The easiest way to document earned income is through a W-2 form sent by your employer at the end of the year. You can contribute to your IRA the lessor of you total earnings or the $6,000 annual cap.
Keep track of any tips you earn that are not reported on your W-2 on a simple ledger. If you earn enough to file a tax return, report these tips so that you can treat them as earned income. The advantages of an IRA far out weigh any taxes that you might have to pay, particularly while you are in the lowest tax bracket.
Keep track of any income you earn babysitting, mowing lawns or from work that does not generate a W-2. Keep a simple ledger on a spreadsheet just as you would for tips. Report this as income if you are required to file a tax return. Consult a tax advisor with on the best way to track and report your earned income.
There are many platforms that allow you to setup an retirement account and trade stocks, mutual funds and electronically traded funds (ETFs) on them. Examples include Charles Schwab, Fidelity and Morgan Stanley.
If you are under the age of 18, it is awesome that you are ready to get started! You will need to work with your parents or guardian to setup your account as a minor. If you are 18 or older, you can setup your own account. You will need your social security number.
In this example, the investor wants to buy one share of Apple, Inc. Each company, mutual fund or ETF has its own unique symbol that is easy to look up. You specify whether you want to buy or sell the shares. A market order ensures that you to buy the share that day. A limit order ensures that you buy the share at or below the stated price. However, you may not buy the share at all if the price stays above the limit for the day.
Start with your core investment, the S&P 500 Index Fund. There are many to choose from and they all do the same thing. Look for one with a low fees to maximize your returns.
The technology sector is so vast that you may want to use several funds. This will also help you diversify your investments. You can find funds that target information technology, e-commerce, biotechnology and/or other fields. You may also want to utilize different investment strategies such as market weight or equal weight.
As you get older and have less time to recover from market setbacks, you will need to reduce risks. Simply increase the allocation to the Index Fund by your decade of age. For instance, in your 50's you will want to have 50% of your account in the Index Fund, 45% in the Tech Fund and just 5% in the Innovation Fund (if any).
