LogFAQs > #886090195

NES4EVER posted...

Out of curiosity, whenever I read articles that talk about saving x% of your income, it doesn't specify what to save for. Does that all go to retirement? Rainy day fund?

I save about 17% of our gross income, but that's spread between retirement, pensions, vacation fund, rainy day fund, and saving for my sons education.

This only covers the basics, but the hierarchy for saving is generally as follows:

1. If you have any credit card debt that's accruing interest, pay that off first.
2. Set aside a rainy day/emergency fund equal to 6 months or so of your living expenses. Put this in a liquid account.
3. Contribute until you max out your retirement account, as this is tax deductible. Any income earned in that account is tax deferred
4. Last, invest in your personal investment accounts (i.e. non-retirement).
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- The Admiral