Investments 101

There are several successful ways that people “store” their money. Before I share my ideas/opinions about saving money with you, I want you to know that I don’t have any money saved past my emergency fund; therefore, I don’t have a lot of personal experience on what works and what doesn’t. What I’m about to outline for you is basically what I have planned for my money-storing future.

Step One: Emergency Fund: Minimum $1,000 (complete)

Step Two: Savings for trips, moving, gifts, etc. You can put this money in the same account as your emergency fund, just know that whatever money you have in there does not include your $1,000 EF.

The following is an EXTREMELY simplified list of pros and cons for a couple common, simple investment plans.

Savings Chart 401Savings Chart RothQ: What if you’re in debt?

A: Personally, I am not contributing to my 401(k) at this point. I have two main reasons I am not saving yet. One, I have not been at my current job for a year; therefore, they’re not matching yet. Two, I am working so hard to pay off my credit card and car payment right now that I want all of my extra money going toward that. I will be finished paying off those debts by the time my employer starts matching, so I’ll contribute then.

Q: What if you’re not in debt?

A: Increase your emergency fund to 3-6 months living expenses. Then, refer to Dave Ramsey’s baby step number 4 and beyond. I’m not there yet, so I have no idea what to advise on this. One day :-)

Like I said, I don’t have a lot of knowledge/experience with investments.  When I was having a difficult time coming up with the right words to explain different accounts, I flocked to my friend, Dave Ramsey.


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