Are You Saving Money in the Right Order?

·26 min·1 clip

High-yield savings accounts can earn 5 to 10 times more than a normal bank savings account.

1. Real Personal Finance frames “Are You Saving Money in the Right Order?” around the question of where savings should go first. 2. Scott Frank, founder of Stone Steps Financial, hosts with Nick Cavio, founder of Swell Financial Partners, and they use client questions to guide the discussion. 3. The episode asks what should be funded before moving on to the next account, and why that order matters for both current life and retirement. 4. The first priority is an emergency fund or cash reserve, which Scott compares to “an insurance policy on life.” 5. Nick gives a rule of thumb of roughly three months for a two-income household and closer to six months for a one-income household. 6. Scott says a small-business owner with cyclical income may need a much larger reserve than a tenured worker with a pension. 7. They say cash reserves should be filled in part before other savings, but not necessarily with all available savings. 8. The next stop is “free money,” especially a 401(k) employer match that many people confuse with maxing out the plan. 9. Scott uses a $100,000 salary and a 4% match to show how a worker could put in $4,000 and receive $4,000 from an employer. 10. Nick says they also look for “free money” in a high-yield savings account instead of leaving cash in a low-yield big-bank account. 11. Scott says all cash reserves should be in a U.S. money market account or high-yield savings account to avoid losing to inflation. 12. The hosts then move to the HSA and call it a “triple tax savings” account because contributions, growth, and qualified medical withdrawals are all tax-advantaged. 13. Nick says the HSA can also function like a retirement account if medical expenses are paid elsewhere and the HSA is left to grow. 14. Scott notes that HSA deductions are federal and, for most states, state dependent, and he mentions California as an exception. 15. The 401(k) discussion turns to Roth versus pre-tax contributions, with Nick favoring Roth in the 10%, 12%, and 15% brackets and a blend around 22% to 24%. 16. Scott cites the 2024 401(k) employee limit of $23,500 and the $7,500 catch-up for people 50 and over, bringing the total to about $31,000. 17. The episode then covers the mega backdoor Roth and the regular backdoor Roth, including after-tax contributions, in-service Roth conversion, and the $70,000 total 401(k) cap under age 50. 18. Scott warns about the pro rata rule and gives an example of someone with $93,000 in an old IRA who would face a tax problem if they try to backdoor only $7,000 into a Roth. 19. The conversation sounds like a practical, back-and-forth planning session with numeric examples, tax language, and a conversational pace. 20. Listeners who like retirement-tax strategy and account-ordering frameworks will get the most from this episode, while people wanting basic budgeting advice may skip it.

As heard by us

A practical episode about where the next saved dollar should go, from high-yield savings to retirement accounts.

The episode takes a simple idea and works through it in a sensible order: savings first, then the tougher decisions around HSAs, 401(k)s, and the choice between Roth and pre-tax contributions at different tax brackets.

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Why you'd press play

Sort your cash buckets before the next saved dollar lands in the wrong place.

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