Fund Your 401(k) First — Here’s Why

Updated : Oct 26, 2019 in Articles

Fund Your 401(k) First — Here’s Why


Should you save towards your 401(k)
or should you create an emergency savings account? Your 401(k) is
a retirement account. Now, a lot of you have something
special in your 401(k) and you don’t even know it. And that’s called a 401(k) match. That’s your company literally saying,
“Hey, here’s some free money. Do you want to take it?” If you don’t take that,
you’re making a huge mistake. So the first thing I want you to do
is go to your HR person or your manager and say, “Does this
company offer a 401(k) match?” It’s okay to ask
if you don’t know. It’s totally fine. If they do, that’s where
you want to go first. That means if you put $100 in, they
might add $50 or $100 to it. That turns out to be worth
a huge amount of money. After you max out your 401(k) match,
if you’ve got it, now you have a decision to make. Should you put more in your 401(k)
or should you create an emergency fund? On the investment side, it’s great
to start investing as early as possible because over time that money
will turn into a lot. But, I also want you to have a
little bit of money in liquid savings just in case
something bad happens. For example, if you’ve gotten laid off
or you lose your job for some reason. So if I had $100 after I maxed
out my 401(k), you know what I would do? I would do something like this. I would take roughly $75 of those
dollars and I would invest it and I would take $25 and put it
in my savings account every month. Now the way you break that
$100 down is up to you. There’s a lot of different variables,
depending on how old you are or how aggressive you are. How much money you have. But in general, I do want you
to build the habit of automatically investing every month and
automatically saving every month. So that’s how you think
about investing versus saving.

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