In my earlier post as part of my financial literacy series I wrote about opening a brokerage account, which then allows a person to invest (for the long term) or trade (for the short term) depending on their level of knowledge and appetite for risk. Since this series of posts is about financial basics I wanted to share a few tips on how a person can invest safely. These tips are based on my experience of investing in brokerage accounts (including retirement and non-retirement) for 25 years. I know that some people who are impatient in terms of their desire to build wealth will scoff at my advice but I do know whereof I speak.

Early on when investing I did things the risky way because it’s what I thought all the big shots in investing did and I found out quickly that for every win that makes you money doing risky things there are bigger losses ahead. In addition to that if you use your brokerage account in a risky way you are exposed to the silent killer known as stress. Stress creates a vicious cycle whereby you’re likely to make more and more questionable decisions that lead you to financial disaster. Thankfully, my desire to avoid heavy losses and the stress that comes with them tempered my desire to get rich quick and for at least 25 years I’ve been investing safely using the tips listed below.

In my previous post meant to help people attain basic financial literacy I covered basic banking products, which are the foundation of wealth building. In this post I’ll expand into the world of brokerage accounts. Brokerage accounts are exciting on one hand because they are a critical wealth building tool. On the other hand, they can be very dangerous because if one uses a brokerage account in the wrong way then that person can create financial misery for themselves. My goal with this post is to help you understand the safe way to utilize a brokerage account so that it truly is the vehicle that will ultimately ensure your financial success over the long-term.

When I wrote about banking products I mentioned how they are safe products that can return between a little more than 0% to around 4% (as of early 2025) without risking the capital that you put into those products. Brokerage products have the capability of earning you much more than 4% a year and also open you up to the possibility of earning dividends, which can really accelerate your wealth building process. On the flip side, brokerage products do not guarantee your initial capital so it is possible to lose some, or even all, of your investment. That doesn’t stop millions of people from transacting brokerage business daily and as long as you don’t act foolish you can build a very solid nest egg as long as you exercise the winning traits of patience and discipline.

This is the third post in my financial literacy series. The first two posts can be found here and here. In this post I’ll provide overviews of the most basic banking products, which are checking accounts, savings accounts and Certificates of Deposit (CDs). Having an account at a bank is the foundation of wealth building so it’s important to know your options as well as the pros and cons of each product. In this post I lay out those pros and cons. Before I continue I do want to remind you that work on increasing your income as well as living on a reasonable monthly budget are critical in giving you a chance to use any financial tool effectively. So always consider how well you’re addressing your income and budget as part of any solid financial plan.

A checking account is the banking product that is most useful and also most widely used by everyone who earns a living and pays bills. Checking accounts today differ quite a bit from the accounts I dealt with in my post college years due to the advent of debit cards and easy online electronic transfers. The good news is that checking accounts have become much more flexible than they were in years past. Checking accounts allow customers to gain access to their funds in multiple ways, which is the reason why they are best used for the direct deposit of your paychecks and for paying your regular monthly bills. As the name implies checking accounts allow customers access to physical checks that can be written out and given to someone as a form of payment. The honest truth is that in 2025 people don’t write many checks but there are some instances where it’s useful to have access to a check to pay for something. So it’s good to have the option. Much more common with checking accounts are transactions that occur via debit cards tied to your checking account. A debit card can be used like a credit card to pay for something, either in-person or online, using funds from your checking account. In addition, a debit card can be used to withdraw cash at an Automated Teller Machine (ATM). Finally, it’s possible to link your checking account (either directly or via your debit card information) to automatically pay bills online or transfer money. As you can see checking accounts are important because they offer extreme flexibility in terms of moving your money to where it needs to be.

My prior post regarding the virtues of attaining financial literacy has energized me to go deeper into the basics of personal finance so that you may benefit from my experiences (including failures) regarding wealth building. Briefly, in my mid-50s I have a net worth approaching $2 million having started from scratch and received no inheritances or large gifts from anyone. I’m 100% debt free and living in a condominium that I own outright. Honestly, 10 years ago (immediately following a difficult divorce) I couldn’t have imagined that I’d be in this financial position, which I’m very happy with. If you would like to know how I got here then please read the next few posts which will be on the topic of personal finance and wealth building. The focus of this post will be the cornerstone of wealth building and that’s your monthly budget. A monthly budget is not a sexy or exciting financial concept for most people. Most people consider a budget to be a financial albatross. Then again, most people are not achieving their financial goals…if they have financial goals at all. This is supported by data from the 2023 Federal Reserve  Report on Economic Well-Being of U.S. Households which revealed (here) that 51% of adults do not have the cash to cover a $400 emergency expense and that 52% of adults have less than $2,000 in savings.  

A good monthly budget that you stick to is the cornerstone of a solid financial plan and a successful financial future. A budget is not a financial albatross. Quite the opposite. It’s a road map to wealth. Follow the budget and you’ll find success. Go off the map and who knows where you’ll end up. People who live without a budget often find that they’re confused as to where their money is going. Eventually they get frustrated with the lack of control they seem to have over their money. This can turn into a vicious cycle where a person who is frustrated decides to avoid really looking at their finances for fear of what they might find out. Which only makes the situation worse. After a certain amount of time things may get so bad that a person either has a breakdown or a break through. I had the latter over 20 years ago. What I know now is that neither of those situations need to occur as long as you embrace the idea that a budget is important and get to work on one. Budgeting can be quite complicated as life becomes more complicated. That’s a great reason to start a budget when life is simple because the practice of maintaining a budget when life is simple and the numbers are small will make maintaining that budget much easier when life is more complicated.

I was recently approached by a family member who wanted my opinion on whether they should hire a financial advisor and give that person the power to make investments on their behalf. This person is relatively young (under 40), had recently been promoted to a higher salary position and is the sole breadwinner for his small family. I asked what prompted the question and he said that some co-workers were advising him on the issue. As a self-made millionaire I definitely have my own thoughts on the topic so I was glad that he came to me for advice before making a decision to turn over his financial future to a paid advisor.

Knowing the basics of his situation, which is a lot like mine was when I was his age, I was able to point out a few things which I think are worth sharing here. First off, it’s worth it early on in your life to invest your own time and effort to understand investing. If for no other reason than there are countless horror stories from people who turned over control of their financial life to an advisor…who then screwed those people over! Bernie Madoff is an infamous name that people will probably recognize and he used a broad, worldwide network of financial advisors to propagate what turned out to be a multi-billion dollar Ponzi scheme. Most people who invested with those advisors knew nothing of Madoff, but the advisors knew. Those advisors later admitted that they didn’t really know what Madoff was investing in. That’s not to say that all financial advisors are foolish or crooks. Just to point out that if you manage your own investments then you’ll know what you’re invested in and you’ll know that you’re going to act in your own best interests.