Back to the Basics: Wealth Creation Part 2

Summary of Back to the Basics: Wealth Creation Part 2

by DIY Money

21m•January 21, 2026
Listen to Episode

Overview of Back to the Basics: Wealth Creation Part 2

This episode (DIY Money — "Back to the Basics: Wealth Creation Part 2") wraps up the series on wealth-building basics and focuses on what to do once you have excess margin: where to invest beyond emergency savings and debt repayment, how to prioritize retirement accounts, what non-retirement investment accounts do, and a simple, practical recommendation for what to put in those accounts.

Key takeaways

  • First priorities: employer 401(k) match and getting retirement contributions up to a sensible rule-of-thumb (10% is suggested).
  • If you have excess margin after emergency fund, high-interest debt, and short-term goals covered, you should invest (not park money for >5 years in a bank account).
  • Use brokerage (taxable) accounts for mid-term goals or additional long-term investing once retirement accounts are handled.
  • Roth IRA is a powerful tax tool: contributions are after-tax, grow tax-free, and qualified withdrawals are tax-free (5-year rule and age 59½ restrictions apply to growth).
  • Consider Roth options inside employer plans (Roth 401(k)) if available.
  • The simplest, low-maintenance investment choice for most investors: a target-date fund (fund-of-funds that automatically diversifies, rebalances and becomes more conservative as you near the target date).
  • Core rule: live on less than you make, invest the rest, and keep doing it for a long time.

Accounts and vehicles discussed

  • Employer-sponsored retirement accounts: 401(k), 403(b), 457 — capture employer match, choose Roth vs. traditional based on tax situation.
  • Roth IRA: after-tax contributions, tax-free growth/withdrawals (subject to the 5-year rule and age requirements), can withdraw contributions (basis) anytime without tax/penalty.
  • Brokerage (taxable) accounts: flexible, liquid investment accounts for mid-term or supplemental long‑term investing (not for goals within ~5 years).
  • Target-date mutual funds: recommended one-stop option for diversification and automatic glidepath toward bonds as retirement nears.

Rules of thumb & recommendations

  • 401(k) match: always take it.
  • Retirement savings target: aim for at least 10% of income as a starting benchmark (adjust for goals/age).
  • Investment time horizon: don’t invest money you’ll need in <5 years — use liquid cash savings/high-yield savings instead.
  • If unsure what to buy: pick a target-date fund that matches your retirement year and “set and forget” it — most now have low fees and automatic rebalancing.
  • Diversify: don’t put all your eggs in one basket (domestic vs international, equities vs bonds).

Target-date funds — why they’re recommended

  • What they are: “fund-of-funds” that hold a diversified mix (U.S., international, emerging markets, bonds, etc.) tailored toward a target retirement year.
  • Benefits:
    • Built-in diversification across asset classes and regions.
    • Automatic annual rebalancing.
    • Glidepath reduces equity exposure and increases bonds as retirement nears.
    • Many are now low-cost (comparable to index funds), making them a simple, cost-effective solution for most investors.
  • Good for investors who want a low-maintenance, single allocation strategy without picking individual stocks or sector bets.

Practical action items

  • If you haven’t already: confirm you’re getting the full employer match in your retirement plan.
  • Set or reassess retirement contribution level — consider 10% as a starting point.
  • If you have excess margin:
    • Open a Roth IRA (if eligible) and/or a brokerage account.
    • Consider putting new contributions into a target-date fund (or a few low-cost index funds/ETFs if you prefer).
  • Don’t invest short-term savings for goals <5 years — use liquid accounts.
  • Send short voice memo questions (≤60 seconds) to podcast@DIYMoney.org to be considered for the show ($25 Amazon gift card if used). Junior questions prioritized (parental permission required).

Notable quotes & simple framing

  • “The secret to wealth is pretty simple: live on less than you make. Invest the rest. And do so for a very long time.”
  • “A mutual fund basically means a basket of stocks.”
  • Target-date funds = someone on payroll who rebalances your portfolio for you.

Podcast logistics & calls to action

  • Follow DIY Money on social media and check their website/blog/newsletter for more resources and weekly posts.
  • They accept listener questions via voice memo (podcast@DIYMoney.org); $25 Amazon gift card if used on the show.
  • Junior submissions are encouraged — they get priority and require parental consent.

Disclaimer (from the episode)

This podcast is for entertainment and educational purposes only and is not personal financial advice. Do your homework and consult a financial advisor before making financial decisions.