36f, single, no kids, make around $106k. Only started contributing to 401k around 4y ago. Currently contributing 22% 401k and $200 HSA. I have $86,600 in 401k, $3,000 HSA, $8,500 HYSA and $2,600 checkings/savings. No current debt, just credit cards (currently $1,500) I pay off fully each month.
Monthly reoccuring expenses (rent/insurance/utilities): $2,800. Monthly budget (food/health & beauty/house/gas/pets/play/misc): $1,700. Honestly, sometimes I stick to my budget and sometimes I enjoy life and don’t.
I live comfortably with my current situation. However, am wondering if it would be a good idea to reduce 401k contributions for a few months to build up HYSA and get to a solid 6 month emergency fund. My job matches 3% 401k. Is this a good or terrible idea?
Reduce 401k contributions to build up emergency fund?
byu/grilledcheesebites inpersonalfinance
Posted by grilledcheesebites
9 Comments
Yes. If you follow the logic in [the flowchart](https://imgur.com/personal-income-spending-flowchart-united-states-lSoUQr2), then you build your emergency fund *before* investing in a 401k.
Yes, makes sense. You could lose your job tomorrow.
How much do you have to contribute, if anything, to get the full 3 percent employer match?
Personally I think it is a good idea to have ~6 months of living expenses for emergencies in a HYSA. It can help you ride out an extended bout of unemployment, or else afford a scary-big emergency expense.
The opportunity cost of keeping the money in a HYSA, is the “premium” you pay for having lifestyle insurance.
Just be sure to set a calendar reminder in the future to rebalance your 401k contributions, so that you don’t forget and miss out on years of growth!
Find a way to get to the 6 months without reducing the 401K
You can do it
Yes that makes sense to do, you got this
I’ve recently faced some job uncertainty so I’ve bumped 401k down to just maximize the match while I build up the emergency cash fund
So. Yes. If you need that fund built up, do it. But I’d recommend at least still getting the full 401k match
Are you in a HCOL area? 2800 for rent/insurance/utilities sounds crazy for a single person.
The most common and accepted advice is the emergency fund. I personally think it is a load of Krap and costs you money. But my opinion is in the minority and may not work for you.