Keep your emergency fund in a high yield savings account rather than investing it. Investing is risky because the stock market is volatile in the short term. When you have an emergency, you often have to withdraw your funds at any time, which can mean selling your stocks when they are going down. By keeping your money in a high yield savings account, you eliminate this risk of loss while earning a reasonable interest rate.
Once you have your emergency fund, you can start saving for retirement. But whenever you run out of your emergency savings, it’s a good idea to make it your top priority. You should also remember to update your emergency fund as your life changes. If your living expenses go up, you should also increase your emergency fund.
2. Those with high interest rate debt
Credit cards and payday loans usually charge you more interest than what you will earn on the stock market each year. If you only make the minimum payment on your debts and put the rest of your money into your retirement savings, you’re probably turning back the clock.
Instead, focus on eliminating your high interest debt first. There are several ways to approach this. You can take out a personal loan or use a credit card with balance transfer. Or you can just spend all of your extra money on your debt each month.