MTM Mailbag: ⚡️ What's Our Next Financial Move After a Healthy Emergency Fund and 401k?

Chris is back from vacation and we are having an extended mailbag session. Thanks to everyone who sent in questions and sorry for a little more delay in answering these via email than we would prefer. TONS of questions came in and we joke that it was because I was gone. 

We answer the specific case situations in more detail over email but share some general feedback so you can find valuable takeaways in your own circumstances.

Let's do this.

Leslie writes: My husband and I have a healthy emergency fund and a 401k with over $100,000, what's our next financial move?  

First off, let’s leave nothing to interpretation here. I define a healthy emergency fund as at least three months of expenses sitting in a savings accounts. The next step would be to balance your pre-tax and after-tax long-term savings. I would recommend meeting the match in your 401k or looking into a Roth IRA, or after-tax account. If you’re under 55, you and your husband can each put up to $5,500 into that account.

Zach asks: I worked for Publix for a few years and I have some money in the 401k they offered me. I’ve noticed that their stock prices have been going down and I can’t contribute anymore because I’ve left the company. I’m now worried about the company's stability. Should I cash out and suffer the 10 percent early withdrawal penalty before the stocks plummet even more?

No! Don’t do it. It’s easy to get caught up on the stock market’s every peak and valley, but don’t let the natural fluctuation influence your judgment. When you leave a company, you have the right to carry over your 401k and convert it— tax-free— into an IRA.

Moshe asks: My partner and I have been living off of one salary and we’ve made ends meet. I recently started a new job and we now have two incomes. What’s the best way to utilize the second salary? We have credit card debt and a small emergency saving fund. What should we do first: Pay off our debt or stick money into savings?

Windfalls are great! Here’s my suggestion: build your emergency fund. There’s a cycle to credit card debt and now’s your opportunity to break it. Your credit card is likely the result of paying for an emergency when you didn’t have liquidity. Pay the minimum on your debt and bank every extra dollar from your second salary into your emergency fund until you’re sitting on three months worth of expenses. Once you have a flush emergency fund, aggressively pay down your credit debt.

Shelly writes: Can I start investing with as little as $500?

Yes! But before you start looking to invest, make sure you have your three-month emergency fund established. I recommend opening an after-tax Roth IRA and if you work with my company, you can start with as little as $20.


Jason writes: What are your thoughts on a first-time home buyer being a baby boomer?

It absolutely depends on your situation. Interest rates are still competitive, so if home ownership and equity make sense for your entire situation then go for it.


That's All For This week!

Every week during the More Than Money show on AM 750 WSB we open up the week's mailbag and answer your questions in the "Lightning Round." MOST of these come from the site, but we aren't afraid to throw in texts, DM's and great things we hear from in-person meetings.

Have a question? Let us help.