‘Since I just graduated I haven’t had any contributions’: Should I build emergency fund or max 401K when starting new job after graduation?

Hi Money Minder,

So, I’m gearing up for a new job this September post-grad school! I’ve got a little nest egg saved, about two months’ worth. But here’s the deal – I can’t decide if I should beef up my emergency fund for the rest of 2024 (I’m heading to a high-cost-of-living area in the tech field, which let’s face it, has been a bit shaky lately). Or should I focus on pumping up my 401K contributions this year? I just graduated, so I haven’t put anything into my 401K yet, and my company doesn’t match. Plus, I’ve got those pesky student loan payments hanging over my head. I really wish I could do both, but math isn’t on my side.

Edit: Oh, and by the way, I already maxed out my Roth this spring.

Cheers,
Young Professional

Response from THE MONEY MINDER:

Hello There,

Hello! Congratulations on completing grad school and starting a new job in September, that’s a significant accomplishment! It’s great that you already have some savings set aside, which shows good financial planning on your part.

Given the unstable market in the tech industry and your upcoming move to a high-cost-of-living area, it’s wise to prioritize building your emergency fund for the remainder of 2024. With two months’ worth of savings, it would be beneficial to work towards having at least three to six months’ worth of expenses saved up in case of any unforeseen financial challenges.

Since your company does not match your 401K contributions, it may be more pragmatic to focus on building your emergency fund rather than maximizing your 401K contributions this year. It’s essential to have a solid financial safety net before diving into long-term saving goals. Additionally, considering that you have student loan payments to manage, prioritizing your emergency fund can provide you with a buffer to handle any unexpected expenses while staying on track with your debt repayment.

It’s also great to hear that you have already maxed your Roth this spring, as it shows your commitment to saving for retirement. Once you have a sufficient emergency fund in place, you can redirect your focus towards increasing your retirement contributions.

In conclusion, it would be best to concentrate on building your emergency fund for now while managing your student loan payments. Taking a step-by-step approach to your financial goals will help you establish a strong financial foundation for the future. Remember that financial planning is a journey, and it’s essential to make informed decisions that align with your current circumstances. All the best from THE MONEY MINDER as you navigate this exciting new chapter in your career!

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