1. Socking away more than you can afford
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It’s easy to invest in your 401(k), and that’s generally a great idea, too. As we have often written, if your employer will match your contribution up to a certain level, you should try to contribute at least to that level — or you’ll be leaving free money on the table.
But in your enthusiasm, don’t deprive yourself of enough cash to cover expenses. Once your money is in your 401(k) — or term CDs, an IRA or similar investments — you usually can’t get it out without paying a penalty. In the event of an emergency, you might have to cover the unpleasant surprise with a credit card. Or, you might be forced into making a late payment or bouncing a check. All of those are expensive ways to do business.
So, be realistic about your budget, and create an emergency fund that you can access without cost. Then, make consistent contributions to your retirement fund and other longer-term investments.