2. Build an Emergency Fund
If you’re relying on your 401(k) as an emergency fund for those rainy days, stop immediately. We know it sounds harsh, especially if you’re going to have a hard time setting up an actual emergency account with limited funds, but budgeting in order to make this happen will be well worth it.
Just think about the risk for a moment. If you fall on hard times and need to dip into your 401(k) savings, you’ll be subject to heavy penalties and weighed against your current troubles the fact you could lose up to 40% of your funds should cause concern. Now imagine entering retirement with 40% less money than you originally planned.
Just remember that as with any other savings, every little helps, so don’t avoid setting up an emergency fund.
