At the Intersection of Macroeconomics and Personal Finance Part 4: From Paycheck to Portfolio
In this series we’ve discussed the degradation of your purchasing power via inflation, the credit-debt cycle and the emergence of digital assets like Bitcoin which challenge the traditional financial model. In this article we will discuss the means and tools we can use to start positioning ourselves to build wealth and achieve financial freedom.
Despite your thoughts on capitalism as an ethical economic model, it’s the model that we currently live in, at least in the western democratized world. I am certainly interested in philosophical and ethical economic theory and perhaps will write about this later and engage in a discourse regarding what model suits the human condition best. However, this is the model in which I (and presumably, you) live and since I alone hold neither the power of the pen nor the sword to change things, I humbly present the lessons I’ve learned regarding wealth building with the ultimate goal of being financially free.
What I am presenting here is strictly what I use personally, and what has worked for me since beginning this journey.
Vehicles for saving and investing
Physical Assets – art, precious metals, real estate. This vehicle is typically accessible to those with outstanding capital reserves already and can be obtained through the appropriate markets. I.e. art dealers, gold brokers and real estate brokers. Although with the meteoric rise of real estate prices, platforms such as Fundrise allow for investors to take advantage of crowdfunded real estate projects that offer investors exposure to property value appreciations without having the necessary capital or taking out steep loans to get ahold of.
Certificates of Deposit and High Yield Savings Accounts – These are entry level savings vehicles offered mostly by whatever bank you have an account with. They typically promise a certain percentage appreciation over a certain amount of time. The returns are modest, but they are relatively low risk given the bank remains solvent for the duration of your savings obligation. These funds are locked up, which means they aren’t easily accessibly for withdrawals until the end of the term.
401k with company match – This is one of the most common investment vehicles available to most people with a full-time job. Even McDonalds offers 401k to employees with a 6% match! I currently contribute 15% of my paycheck straight into this account with allocations to index funds at a varying degree of risk tolerances. My company matches my contributions at 3% which can add up over time. It’s pre-tax money which lowers your income tax liability every year. However, once you qualify and start withdrawing these funds, they are considered taxable income by the IRS.
Individual Retirement Account (IRA) – This is another “pre-tax” vehicle that lowers your overall income tax liability every year. The current contribution limit is $7,000 meaning after contributing to your 401k or other employer sponsored retirement fund you can “write off” an additional $7,000 when you contribute the maximum amount to your IRA. This can be useful for individuals or families that exceed a tax bracket threshold in which their tax liability increases. These funds, like the 401k are taxed once you start to withdraw them. These accounts can typically be opened with your bank or brokerage firms like Fidelity or Charles Schwab.
Roth IRA – Similar to an IRA, but the money contributed to this type of account is post tax money, meaning you cannot claim contributions as write-offs for your annual tax filing. The advantage to this type of account is that when you eventually withdraw these funds after your 591/2 birthday, they are tax exempt and are not to be considered taxable income. Like the IRA these accounts can be opened with your bank or with brokerage firms like Fidelity and Charles Schwab.
Personally managed brokerage accounts – These are accounts you can open and manage personally from your computer or smartphone. There are dozens of options out there for which platform you want to use. I personally use TD Ameritrade by Charles Schwab. As I mentioned in the overview article, At the Intersection of Macroeconomics and Personal Finance, my journey began using Robinhood. There are also platforms like Acorns and Stash which take advantage of automated investing and round-ups (rounding change from purchases up to the dollar amount into your account). When utilizing these platforms as a beginner, I strongly recommend purchasing Exchange Traded Funds (ETF) which limits risk compared to buying a single stock like Apple (AAPL) for example. An ETF can be conceptually described as a basket of stocks with varying allocations to individual publicly traded companies. A few popular ETFs that I invest in are SPY which tracks the S&P 500 and QQQ (NASDAQ). Personal brokerage accounts also include centralized crypto exchanges such as Coinbase, which I use as my crypto on-ramp which I’ll discuss in more detail below.
Cryptocurrencies – As I wrote about in the last part of this series The Case for Bitcoin and Cryptocurrencies, crypto is now an institutionally accepted investment vehicle. Bitcoin, Ethereum, Solana and XRP spot ETFs are becoming approved by the Securities and Exchange Commission (SEC) and rapidly becoming more available to the broader market. You can even allocate your 401k contributions to Bitcoin ETFs which track the price of Bitcoin now. As I briefly mentioned before, I use Coinbase as my crypto on-ramp. An on-ramp simply refers to an exchange in which you can trade dollars or other fiat currency for crypto. There are also decentralized exchanges (DEXs) like Mexc , OKX, Uniswap, and dozens of others. Although most DEXs are not available in the United States due to their decentralized nature and non-conformity to IRS tax requirements. (Learn what a VPN is and how to use it!) These exchanges provide you with a digital wallet which is what keeps track of your holdings. From these exchanges you can send your assets to a “cold storage wallet” device such as a Ledger. I use a Ledger Nano-X which is similar in appearance to a USB device. If you are considering delving into crypto, I cannot strongly enough recommend a cold storage wallet which is not connected to the network. This protects you from hacks and exchange failures such as the recent FTX collapse due to fraud by the CEO, Sam Bankman-Fried. Centralized exchanges are also subject to national laws and tax policy enforcement, which at the philosophical level is antithetical to the crypto thesis. The whole point is to maintain control of your assets on a wallet not connected to an exchange where it is subject to government or centralized exchange interference. Crypto wallets are encrypted and can be unlocked with a seed phrase which is nothing more than a collection of words that have to be input in a certain order to unlock access to the assets. The seed phrase is your key, and without the key the assets cannot be accessed or moved. Lose your keys, lose your cheese.
In this article I’ve written a brief overview of the difference savings and investment vehicles that I use personally. This is not by any stretch an exhaustive list of what is available. It's also important to keep in mind the goal of investing is to protect your buying power and build wealth by outpacing inflation and establishing capital reserves to withstand the credit-debt cycle. As with any financial decision, consult with a financial advisor and do your due diligence regarding any potential investment. Below I will detail the platforms I am currently using with links to establish accounts and offer rewards for both of us.
Thanks for reading and I wish you all happiness, health and wealth.
Charles Schwab (TD Ameritrade) – This has been my go-to investing platform for several years now. It’s recommended for investors and stock traders with intermediate to advanced experience. I like the platform for the tools it offers for technical chart analysis and research resources.
Coinbase – entry level centralized exchange useful for buying crypto using market orders. It’s an appropriate and well-established centralized exchange for beginners to the crypto market.
Coinbase Advanced – Advanced platform with Coinbase that offers a little extra in terms of charts and tools for technical analysis and research. There are also API integrations for AI agents and other functions which is pretty cool to play with. I would recommend Coinbase Advanced to those with an intermediate to advanced level of experience with crypto trading.
Robinhood – The first personal brokerage account I started. This is a great platform for the beginner to intermediate experience level individuals looking to invest in stocks and ETFs. Robinhood also offers access to select cryptocurrencies such as BTC, LTC, ETH, SOL and others
Acorns – Probably one of my favorite savings platforms. It’s perfect for beginners or people that want to put their saving and investing habits on autopilot. I have $10 per week withdrawn from my checking account into Acorns and the investing is done for you based on questions you answer at sign up regarding time horizon and risk tolerance. It also leverages round-ups which is another way to maximize your savings on autopilot. I can’t recommend this platform enough.
Ledger – If you’re going to start investing in crypto and you plan on holding your assets in a safe, secure and encrypted way, then you absolutely need a cold storage wallet. I use a Ledger Nano-X with integrations to the Ledger Live app for your computer and smartphone. The app keeps track of your balances without having to be connected to your wallet so you can see the value of your assets at any time. However, in order to send or receive crypto assets you will need to connect your Ledger wallet to your computer via USB or to your phone via Bluetooth. The cool thing about this device is as long as you have your keys written down and stored in a secure place or memorized, the assets are yours and only yours. Imagine transferring all of your net-worth into BTC and being able to go anywhere in the world without having to rely on a bank to move your money for you.
