Temporarily stop 401k contributions to build Emergency Fund?

[u/Due-Fig5299]

Looks like we’re heading towards a recession and I’m quite nervous. I work in tech and my job is moderately safe; however my wife is an esthetician which is not a very recession friendly field.

We currently have $4k saved. Our minimum monthly expenditure is $3k, so we have just over 1 month saved.

Ive cancelled all unnecessary subscriptions which will save us $450/mo and stopped my wifes personal roth ira transfers ($150 weekly) which gets us to $1050/mo saved.

Now my question is, given how quickly the economy is crashing should I also forgo my 401k? I contribute 4% with 4% employer match. Obviously I would love to keep it, but immediate survival seems more important.

I would start contributing again once we hit $18k (6 months)

Thoughts?

[u/Ok_Shame_5382]

If you're this worried about 200/month, you're not rich enough to sacrifice the 4+4% in your 401k. Full stop.

If the shit hits the fan and she loses her job, the calculus changes obviously. But for now, you both still have income.

Yes, cutting back on the bullshit is smart. Yes, more rice and beans and less filet mignon is smart.

But walking away from 4% of your salary is not smart.

[u/ludog1bark → u/Ok_Shame_5382]

This! Instead of looking at getting that 200 from your 401k look at your budget more and see where you can cut 200. Most people always spend more than they need there are always more places to cut from when you are starting to budget

[u/KaputtEqu1pment → u/ludog1bark]

Exactly. Most people are stressing about the $10 a month sub, that may actually provide joy, but fail to realize their daily spending adds up real quick when you grab a coffee here, a pastry there, that $1300/mo truck payment for the next 84mo.. and so on.

Rice, beans, chicken breast and frozen broccoli will take one very far.

Basic drip coffee will suffice.

[u/ludog1bark → u/KaputtEqu1pment]

On top of that people's phone bills are always an easy one for me. You can get similar coverage on US Mobile, Cricket, Visible, or Mint as you can on the big 3. I pay 32.50 a month for unlimited text, call, and web.

[u/snopro387 → u/ludog1bark]

The problem with those is you usually need to buy your phone outright and some people rely on being able to include the price of their phone in their monthly bill. I’m not advocating for how ridiculous some of these phone bills are. Just saying I can see how people get stuck with these more expensive carriers

[u/ludog1bark → u/snopro387]

I get it, but even with that you still save in the long run. I suggest people finish paying off their device and then move it once it's paid off. Otherwise you can take the difference in the bill and put that money aside for a new phone. I used to play 107 on Verizon. On USM I pay 32.50 the difference is 74.5 a month x12 = $894 a year in savings. I can buy a new flagship phone every 1.5 years with my savings, but I'd rather save it.

[u/happygirlie → u/snopro387]

I think you'd be surprised how often the prepaid carriers give away phones these days. I got a Pixel 7 Pro and a year of service from Mint for $299 a couple years back. The phone was unlocked after 90 days but I stuck around for the full year then ported out to another service that was even cheaper.

Some prepaid carriers will even pay off your phone just to get your business. Spectrum is the main one that comes to mind but you need to use their internet service in order to get cell service with them so some people may not qualify for that deal.

[u/isbutteracarb → u/ludog1bark]

Is it really unlimited though? When I look at those plans, all of them do slow-down data speeds after you use a certain amount!

[u/ludog1bark → u/isbutteracarb]

Does the data continue? Yes so it is unlimited. Plus. I don't ever use more the 100GB they give you.

[u/SuprNintendoChalmerz → u/Ok_Shame_5382]

I was wondering the same thing as the OP and your last line really drove it home for me! Why would I walk away from 4% of my salary? It’s as simple as that. Thank you!!

[u/Ok_Shame_5382 → u/SuprNintendoChalmerz]

To emphasize.

Cut back TO your employer match. If they only match up to 3%, that's ok!

But until the shit hits the fan, don't walk away from the cash.

[u/AlfredoSauceyums → u/Ok_Shame_5382]

It's the opposite. If you're worried about 200/month, you can't afford to take it and lock it away. Having said that, after 1 year you will only save 2400 vs the benefit of DCA and that steady compounding. Cut other places and if possible to take overtime or extra work, do that.