📖 From the book: 10 Laws of Finance

How to Start Building Wealth

A practical framework for students and young professionals—do these in order, automate everything, and let time work for you.

DC
Devon Coombs, CPA, MBA
Author, 10 Laws of Finance • Finance Lecturer, SJSU
PRINCIPLE Compound Interest
⏰ Time Is Your Greatest Asset

"Compound interest is the most powerful force in the universe—but only if you give it time to work."

Starting at age 22 investing $500/month at 8% average returns:

Age 22
$2.15M
Age 32
$0.92M
Age 42
$0.38M
Starting 10 years earlier = $1.2 MILLION more
The Order of Operations
🛡️
STEP 1
Build Your Emergency Fund
3-6 months of expenses
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INSIGHT Why this matters

"Wealth without protection is just temporary possession."

Before investing a single dollar, protect yourself. Life happens—job loss, medical bills, car repairs. Without a cash cushion, you'll be forced to sell investments at the worst possible time, locking in losses.

Action
High-yield savings account (currently 4-5% APY)
Pro Tips
💡 Start with $1,000 as a 'starter' emergency fund while paying off debt
💡 Keep it separate from your checking to avoid temptation
💡 Good options: Marcus, Ally, Discover, SoFi (compare rates monthly)
✓ Can you cover 3-6 months of expenses without touching investments?
❌
STEP 2
Eliminate High-Interest Debt
Anything above 7-8%
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INSIGHT The Math of Debt

"Debt is a tool—but a dangerous one. Master it or it will master you."

Credit card debt at 20%+ is a guaranteed negative return. Paying off a 20% credit card IS a 20% guaranteed return. No investment offers that with certainty. This is the highest-return 'investment' you can make.

Action
Pay minimums on low-rate debt, attack high-rate debt aggressively
Pro Tips
💡 List all debts with interest rates—attack highest rate first (avalanche method)
💡 Or attack smallest balance first for psychological wins (snowball method)
💡 Federal student loans (5-7%) can wait—they have protections and may qualify for forgiveness
✓ Is all debt above 7-8% interest eliminated?
💰
STEP 3
Capture Free Money
401(k) employer match
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INSIGHT Leverage

"The wealthy use other people's money. Start with your employer's."

If your employer matches 401(k) contributions, this is an instant 50-100% return on your money. A typical match is 50% of your contribution up to 6% of salary. That's free money you're leaving on the table.

Action
Contribute at least enough to get the full employer match
Pro Tips
💡 Example: $60K salary, 6% contribution = $3,600/year. 50% match = $1,800 FREE
💡 This is pre-tax money, so it also lowers your taxable income
💡 If no 401(k) available, skip to Roth IRA (Step 4)
✓ Are you getting 100% of your employer's match?
🐷
STEP 4
Max Out Roth IRA
$7,000/year limit (2024)
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INSIGHT Tax Efficiency

"It's not what you make—it's what you keep after taxes."

For young people, a Roth IRA is often the best account. You pay taxes now (when you're in a low bracket) and ALL growth is tax-free forever. $7,000/year from age 22-65 at 8% = $2.1 million TAX-FREE.

Action
Open a Roth IRA at Fidelity, Schwab, or Vanguard
Pro Tips
💡 You need 'earned income' to contribute (job, freelance, etc.)
💡 Can withdraw contributions (not gains) anytime without penalty
💡 Income limits apply—if you make over ~$160K, look into 'backdoor Roth'
✓ Is your Roth IRA maxed out for the year?
📈
STEP 5
Start Simple Investing
Low-cost index funds
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INSIGHT Market Growth

"Money must move to multiply. Idle cash is dying cash."

Now you're ready. Don't overcomplicate it. Two funds can give you exposure to America's best companies. You don't need to pick stocks. You don't need to time the market. Time IN the market beats timing the market.

Action
Buy and hold broad market index funds
Simple Starting Options
VOO 0.03% expense ratio
Vanguard S&P 500 ETF
500 largest U.S. companies
VTI 0.03% expense ratio
Vanguard Total Stock Market
Entire U.S. stock market (~4,000 stocks)
QQQ 0.20% expense ratio
Invesco QQQ Trust
100 largest Nasdaq companies (tech-heavy)
VT 0.07% expense ratio
Vanguard Total World Stock
Global diversification in one fund
Simple portfolio: Many people just buy VTI or VOO and add nothing else. That's a perfectly valid strategy.
⚠️
Common Traps to Avoid
Don't do these before mastering the basics
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INSIGHT Human Nature

"Your biggest financial enemy looks back at you in the mirror."

₿
Crypto (as your first investment)
High volatility, no underlying cash flows, speculative. Fine as <5% of portfolio AFTER you've built a foundation.
📈
Options Trading
90% of retail traders lose money. Complex derivatives designed to transfer wealth from amateurs to professionals.
🎰
Penny Stocks
Easily manipulated, poor liquidity, pump & dump schemes. The 'next big thing' is almost always a scam.
⚡
Day Trading
You're competing against algorithms that execute in microseconds and institutions with billions in research budgets.
🎯
Timing the Market
Missing just the 10 best days over 20 years cuts your returns in HALF. Nobody can predict them.
📱
Following 'Finfluencers'
Most make money from views, not investing. If they had a winning strategy, they wouldn't share it for free.
PRINCIPLE Optimize Your Accounts
Know Your Account Types

Where you invest matters almost as much as what you invest in. Tax-advantaged accounts can save you hundreds of thousands over your lifetime.

The Priority Order
1. 401(k) up to employer match (free money)
2. Max Roth IRA ($7,000)
3. Max 401(k) ($23,000 total)
4. HSA if eligible
5. Taxable brokerage for anything beyond
PRINCIPLE The Power of Systems
Set It and Forget It

The best investment strategy is one you'll actually follow. Automation removes emotion, eliminates decision fatigue, and harnesses dollar-cost averaging.

🔄 Dollar-Cost Averaging (DCA)

Investing a fixed amount at regular intervals regardless of market conditions. You buy more shares when prices are low, fewer when high—automatically.

Example: $500/month into VOO every payday. Market crashes? You're buying more shares at a discount. Market soars? Your existing shares grow. Either way, you win long-term.
% The 10% Baseline

Aim to invest at least 10% of every paycheck. More is better, but 10% is where wealth-building starts. This should be non-negotiable.

$50K salary $417/month → $1.5M by 65
$75K salary $625/month → $2.3M by 65
$100K salary $833/month → $3.1M by 65
*Assumes starting at age 22, 8% average annual returns
How to Actually Set This Up
1
Open accounts
Fidelity, Schwab, or Vanguard—all free, all excellent. Takes 15 minutes.
2
Link your bank
Connect your checking account for transfers.
3
Set up automatic transfers
Schedule transfers for the day after each payday.
4
Enable automatic investing
Most brokerages let you auto-buy specific funds when money arrives.
5
Never look at it
Seriously. Check quarterly at most. Daily checking leads to panic selling.
⚠️ Beware Lifestyle Creep

When your income rises, your investments should rise too—not just your spending. Got a raise? Increase your automatic investment by at least half of it. The goal is to keep your savings rate constant or growing as you earn more.

PRINCIPLE Maximize Your Resources
Resources for Students

If you're struggling financially, there are programs designed to help. Using these isn't weakness—it's strategic. These exist so you can focus on building your future.

🎓 Federal Aid & Grants
FAFSA studentaid.gov
Free Application for Federal Student Aid—required for all federal aid, grants, and many scholarships
Pell Grants Via FAFSA
Up to $7,395/year for undergrads with financial need—doesn't need to be repaid
Federal Work-Study Via FAFSA
Part-time jobs for students with financial need—good for building experience
🎓 State & Institutional Aid
Cal Grant (California) csac.ca.gov
Up to $14,000+/year for CA residents at CA schools
Your school's financial aid office Visit in person
Often has emergency grants, food pantries, and resources they don't advertise
🎓 Income-Based Programs
SNAP (Food Stamps) fns.usda.gov
Students may qualify if working 20+ hrs/week or in work-study
Medicaid healthcare.gov
Free healthcare for low-income individuals—income limits vary by state
VITA Free Tax Prep irs.gov/vita
Free tax preparation for income under ~$60K—don't pay TurboTax fees
Earned Income Tax Credit irs.gov/eitc
Up to $7,430 back if you work and have low income—even without kids
🎓 Student Loan Strategy
Federal loans first studentaid.gov
Lower rates, income-driven repayment, forgiveness programs. Never private loans if federal is available.
Income-Driven Repayment (IDR) studentaid.gov/idr
Caps payments at 10-20% of discretionary income—remaining forgiven after 20-25 years
Public Service Loan Forgiveness studentaid.gov/pslf
Forgiveness after 10 years of payments while working for government/nonprofit
💳 Build Your Credit Score Now

Your credit score affects loan rates, apartment applications, and sometimes job offers. Start building it now:

• Get a secured credit card or become an authorized user
• Use less than 30% of your credit limit
• Pay the full balance every month (never carry debt)
• Never miss a payment—set up autopay
• Check your score free at Credit Karma or through your bank
❤️ A Note to Those Struggling

If you're working through difficult circumstances—food insecurity, housing instability, no family financial support—know this: using every resource available to you is smart, not shameful. These programs exist so that your current situation doesn't determine your future. Start where you are, use what you have, and build from there. Your future self will thank you.

🎯
The Bottom Line

Building wealth isn't complicated. Follow the order of operations, automate your investments, avoid the traps, and let time do the heavy lifting. The best day to start was yesterday. The second best day is today.

📖
Go Deeper
10 Laws of Finance
A Real-World Education in Money, Business, and Freedom

Disclaimer: This is educational content only, not financial, tax, or legal advice. Past performance does not guarantee future results. Investing involves risk, including possible loss of principal. Tax laws change frequently. Consult qualified professionals for personalized guidance. Fund mentions and contribution limits are examples as of 2024 and may change.

© 2025 Devon Coombs, CPA, MBA. All rights reserved.