I just got a raise and trying to figure out where to put the extra money. Is it smarter to increase my 401k contributions or focus on building up an emergency fund? My savings feel light, but I don't want to miss out on investing early. What would you do?

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If you don't have an emergency fund (at least 3 months worth of living expenses, eventually you want 6 months worth) focus there first. If you have any left after establishing an emergency fund then focus on savings (retirement, HYSA, etc.). Without an emergency fund you may find yourself needing to withdraw retirement funds early in a rough spot.

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Tacking on to this to add that, once you’ve got the 3-6 month emergency fund, you should be contributing the minimum required amount for any 401k match or profit sharing, then working to max out a Roth IRA if eligible. After that, it’s all about personal goals.

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Put it all in crypto

funny

not advised LOL

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401k contribution should be at least enough to get full company match, or like 5%. Early investment gains are so important. I probably wouldn't do more than that though until you build up some decent liquid savings. It's a balance.

likehelpful

Take your emergency fund to 3-6 months of expenses. Depending on your debt load, pay that down or off. Then increase your 401(k) to 15%

likehelpful

If you don’t have adequately built up emergency savings, those emergencies will come and you won’t be able to contribute as much as you would have liked to retirement because those funds are being diverted. Life WILL happen. I’ve found that I’ve had less “emergencies” in my life when I’ve planned appropriately. Having an extra $5k-$10k of emergency savings that doesn’t “leverage the market” isn’t going to be the difference in retiring wealthy. Being able to put my head on my pillow each night knowing my family and I are covered in the case of an emergency has given me and my wife more peace than most other things could.

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Completely agree. Setting aside those emergency funds in a HYSA that is readily accessible is step 1.

HSA, if available, before non-matched 401(k) contributions.

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