Saving vs. Investing - Where to Start

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Hello there!

It’s not only been awhile since I’ve blogged, but it’s been awhile since I’ve blogged about a personal finance topic. However, I’ve gotten a few questions on saving vs. investing and what to do for each and thus, I thought I’d whip up a quick blog post to give you my 2 cents!

As I’m furiously typing away here, my two babes (that’s right - we welcomed our second baby girl Marley on April 1st!) are both napping so we will see if I can pull off this entire post before they wake up #workingmomlife

Here are the list of priorities I recommend when it comes to saving and investing:

1) If you company has a 401k or 403b with a match TAKE ADVANTAGE OF THE FREE MONEY! Put in as much as you need to in order to get the match. Free money is free money and it would be just stupid to not take advantage. If you feel like you can’t afford to have anything more taken out of your paycheck, seriously go through your expenses and see if there are some things you can move around/edit out in order to make it possible. If you need help setting up a budget, see this post HERE.

2) After you’ve gotten your match, I recommend starting an emergency savings account. Some people prefer the term “rainy day fund” or even something more positive (sorry can’t think of any examples currently, haha) I don’t care what you call it, just start one. Use your bank’s savings account or open a new savings account, I don’t care. Just do it (like Nike)

Here’s the kicker though: your emergency fund is for unexpected expenses NOT impulse purchases (read that again if you need to!)

It’s not to be used for a trip you want to take or the newest gadget you want to buy. What it is for is medical bills that pop up or to bridge a gap if you or your partner are in between jobs or something else UNEXPECTED.

Your emergency fund may fluctuate if you need to dip into it and that’s OK. The point is that you have one and you continue to put money into. Experts recommend 3-6 months worth of expenses. I know Dave Ramsey says start with $1,000. Personally for our family I feel comfortable with $10-12k but always like having more (we just normally don’t increase over that amount!)

Why is it important to start an emergency fund before paying off debt or investing?

I get this question a lot and it boils down to this: if you start dumping money into investing or paying down debt (student, car, mortgage etc.) and you have unexpected expenses come up, where is that money going to come from? You are going to have to pull money from investments (and pay a penalty) or put money on a credit card (and pay the interest) Those are both lose-lose situations. I know you want to save for retirement and you think having money in a savings account not earning interest is stupid but an emergency savings account will save your ass for when stuff comes up (and guess what, it will!)

After you’ve gotten your emergency savings account to a level you’re comfortable with, THEN you can start paying down debt faster or increasing your investing. Some people prefer to pay down debt first, some people like to throw more money into investing, some people like to do both at the same time. Of course there’s the practical “math” involved with these decisions, but there’s also a lot of personal preference thrown in. I will touch on this topic in an entirely different post (when the babes are both napping again at the same time!)

Again these are just my recommendations. Everyone has a different viewpoint on saving/investing priorities but mine are a) start with your company match and then b) build up your savings account.

Also - being I talk a lot about self-love and worthiness too, consider these two steps as acts of self-love. You are protecting yourself and your family and setting yourself up for future success (and less stress!) Now that’s a win-win :)

Do you take advantage of your company’s match? Do you have an emergency savings account? I hope this post inspires you to take action on both if not!

Until next time,

Katie O