What’s my next step?

[Ivan Melendez]

I just reached a HUGE milestone and I am debt free!!! Now my next step is to have a 6 month of emergency fund. Which is where my question starts. Should I invest in a Roth IRA ($500/ month) and save for 6 months of an emergency fund? I calculated it and it should take me 4 months to reach my 6 month of expenses if I don't save for a Roth. What should I do?!

[Patrick Blanchard]

@Ivan Melendez Hi! First, big congrats to you on becoming debt free!! That’s awesome! I personally know how good that feels.

In terms of your question,  it’s never a simple, straightforward answer. This is because everyone’s goals and the way people work with money is always different. That said, some general thoughts (not investment advice 😁): having an emergency fund is never a bad thing to have. It opens up options for you to save more money down the road. And it’s there in case the worst happens. Are you sure you’re calculating the ER Fund amount correctly? Be sure to include only those necessary expenses, like shelter, food, and utilities.

If you want to do both, an option could be: set a short term goal of building a “baby” emergency fund of about 3mo of living expenses and then switch to putting some money away in the Roth. After a month or two, you could refocus back on building the ER fund to the 6mo of savings. Whatever you, don’t “split the difference” and put $250 in each per month.. it takes a lot longer to hit goals that way and most people get discouraged unless they have an accountability partner. Congrats again on paying off the debt!!