How to prioritize an emergency fund or retirement savings.
Having a well-stocked emergency fund is important. But so is saving for retirement. So how do you know which one to focus on? Well, we’ve got you covered. Here’s what you should know.
Emergency Fund is Important
An emergency fund is extremely important. If something unexpected happens, you don’t want to be completely unprepared. When deciding on saving for emergencies or retirement, you should consider your personal goals.
- Small Short-Term Goals. However, just to cover yourself, you might want to start with your emergency fund first.
- Get at Least Six Months. When saving for your fund, shoot for saving enough to cover six months of fixed expenses. In reality, you probably want more than that stashed away, but six months is the bare minimum.
Retirement Savings is Also Important
Saving for retirement is just as vital as an emergency fund. However, since it is typically years down the road, you have some wiggle room here.
- Get the Match. If you have an employer match for a 401(k), try to make that your first retirement savings goal. That’s free money being offered to you.
- Start Small. If you don’t have employer-sponsored retirement savings, start small and make sure you’re saving something each month for retirement.
- Shift Priority. Once you have your emergency fund stocked, shift your focus to retirement and make it a priority.
It’s Okay to Juggle
Life isn’t always cut and dry, so it’s okay to move between two financial strategies as you try and do what’s best for you. Don’t be too hard on yourself. As long as you’re making an effort to save for emergencies and your golden years, that’s what matters most.
Do One Thing: Consider your financial goals when deciding between saving for emergencies and saving for retirement.