Emergency Fund or Retirement First?
It’s easy to feel torn between saving for what’s next and what’s way down the road. The good news? You don’t have to choose just one. With a little planning and the right tools, it’s possible to build emergency savings and invest in your future—without overcomplicating your budget.
Here’s how to decide where to focus first, and how to keep both goals in view.
How to Balance Short- and Long-Term Saving
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.
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. However, just to cover yourself, you might want to start with your emergency fund first. 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.
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. 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. If you don’t have employer-sponsored retirement savings, start small and make sure you’re saving something each month for retirement. Once you have your emergency fund stocked, shift your focus to retirement and make it a priority.
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.