So, I’m 30 and finally starting to build my savings after being pretty irresponsible in my 20s. I began a journey to pay off my credit card debt last year and should be done by April. I know an emergency fund is my first goal, but I also want to contribute to my ROTH IRA. Should I focus on building a 3-month emergency fund first and then split my savings between the ROTH IRA and the emergency fund, or should I aim for a 6-month emergency fund before worrying about the ROTH IRA? I also have a 401k with $25k in it and contribute 6% of my salary biweekly with a company match.
Check out the FIRE flow chart. It really helps with figuring out priorities in saving and investing.
Hollis said:
Check out the FIRE flow chart. It really helps with figuring out priorities in saving and investing.
Thanks for the tip! I’ll definitely take a look.
I built my emergency fund first. During those 3 months, I saved up $10k from my main job and some side gigs. If you have just one job, I’d suggest splitting your extra cash from every paycheck between the ROTH IRA and the emergency fund until you hit 3 months’ worth of living expenses. After that, go all in on your ROTH IRA, HSA, and other investments.
@Lyle
That makes sense. I like the idea of splitting my savings at first.
Since you’re almost done with credit card debt, focus on building a 3-month emergency fund first. Once that’s set, you can split your savings between adding to the emergency fund and contributing to your ROTH IRA. Balance is key—try to max out your ROTH while still growing your safety net. You’re already in a good spot with your 401k and company match, so keep it up!
@Fern
Great advice! I’ll definitely prioritize the emergency fund first.
I had to rebuild my emergency fund several times in the past. After contributing to my 401k with the company match and covering monthly expenses, I would divide what was left in half: one half for the emergency fund until I reached 3 months (or 5-6 months if my job felt unstable) and the other half for sinking funds for things like taxes, insurance, holidays, and car maintenance. Once the emergency fund was complete, I’d start a month-ahead sinking fund. It might take over a year, but it gives you a great understanding of your expenses and peace of mind. Good luck with your journey!
@Zola
Thanks for sharing! That approach sounds smart, and I appreciate the advice.