How to Build a Complete Financial Portfolio

Planning for Emergencies, Education, Retirement, and More

Text reads: "How to build a complete financial portfolio: craft a balance sheet, contribute to your 401k, pay off credit card debt, open a roth ira, purchase a home, build six-month emergency fund, look into other investments, invest in yourself, save for your children's education, stay the course"

The Balance / Gary Ferster

Most people have a general idea of how they want to spend their later years. Not many ever stop and figure out how they will financially achieve their desired lifestyle.

There are several considerations for retiring comfortably. At a minimum, you should work to fully fund your retirement account(s), own your home, have no debt, and have emergency funds set aside.

This step-by-step guide empowers you to take control of your retirement plans by building a holistic financial portfolio.


Holistic financial planning is the concept of planning for all of your retirement needs (and unexpected events) rather than applying a traditional catch-all formula.

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Start by Taking Stock

When starting your planning, it helps to make a list of everything you own. Include assets such as cars, stocks, bonds, mutual funds, cash, and bank accounts. Next, list everything you owe, such as your student loan or credit card debts.

Don't keep any debts off the list. The key here is to determine exactly where you stand financially. This creates what is known as a "balance sheet." It lets you see everything about your finances.

Once you know what you have and owe, you can set realistic goals for balancing them out and getting ahead.

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Fund Your 401(k) With Matching Funds

Many businesses match the contributions their employees make to their 401(k) accounts. The amount of these matching contributions can vary widely from company to company.

Matching contributions are free cash. Some people do not take advantage of them, because they don’t understand the time value of money or don’t believe they can afford to have their take-home pay reduced.

However, it pays to maximize your contributions. If your employer were to match you dollar-for-dollar on the first 5% of your contribution, you would immediately be earning a 100% ​return on that 5%.


If your employer doesn’t match your contributions, you won't benefit by putting this step first.

Consider that 401(k)s grow tax-deferred in your 401(k) until you begin taking distributions—usually after age 59 1/2. There is a high possibility that if you don't contribute enough for employee matching, it could cost you millions of dollars over the length of a career.

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Pay Off High-Interest Credit Card Debt

The next step in building your complete financial portfolio is to develop a plan for paying down high-interest credit card debt. You could use the "debt-avalanche method":

  • Rank your debts by interest rate: From your balance sheet, rank all of your debts by the interest rate you are paying, starting with the highest.
  • Allocate as much as possible to debt pay-down: Decide how much you can dedicate to debt reduction each month.
  • Attack the card with the highest interest: Pay the minimum balance on all credit card debt except the highest-ranked one. Pay as much as possible on the highest-ranked card until it has been completely paid off.
  • Eliminate debts one by one: Cross each card off your list, and put the plastic in a drawer when you finish paying it off. Don't cancel the card; it lowers your credit score and increases the interest rate. Don't charge to it again.
  • Keep going: Continue this process until all of these accounts are paid in full.

There are other methods for paying off your debts, but the debt-avalanche works well. Remember that you shouldn't abandon your cards altogether—credit cards can be a valuable financial tool when used responsibly.

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Fully Fund a Roth IRA

The Roth IRA is one of the best retirement accounts available to investors in the U.S. Most people qualify—in 2021, if your annual income does not exceed $140,000 (if you are single) or $208,000 (if you are married and filing jointly), you can contribute to a Roth IRA. These limits increase to $144,000 and $214,00 for 2022.

Contributions—subject to annual limits—are made with after-tax dollars. Roth IRA contributions can also be withdrawn at any time without any penalty.

Once you reach age 59 1/2, withdrawals of earnings are tax-free as long as your account has been open for five years.

In other words, if you purchased $10,000 worth of a stock through your qualified Roth IRA and held it for 20 years, you could sell your shares at retirement, and you would owe Uncle Sam nothing—even if that stock grew to be worth millions of dollars.

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Purchase a Home

Saving for a down payment on a house is one of the best ways to work toward completing your financial portfolio. While there are expenses generated when owning a home, you're converting what was previously an expense (rent) into equity that you can turn into other loans.

Additionally, the interest paid on your mortgage is tax-deductible, and you're permitted a lifetime capital gains tax exemption of $250,000 (if you're single) or $500,000 (if you're married) if you sell your home at a profit.

Consider your house to be an investment. For example, if you put 20% down on a $100,000 home, you've spent $20,000. If it appreciates 4% ($4,000) over the next year, it will worth $104,000.

If you had purchased a stock for $20,000 and received $4,000 in value in one year, you would have an investment with a 20% return rate—an excellent return for the money.

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Build Your Emergency Reserves

It's essential to establish a six-month emergency cash reserve to cover basic living expenses. A reserve helps you pay for any unexpected home repairs, unemployment, or medical bills. At a minimum, your emergency fund should be sufficient to cover up to six months of the following:

  • Mortgage payments
  • Insurance costs
  • Utility bills
  • Groceries
  • Fixed payments (e.g., car payments or student loan payments)
  • Minimum payments on credit cards

The objective for your emergency cash reserve is safety, not return. The simplest option is to park the funds into savings such as a money market account. If you are interested in generating income, consider building a laddered certificate of deposit (CD) portfolio.

To build a laddered CD portfolio with a reserve of $12,000, you could go to your local bank and open six CDs as follows:

  • $2,000 30-day (1 month) maturity
  • $2,000 60-day (2 month) maturity
  • $2,000 90-day (3 month) maturity
  • $2,000 120-day (4 month) maturity
  • $2,000 150-day (5 month) maturity
  • $2,000 180-day (6 month) maturity

As each CD matures, roll it over into a new six-month CD. In short order, you will own six separate six-month CDs, one of which will mature every month.

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Pursue Other Investment Opportunities

A brokerage account allows you to invest in stocks, bonds, mutual funds, certificates of deposit, real estate investment trusts (REITs), Treasurys, and other investments.

Investing allows you to further diversify your portfolio, allowing you to mitigate the risks of all of the financial plans you've been making. You can also reduce your investing fees by using online discount brokers.

However, in case you're not comfortable with that option, many brokerage firms offer both traditional and online options and allow the client to choose.

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Invest in Yourself

If you’re thinking about starting a business, improving your professional skills, or standing out to potential employers, consider investing in yourself by taking courses. They will help you increase your earning potential, enabling you to accelerate your financial plan.

Many colleges and universities offer professional certification programs. For example, New York University's School of Professional Studies offers certificates in finance, entrepreneurship, management, technology, and other areas. Many different courses and certification programs are available online.

One excellent option is to enroll in basic accounting and finance courses. Although the cost may be several thousand dollars, the knowledge you would gain can make a significant difference in your income if applied wisely, paying for itself many times over.

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Save for Your Children's Education

Here's a secret: You have no obligation to put your child through school. Most parents want the best life for their children; however, consider that education may be more valuable to the recipient if they have something at stake and are required to fund or help with the rising costs of their education.


It is essential that you save for your retirement before putting funds aside for your children’s education. Your kids can find numerous low-interest loan options, scholarships, grants, and federal student aid. If you deplete your retirement fund to help your children, you will have no recourse.

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Stay the Course

Congratulations! The hard work is done—you’ve laid the foundation for a solid financial future. The keys to success are making intelligent decisions and sticking to the basics of building a complete financial portfolio.

There is nothing magical about wealth building; it is achieved through a culmination of small, disciplined choices. Keep your mind on the larger goal as you navigate everyday decisions, and you will find yourself making good progress.

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Frequently Asked Questions

How Much Can I Put Into a 401(k)?

Contributions from your salary to a 401(k) are called "elective deferrals." In 2021, the limit you can contribute to a 401(k) is $19,500; this increases to $20,500 in 2022. If you are at least age 50, you can make additional annual "catch-up" contributions of $6,500 for 2021 and 2022. The maximum amount you can contribute includes employer matching contributions, non-elective employer contributions, elective deferrals, and forfeitures.

It's vital to ensure that you contribute enough to meet your employer's matching criteria—this maximizes your account's earning potential with money you didn't have to earn.

How Much Can I Put Into an IRA?

Roth IRAs and Traditional IRAs have the same annual contribution limits. The maximum amount can change annually, so be sure to check each year for changes.

For 2021 and 2022, the maximum contribution for both types is $6,000 if you're age 49 or younger. If you're 50 or older, you can make catch-up contributions and contribute up to $7,000 per year.

How Much Should I Save for Retirement?

There are many factors to consider, such as health care, living expenses, and hobbies when retiring.

If you want to maintain the lifestyle you have before retiring, the 80% rule is an excellent guide—you should have enough in your account to annually withdraw 80% of your current salary for the number of years you expect to be retired.

There are other methods, but each one depends upon your goals and circumstances.

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Internal Revenue Service. "Retirement Topics - Exceptions to Tax on Early Distributions."

  2. Internal Revenue Service. "Amount of Roth IRA Contributions That You Can Make for 2021."

  3. Internal Revenue Service. "Amount of Roth IRA Contributions That You Can Make for 2022."

  4. Internal Revenue Service. "Publication 590-B: Distributions From Individual Retirement Arrangements (IRAs)," Page 30.

  5. Internal Revenue Service. "Topic No. 701: Sale of Your Home."

  6. New York University. "NYU SPS Continuing Education Courses."

  7. Internal Revenue Service. "Retirement Topics - 401(k) and Profit-Sharing Plan Contribution Limits."

  8. Internal Revenue Service. "2022 Limitations Adjusted as Provided in Section 415(d), etc.," Pages 1-2.

  9. Internal Revenue Service. "Retirement Topics - IRA Contribution Limits."

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