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Last night I was stranded about four miles from home after some minor car trouble and during my hike home, I got to reflect on my monetary situation. I thought I would post to my fellow fools because you all give very good advice and information. Anyway, here is my quandry.

I have 730 dollars (pretty pathetic I know, but August always hits me hard in the wallet) in my savings account that I use for an emergency fund, and I need to put another 1200 dollars into my rIRA for the year. My question is which should I put money into first, the rIRA or the EF? My inclination is to put the 1200 in the IRA as quickly as possible and not miss those precious three to four months that it would take for me to build the Emergency Fund to three months wages. Am I right in thinking this, or would it be better to have the emergency fund so this minor stuff doesn't put a big hurt on my savings, as this situation will probably do?

By the way, I am 25, single and the only bill I really have is 600/month for rent. Any information is helpful, and thanks in advance


Dear J.D.,

Wow! Quite a story. I'm glad to know that you will look into AAA. My vote would be to start the emergency fund, and then continue to add to your IRA. Assuming that you meet the requirements, the Roth IRA would be the way to go.

You mentioned that you you want to put another $1200 into the IRA, so I figured that you already have contributed @ 800 (you probaby want to reach the $2000 goal). If that is not the case, then perhaps you contribute to the IRA, and then work on the emergency fund.

If you are interested, look into a Motley Fool Crash Course. I think 'Disaster Proof your Finances' would be a good one for you. In this 60 minute course, you'll learn, step by step, what you need to do to insure your security.

For more information, go to:

http://www.foolmart.com/Shopping/Product_View.asp?PRODUCT_ID=MF2702_01&ref=CSBO03105

Foolishly yours,

Karen Kosoy
TMF Karen
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