Looking for some advice on how to best handle a significantly tighter budget over the next 12 months. Long story short, I'm having an expensive surgery next month that I will be financing @ 0% interest over the next 12 months. The monthly payment essentially eats the entirety of my monthly cash surplus. Running the numbers I'll be roughly +$50 monthly, which includes nothing but the essential/fixed expenses.
A couple notes on current financial situation:
34/M
142k gross yearly income
200k in 401k (13% contribution from me + 5% company match)
30k emergency fund in HYSA
0 credit card debt
Homeowner
With only the $50 surplus each month, I'm expecting to run into some situations where I can't cover expenses fully. I'm thinking through two potential options. Number 1, just pull from emergency fund as needed to cover any gaps. Option 2, reduce 401k contribution from 13% down to the company match at 5% for the next 12 months which I think will free up enough slack to be comfortable over the next 12 months. Logically I feel like the best strategy is to just pull from savings as needed, but I have a lot of anxiety around the thought of doing that. I know it's mostly a mental thing, but I' really struggling with that. I also know I'm in prime 401k contribution years and don't love the idea of leaving compounding interest on the table. It feels like an easier pill to swallow for 12 months though.
Any advice on which way to go would be greatly appreciated!
Advice on strategy for handling 12 months of increased expenses
byu/thaaaaaaaaaatguy inpersonalfinance
Posted by thaaaaaaaaaatguy
3 Comments
You could just lower your 401k contribution a little vs 8%.
i’d stop the extra 401k before touching the emergency fund.
this is exactly what cash is for, but if you already know the squeeze is coming, give yourself the monthly breathing room first. keep the match, pause the extra, get through the 12 months, then turn it back on.
no need to make this a heroic suffering contest lol.
You could use the EF temporarily if a need arises and then adjust your 401k to refill what you used. It doesn’t have to be all or nothing and money is fungible.