Money Flow
How do you decide how much money to save and where it should go first?
This handy flowchart illustrates where those dollars should go. [MORE HERE]
Paycheck
Employer’s 401k Plan
(Up to the Match)
Emergency Fund
Pay off Credit Cards
Roth IRA
Money Flow Chart Explained
Spend less than you earn and follow the 20-50-30 rule and plan to save 20% of your income. Here is what to do with the money you save.
Paycheck
Each pay period contribute to your company’s 401k (or similar) retirement plan up to the “match.” For example, if your company matches your contribution up to 3%, you set aside 3% of your income into the plan. This is a guaranteed return of 100%!
Emergency Fund / Pay off Credit Cards
If you have credit card debt, split the rest of your savings. One portion goes to paying down the credit cards and the other portion goes toward your Emergency Fund. Your goal is to have 3 months of necessary expenses (“Needs”) in the Emergency Fund.
Roth IRA
Once you’ve paid off the credit cards in full, that money now goes into a Roth IRA.