People always seem have questions about their financial priorities: Should I invest or pay off debt? Save in my work 401(k) or open an IRA? This cheat sheet will tell you. It helps you visualize your financial priorities in the most basic terms.
It’s sort of like the previously mentioned “Ladder Method,” which tells you how to prioritize your investments. But this “retirement wrapper,” as Reddit puts it, includes all of your finances in general: debt and emergency funds, too. Plus, it helps you visualize it. Here’s a basic explanation of each line, and if you want more detail, just hit the links in each.
- Emergency fund: You should have a safety net before anything else.
- 401(k) contribution match: This is almost like free money, so you want to take it if you can.
- Debt: Obviously, paying off debt is important. Those interest rates will kill your finances.
- Individual Retirement Accounts (IRAs): Max these out if you can. Saving for your retirement is important.
- 401(k): Still have cash left over? Congrats, moneybags. Now go back to saving in your 401(k). Your don’t have as much flexibility as an IRA, but at least you have the tax advantage.
- Savings/Investments: If you STILL have cash after maxing out your 401(k), then stash it in your personal savings or a taxable investment account.
Source – Lifehacker.com
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