Ask Matt: Step-by-step plan to rebuild your portfolio

— -- Q: I'm 35-years-old and have been unemployed for three years, and am now interested in getting back building my portfolio now that I have a job. Where should I start?

A: Coming off a devastating time for the markets and economy, you're certainly not alone in trying to get your financial future back on course.

Many investors who may have been dutifully building their nest eggs prior to 2008, got seriously knocked back in the past three years. Stubbornly high unemployment and disruptions of entire industries have created a giant barrier for many younger workers. Losing a job this early in your career is a blow, since you miss out on some of the power of compounding.

Don't despair, though. Sounds like you're determined to get things back on track, and that's certainly within your power. By starting now, you can definitely repair the damage you suffered the past three years as well as start pushing forward.

Your No. 1 objective should be to rebuild your rainy-day or emergency fund. This is cash you'd need in the unfortunate event something would happen to your new job. Most advisers recommend having enough cash to get you through six months of living expenses. But lately, giving the economy's state of health, it's not a bad idea to amass nine months to a year's worth of cash to give yourself a bit more of a cushion.

Your emergency fund should be kept in cash and far away from your brokerage account. This isn't money you want to make huge returns on. You just want it to be there for you if you need it. With interest rates at historic lows, don't expect to get rich off this savings. But by putting your emergency fund in a savings account, you don't have to worry about losing it either.

After you build an emergency fund you should start setting up your retirement fund. If your new employer offers a 401(k) and provides any kind of match, you need to avail yourself of this as soon as possible. Try to contribute to the 401(k) at least enough to get the maximum company match.

With your emergency and 401(k) accounts set up, it's time to take advantage of any other tax-sheltered accounts you can. If you aren't putting much into your company's 401(k) plan due to a small match or lackluster investment choices, strongly consider opening a Roth IRA. Roth IRAs allow you to take earnings that have already been taxed and contribute them. This money can compound over your working years so you can withdraw the funds without paying taxes in the future.

And if you have young children and think that college might be in their future, you might also consider making contributions to a 529 college savings plan. These accounts allow you to pile up money and take out the contributions and earnings in the future tax free, as long as the cash is used for qualified education costs.

But wait. You probably thought by now I'd urge you to rush out and open a brokerage account and start speculating on hot stocks. That is what many people think they're supposed to do after money starts coming in.

There is room for opening a regular taxable brokerage account. You can start building a diversified portfolio of investments, ranging from holdings in large U.S. stocks, small U.S. stocks, foreign stocks and emerging markets. But this is actually the final step you should take after getting your emergency, retirement and college savings plans in place.

Matt Krantz is a financial markets reporter at USA TODAY and author of Investing Online for Dummies and Fundamental Analysis for Dummies. He answers a different reader question every weekday in his Ask Matt column at money.usatoday.com. To submit a question, e-mail Matt at mkrantz@usatoday.com. Follow Matt on Twitter at: twitter.com/mattkrantz