Over the past couple of weeks, I have been traveling through Portugal and have met some very nice people. And once they find out I’m a life coach, many of them have become very interested in any financial advice I can provide to help them create a brighter future. So, this inspired me to write the “Joe Brennan 6-Step Process to Financial Success” with minimal effort:
1. Get into the practice of automatically saving a minimum of 20% of everything you earn – wages, gifts, tips, whatever. The 20%+ automatic savings is important because it forces financial discipline – resulting in a greater ability to accumulate financial wealth and achieve financial freedom much sooner than would be experienced otherwise. In fact, if you have kids and get them into this practice at a very young age, then this would serve to not only benefit them, but you as well since you won’t have to worry so much about their finances, and they won’t have to rely on you as much in the years and decades to come. The earlier you start saving, the less of your overall income percentage-wise you would need to save over the years of your life. I generally recommend 20% for people who start at the age of 20 and increase it by 1% per year if they start later than age 20. So, if you start at age 24 you need to save 24%, if you start at age 31 you need to save 31%, and if you start at age 41 you need to save 41% for the rest of your life. So, the earlier you start, the less of your overall income you have to save percentage-wise over the years of your life. So, if you start at age 20, you can save 20% for the rest of your life and be in good shape financially speaking – but if you start at age 34, you’ll need to save 34% for the rest of your life. So, the earlier you start, the better. And the percentages above include any matching funds or financial incentives your employer might provide (some employers provide up to 5% or so of matching funds and such for retirement plans so be sure to always do this first – this is free money! And always choose the Roth option if you have a choice unless you are in a higher tax bracket than anticipated at retirement. You never have to pay taxes on gains for Roth accounts).
Let me provide some examples to demonstrate how investing will help you. Let’s assume you live in Mississippi, and your annual wages are $44,966 (this is the lowest average annual wage in the U.S. for 2025 and is used just as an example to show that even lower wages can grow wealth over time). A 20% savings rate would be $749 per month. Using an investment calculator such as https://www.calculator.net/investment-calculator.html shows that if you invested your money using the long-term average annual gain in the S&P500 Index of 10% per year (including dividends), then you would have:
a. $1.5M in about 42 years if you saved $187 per month (5%).
b. $1.5M in about 35.5 years if you saved $375 per month (10%).
c. $1.5M in about 29 years if you saved $749 per month (20%).
d. $1.5M in about 25 years if you saved $1,124 per month (30%).
Most investors would do much better than the above due to the fact your annual income is likely to exceed that of the Mississippi average at some point, and you will probably continue increasing the amount you save as your annual income increases. So, be sure to do this for yourself if you can.
2. Open investment accounts at an online broker to place your money in such that it earns a decent interest rate (I earn about 5% interest via my standard trading account). The reason this is important is because you don’t want to fall behind inflation when saving money. A lot of banks pay much less interest than online brokerage trading/investment accounts do. I presently use fidelity.com but have also used Ally and Robinhood in the past. All of these have $0 fees for trading/investing but Fidelity has, in addition, more options for fixed income – something some people might have interest in later in life once they’ve accumulated a considerable sum. It’s helpful having just one online broker for all of your accounts so you don’t have to go back and forth across brokers and keep track of multiple statements and tax documents. So, take some time and choose wisely. A minimum of two types of investment accounts should be opened:
a. Roth IRA Investment Account: You’ll want to max out what is put into this account every year because all gains are tax free. The downside is that any gains cannot be withdrawn until age 59.5 without being penalized – there are some exceptions to this and any contributions you provide can be withdrawn at any time without penalty. As such, this account needs to be used primarily for your long-term future. Here’s one source outlining the Roth IRA rules: https://www.investopedia.com/articles/personal-finance/081615/basics-roth-ira-contribution-rules.asp. The max contribution and income limits tend to adjust upwards every year so be sure to check every year to see what they are before making annual contributions. In addition to the Roth IRA, a 529 plan might be of interest if you want to save for your children’s education. It works like a Roth IRA, but you can withdraw at any time to support various educational expenses (k-12, college, etc.). There are a lot of sources about this. Here’s one: https://www.savingforcollege.com/intro-to-529s/name-the-top-7-benefits-of-529-plans?fbclid=IwAR3FkVxhx5oTzY_Hut1mN5-iHV2nBVp-IfzMNLPrBbf9IT-s71jSpYRqYbA.
b. Standard Trading/Investment Account: Any additional funds you have can be placed into a standard trading/investing account. These funds can be withdrawn at any time – even though it serves people best to leave it there until they reach their financial goals – but taxes have to be paid on all gains earned (a 15% tax for gains on everything held longer than a year – or a tax based on your income tax bracket for gains on anything held less than a year before selling: https://www.nerdwallet.com/article/taxes/capital-gains-tax-rates?fbclid=IwY2xjawNiC-wBHVa9mVDFCZH9jBECfhZMHyirLIueisWakRlxOQTWoeJy1Q54dmDf-YOFag).
After maximizing your employer match (see last sentence in first paragraph of step 1 above), I recommend maxing out the Roth IRA every year, and then placing any excess funds you have available into the standard account.
3. When you’re ready to start buying investments, become an expert by reviewing, understanding, and executing this structured, market-based, investment buying strategy: https://brighterdayslifecoaching.com/a-structured-market-based-buying-strategy-for-investing-well-with-minimal-effort/.
4. Become an expert on selling investments by reviewing, understanding, and executing this structured, market-based, investment selling strategy: https://brighterdayslifecoaching.com/a-structured-market-based-selling-strategy-for-investing-well-with-minimal-effort/.
5. Only pull money from your investment accounts when substantial gains are experienced and only for that which invests in your future such as a down payment for a house, educational expenses likely to lead to a higher paying job, rental properties as an investment, a new business you want for yourself, or after reaching your long-term financial freedom or retirement goal.
6. Repeat steps 1-4 for any new savings accumulated.
The above is a good process for getting your finances and investments in order. If you are in your mid-thirties or so (or even less – the younger you are, the better you will likely do over time), then this process will get you where you need to be in your life financially speaking. However, there is never a guarantee, and you might want to adjust this process over time. If you elect to take a higher risk approach, then you can earn substantial gains if you wait things out – although you might experience substantial losses in the near term. If you elect to take a lower risk approach, then you may not experience substantial losses in the near term but will probably not make as much in gains over the longer term.
The reason the above process works so well for so many people is that in the first few years of investing, the amount saved matters much more than the actual gains or losses experienced in the stock market. As such, people can just save and wait for a substantial stock market drop to invest and try out various investment options and techniques early on without it affecting their finances much. If they do, they will probably become a much more successful investor over the longer run. Once savings have been accumulated for a few years or so, then the gains and losses experienced matter increasingly more over time. For example, things become more interesting once you have $100k in savings. Using the long-term, stock market average return of 10%, $100k becomes $200k in about 7.2 years, $400k in 14.4 years, $800k in 21.6 years, and $1.6M in 28.8 years. The overall stock market rarely achieves the average return in a single year – it’s usually either much higher or much lower than its average in any one year.
February 2025 update: Investing expert Charlie Munger’s advice back in 1998 was to do whatever it takes to get to $100,000 and the rest of your investing growth will be easy over the years due to the power of compound interest (you can read about that here: https://finance.yahoo.com/news/charlie-munger-said-hardest-part-193015265.html). I wholeheartedly agree with him except $200,000 is the number you need to get to in today’s 2025 dollars. It’s very difficult getting to that number, but once you do, you’ll experience substantial growth in your investments. So, do that for yourself if you can. Because once you get to $200,000, it will only take about 21 years to grow that to $1.6M if you stay invested in a stock market that earns the long-term average of 10% per year (including dividends).
The above process is not perfect, but give it a try, make adjustments over time, and if you need help with any of this just ask.
You can learn about all of my investing techniques via my “Invest Like a Pro in 10 Minutes a Day!” series of 4 books where you can learn the “end to end” process to investing: https://brighterdayslifecoaching.com/published-books-and-life-coaching-services/.
Also, you can read all about my stock market activities here: https://brighterdayslifecoaching.com/stock-market-activities.
I wish you much investing success for 2024 (and beyond!).
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