looking for everyone's two cents here. I'm 25, I have a good paying job (75k) and am able currently pay down my debt (student loans) at twice the rate necessary (800 a month). I have just over 25k left that I anticipate will be done with in 3 years or so.

I have a savings account with a little over 7k and a money market with a little over 3k in it.

I just opened an IRA and will roll over a balance of around 3900 from my old job. I am also thinking about opening a roth.

The question here I guess is what I should focus on outside of the debt? Feed retirement? Continue to save for rainy periods of time? Look to actively invest?

Each month I put away around $500 I'm wondering how I can get the most out of that money.


  • Do you have an emergency fund?
    – Bishop
    Oct 25, 2016 at 19:50
  • right now the emergency fund would be the 7k in savings then the 3k in the money market
    – gwar9
    Oct 25, 2016 at 20:04
  • In your mind what is the difference between feed retirement and actively invest. Oct 25, 2016 at 20:09
  • @mhoran_psprep when I think invest vs retirement its taking more risk with my savings than the steady growth of an ira. at this point should I even look at other investment options?
    – gwar9
    Oct 25, 2016 at 20:28
  • The savings account and money market you identified as your emergency fund should have zero risk. The retirement funds weather an IRA (either flavor) or 401K (either flavor) should be the one where you can have risk. Oct 25, 2016 at 20:32

2 Answers 2


Set up budget categories. Earmark your income as it is paid, for your budget categories. Pay your bills and expenses. For debts, pay the minimum on everything. There will be an amount left once everything is budgeted. That's the 'extra'. Then focus on, in order of priority, the following:

  1. emergency fund
  2. debt reduction
  3. fund retirement
  4. wealth building

So, when your emergency fund is up to an appropriate level (3-6 months of living expenses as a rule of thumb, adjusted according to your comfort level).

Once you have your emergency fund started, budget at least enough toward your 401k to capture any matching offered by your employer.

Then use the snowball plan to pay off your debts. (From what your post says, this does not apply to you, but you may have some small credit card debts taht were not discussed). Earmark the 'extra' for the smallest debt first. When that debt is paid, the 'extra' grows by the minimum payment of the smallest. Thus the snowball grows as you pay off debts.

Once the debts are gone, reward yourself, within reason (and without going into debt).

Now shift your extra into fully funding your retirement savings. Consult a financial advisor to help you plan how to distribute your retirement savings across the available retirement savings types. They can explain why it's good to have some of your retirement savings funded from after tax income. They can help you find the balance between pre- and post-tax funded accounts.

Eventually, you may come to the point where you're putting the max allowed into your tax advantaged retirement accounts. At your age, this is a significant achievement. Anything left over after retirement savings is funded can be used for whatever you want. If you choose wealth building, it can lead to financial independence.

The first two should be a one time thing. You can/should do more than one at a time. The fourth one is optional, and should not be considered until 1 and 2 are completed, and 3 is maxed out.

What you achieve is up to you. Look up FIRE, or Financially independent, retire early. There are groups of folks striving for this. They share advice on frugal living and wealth building strategies. The goal is to save enough capital to live off the passive income of interest and dividends. Most of them seem to have pre-50 target ages. At your age and income, you could hit a pre-40 goal. But it takes commitment and a certain type of personality. Not for me but it might be for you.


The 10K in savings and money market is equal to about 1.5 months of income for emergency funds. You should add additional funds to this account over the next few years to let that increase to 3 to 6 months of monthly expenses. This money should be kept secure so that it will be there when you need it. Growth is not the primary function for this account.

Investment at this stage should be for retirement. This means take advantage of 401K matching if it is available. You will have to determine if Roth or regular makes the most sense for you. In general the lower your current tax bracket the more sense Roth makes for you.

If you want an IRA again decide which type. Also remember that you have until the tax deadline to make a contribution so you can decide to use a refund to fund the IRA.

IRAs and 401Ks are just account types with some rules attached. They can be invested in everything from CD's to individual stocks depending on how aggressive you want to be.

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