted Stock Unit vests (RSUs), let’s set aside an additional buffer for those too, to tide you over between vests.
  • If you have more than 12 months in cash, that probably means that you are leaving opportunities on the table.

Where should you keep your cash reserve? It should not be kept in your regular bank or credit union account earning 0.01% interest, rather in an online, high-interest savings account where current rates (as of mid-March 2024) are around 4-5%. Examples include:

Savings Order of Operations

The most common question I get is where to start in balancing multiple savings goals. If you’ve read through the first section already, you have probably already finished the first two steps:

  1. Build up the 1-month buffer in your checking account.
  2. Build your emergency fund in an online savings account.

After the first two items, we sort based on the expected return on an investment.

  1. Contribute to an employer retirement plan such as a 401(k) or a 403(b) enough to get the full employer match. (This likely has a 50-100% return on your investment.)
  2. Contribute the maximum to a Health Savings Account (HSA), if a high deductible health insurance plan makes sense for you. (This provides federal income tax savings, plus Social Security and Medicare taxes.)
    • If cash flow allows, consider letting your HSA funds grow for the long term.
    • If you spend from the account, keep one year’s out-of-pocket maximum in cash and invest the rest. Be sure to keep your receipts!
  3. If your household income is over $250,000 (in 2024, middle of the 24% federal income tax bracket if you are married and file your taxes jointly or early in the 32% federal income tax bracket if you are single), then maximize your 401(k) pre-tax.
    • Review your employer 401(k) documentation – do you need to contribute every paycheck enough to get the match?

After this, we look at your goals. Do you have known/unknown short or medium-term goals such as a new car, a new house, a big vacation, or undergraduate or graduate school? Do you have debt?

  1. Make a list of all of your debts and sort them in several ways:
    • From highest interest to lowest
    • From smallest balance to largest
    • From most annoying/stressful/anxiety-inducing to the least
    • Prioritize paying off anything that is 7% or higher and/or stressing you out.
  2. For each of your short-term goals, how much do you need to set aside each month to reach them?
    • For example, if you want to spend $20,000 on a new car in 4 years and you don’t want to take on a car loan, then you would need to set aside $5,000/year or ~$417/month, ignoring any interest that you might see. Some people recommend after paying off your car, to continue making a car payment to yourself instead, so that you are ready when it is time to buy the next one!

Where to put your money for your goals

In general, the savings vehicle to use depends on the timeline for your goal and there are also some special accounts available.

If you will need this money for your goal in the next 1-3 years, then open up an additional high-interest savings account, label it for your goal, and set up automatic or regular contributions.

If you will need this money for your goal in the next 5-10 years and it is a bit flexible/not known precisely, then invest in a taxable brokerage account in a balanced mix of stocks and bonds.

If you don’t need this money for at least 10 years, that’s when we start to have more options.

Are you investing this money for education?

A 529 can be a great option. If your state plan does offer a tax benefit, let’s start with that plan, but otherwise, Utah’s my529 plan may be a wonderful option, depending on your circumstances.

Pros of 529 plans

  • Funds grow tax-free and if you withdraw them for qualified education expenses, withdrawals are tax-free.
  • Your state may offer a tax benefit, though Washington state does not.
  • Friends and family members can gift directly to your child’s 529 plan:
  • Similar to retirement target date funds, 529 plans typically have investment options that shift automatically based on the beneficiary’s age and/or target enrollment date.


  • If the intended recipient does not have a Social Security Number, you cannot name them as a beneficiary on a 529 plan.
  • If the intended recipient might not go to college in the US, a 529 plan might not make sense. You can review the list of eligible institutions.
  • If the owner of the 529 plan might not be a resident of the US at the time the intended recipient goes to college, that can make things more complicated.
  • The intended recipient might not go to college or might not need as much money as you save in the 529 plan.
  • If you withdraw funds not for qualified education expenses, then you will owe federal income taxes on the earnings portion of the withdrawal, as well as a 10% federal penalty, versus had you invested the money in a taxable brokerage account instead, the funds might be eligible for long-term capital gains tax rates.


  • If you contribute at most $18,000 (2024) per beneficiary from each parent to a 529 plan, then you don’t have to file gift tax forms. You can contribute up to 5x this limit per child per adult in one year, using 5 years worth of the gift tax limit. It’s called super funding and does require filing a gift tax return to take advantage of this provision. Your tax professional can likely assist you with this process.
  • Qualified education expenses include tuition and mandatory fees, books, supplies, and required equipment, room and board, computers, educational software, and internet access.
  • There are options to change the beneficiary on the plan if the intended beneficiary does not use all of their allocated funds or to transfer at most $35,000 to the beneficiary’s Roth IRA over time, given some limitations.
  • To not overfund a 529 plan, consider targeting contributing less than the amount you plan to cover and save for the rest in a taxable brokerage account. For example, you could target saving at most 75% of your overall goal in a 529 plan and saving the rest elsewhere.
  • Please be on track with your retirement savings prior to setting aside money for your children’s education.
  • As your kids get older, have honest conversations with them about how much different colleges cost and how much you can pay.
  • If you live in a state that doesn’t provide a tax benefit to opening a 529, the main benefit of a 529 is tax-free growth, which makes starting a 529 less valuable once your child is in high school, so an online savings account is an option to consider as well.

Are you investing this money to be used after age 59 ½?

If you are investing this money with the intention to use it in “traditional retirement” after age 59 ½, then you may have access to a variety of options depending on your employer.

Alphabet soup account types you might have access to include:

  • 401(a)
  • 401(k) – generally from private employers
  • 403(b) – generally from public employers
  • 457(b) – generally from government employees of various locales
  • IRA – Individual Retirement Arrangement
    • SIMPLE IRA – generally smaller employers
    • SEP IRA – generally small businesses including only owners, only the employer can contribute
  • TSP – Thrift Savings Plan, which is for federal employees and similar to a 401(k)

Flavours of contributions that might be available to you:

  • Pre-tax – you get a tax deduction today for making the contributions
  • Roth – you do not get a tax deduction today for making the contributions, but qualified withdrawals could be tax-free later
  • After-tax/Traditional after-tax – you do not get a tax deduction today for making the contributions and you will pay taxes on the earnings later when you withdraw the funds
    • If you convert after-tax contributions to Roth today, that could circumvent paying taxes on the earnings later

Are you investing this money for general mid to long-term goals?

A taxable brokerage account is a perfect account for everything else goals that are 5+ years away. Your risk tolerance and time horizon will impact the balance of investments we use in this account type.

When it comes time to withdraw funds, we will withdraw both principal and earnings from this account. Ideally, we would withdraw lots that you have held for longer than one year so that you can pay long-term capital gains tax on the earnings, which are 0%, 15%, or 20% federally, depending on your income range. You may also be subject to an additional 3.8% net investment income tax.

Final Thoughts

Investing can get complicated. At Ruby Pebble Financial Planning, we work with clients to develop their personalized savings order of operations that reflect their life goals, risk tolerance, and accounts available to them, beyond what generalized online searching can help you figure out.

Disclaimer: This article is for general information and educational purposes only and should not be considered investment, financial, legal, or tax advice. It is not a recommendation for purchase or sale of any security or investment advisory services. Please consult your own legal, financial, and other professionals to determine what may be appropriate for you. Opinions expressed are as of the date of publication, and such opinions are subject to change.