While all of the advice points are things you should, if possible, do, the order of operations is not well represented. Money is finite, and there is an order in which you should do these things. I propose:
- Pay your bills in full every month.
- If you have existing high interest debt (~8% or higher, IMHO) pay it down as quickly as possible. Amortgage at 4% and subsidized student loans at 5% are not in this category.
- Build up an emergency fund (ideally enough to cover 3-6 months of essential expenses, but some is better than none). Different people suggest cash, short term CDs, etc. for the form of this fund, but it should be something safe.
- Put enough into your 401k to get the maximum employer match. This will typically be far less than the full ~$17k/yr.
- Take advantage of other tax advantaged accounts as he describes (IRA or Roth IRA - I prefer Roth since I expect to be making more, and paying a higher rate in taxes, when I retire than I do now, 529s, HSAs)
- Now go ahead and max your 401k
- If you still haven’t hit 20% of your income (lucky you!) you can either open a brokerage account, or pay down lower-interest debt, or save for a down payment, etc., depending on your risk tolerance.
Right now I’m in the middle of step 5. Since I don’t have kids (no 529s) or an HSA, I should be ready to start step 6 in about a year.
