Where To Put My Excess Money? Roth? 401(K)? Emergency Fund?

It’s taken almost a year, but now every stray dollar that is associated to my name is now in my possession. This thanksgiving I picked up a few bonds and stock certificates that I ‘owned’ but didn’t have in my possession. Now, the question is where to allocate this ‘found’ money?

401(k), Roth IRA, Emergency Fund, Brokerage Account? There are so many options and all are viable vehicles that could use an influx of cash.

This decision comes down to priorities. Next year I may be able to max out my 401(k) and get my bitchin’ employer match, but if I do this, it’s likely I will not be able to fully fund the Roth. At the same time, my emergency fund is only around $3.7K. I never set a specific goal, but $10K sounds appropriate so I will need a boost to get there within the next year.

When you have excess money, what is it you do?

I think I will be looking at cashing in the bonds to boost my emergency fund. I may have to run the numbers to make sure this is wise though. 2010 is quickly approaching and I have yet to calculate my expected costs. Until that is done, I can only make some assumptions as to what is best.

Of course, my colleagues in the Personal Finance world will be happy that I have finally come around on an emergency fund after so boldly claiming that I didn’t need one several months ago.

Lastly, December looks to be an exciting month as it is a three paycheck month at my day job. It looks like that emergency fund will be getting at least one boost this month.

10 Responses to Where To Put My Excess Money? Roth? 401(K)? Emergency Fund?
  1. Craig
    November 30, 2009 | 10:36 am

    I would say your Roth. Let the money grow and it can help out more in the long run. Plus there will be a time when you need money more and may not be able to contribute to your Roth, so get started now.

  2. Financial Samurai
    December 1, 2009 | 12:17 am

    Brian – If you’ve maxed out your $16,500 in your 401K this year, just keep building your Emergency Fun, which should really just be considered your savings.

    You’ll be amazed after 10 years how much you’ll have in your 401K due to the company matching, returns, and profit sharing. i bet if you keep at it, in 10 years, you’ll easily have $200,000+ in it. You won’t even notice the huge jump until you one day say WOW!

  3. J. Money
    December 1, 2009 | 6:23 pm

    Well would you look at that 😉 Brian and an Emergency Fund sittin’ in a tree – S-A-V-I-N-G-G (that last g is so it rhymes.)

  4. clayton
    December 2, 2009 | 9:23 am

    I would pick the one you plan to have the longest like the roth or brokerage because it will do more good in the long run for you. That’s what I’m doin.

  5. James
    December 2, 2009 | 1:13 pm

    ROTH, no question about it. Its tax free and if you really, really have an emergency you can borrow against it or cash it out – although cashing it out isn’t optimal.

  6. www.poringa.net
    August 9, 2015 | 8:28 pm

    Very good info. Lucky me I recently found your blog by accident (stumbleupon).
    I have book marked it for later!

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