I'm inspired, but WHERE do I start?

[smustache]

​Hello, fellow mustacheans. I've been reading the blog for about a month now and have been inspired to start saving hardcore, paying off debts, and investing, with a goal of early retirement.  The problem is I'm not exactly sure WHERE to actually start putting the extra money that I save based on my specific financial situation.

Age: 32
Salary: $54,000
Mortgage: $76,332 @ 4.75%
Student debt A: $22,632 @ 3.875%
Student debt B: $32,311 @ 3.625%
Checking Account: $5,821
Savings Account: $32,426
HSA Account: $961
401k: $58,505
RothIRA: none
Taxable account: none

1. For the past 9 years of my working career, I've assumed it best to pay the minimum payment on my debts since the interest rates are relatively low, and instead put as much as I can into my 401k (which has been 10% of my salary).  While my employer does not do a matching program, they do annually add 3% (based on my salary) into my 401k.  Is this a correct strategy?  Should I continue to put money into my 401k until I max out the limit, and only THEN pay above the minimum monthly fee on my debts?

2.  I realize I have WAY too much money in my savings account that isn't "working" for me.  (Originally, I was saving up to re-side my house in vinyl siding, but after reading the blog for awhile, I realize I can live with my shabby insulbrick siding for now since its not leaking and I'm not selling anytime soon.)  That said, I would like to put a portion of my $32k somewhere where it could still serve as an emergency fund but also be making a good return.  If would I channel that money into my 401k or open a Roth IRA, but then do end up having an emergency, I think I would be penalized if I touched it.  (I realize there are hardship exemptions, but I'm not 100% sure how those work.)  Would it be wiser to put a portion of the $32k into a taxable account (like a Vanguard index fund) so I have easier access to it in case of emergencies?

3.  If my level of saving is such that I'm not yet maxing out my 401k and I'm only paying the minimum payment on my debts, is investing in a taxable account (like a Vanguard index fund) out of the question?  Or should I be trying to do multiple things at once, like pay a little more into my 401k, pay a little more on my debts, and pay a little into a taxable account.  My thought is that if I would start a taxable investment account now, if I ever get to the point of retiring before age 65, I'd have some accessible funds to bridge the gap until I have unpenalized access to my 401k at age 65.

4. At the end of the day, is there a hierarchy of To-do steps that one should complete in a certain order before moving on to the next step?  Maybe I'm thinking too much into everything and there's a simple time-tested strategy that applies to everyone, if only they can hunker down and start hardcore saving!

Thanks for any advice that anyone takes the time to offer!

[MDM]

smustache, welcome to the forum.

In the lists below, thinking "first your 457 (if you have one), then your 401k and/or 403b" wherever "401k" appears is likely correct.
Differences of a few tenths of a percent are not important when applicable for only a few years (in other words, these are guidelines not rules).

WHAT
0. Establish an emergency fund to your satisfaction
1. Contribute to 401k up to any company match
2. Pay off any debts with interest rates ~5% or more above the 10-year Treasury note yield.
3. Max HSA
4. Max Traditional IRA or Roth (or backdoor Roth) based on income level
5. Max 401k (if 401k fees are lower than available in an IRA, or if you need the 401k deduction to be eligible for a tIRA, swap #4 and #5)
6. Fund mega backdoor Roth if applicable
7. Pay off any debts with interest rates ~3% or more above the 10-year Treasury note yield.
8. Invest in a taxable account with any extra.

WHY
0. Give yourself at least enough buffer to avoid worries about bouncing checks   
1. Company match rates are likely the highest percent return you can get on your money   
2. When the guaranteed return is this high, take it.   
3. HSA funds are totally tax free when used for medical expenses, making the HSA better than either traditional or Roth IRAs.   
4. Rule of thumb: traditional if current marginal rate is 25% or higher; Roth if 10% or lower; flip a coin in between (or see   
   http://forum.mrmoneymustache.com/investor-alley/deciding-between-roth-and-traditional-ira-based-on-marginal-tax-rate/
   if you want even more details on that topic.)
5. See #4 for choice of traditional or Roth for 401k   
6. Applicability depends on the rules for the specific 401k   
7. Again, take the risk-free return if high enough   
8. Because earnings, even if taxed, are beneficial   

Is that what you seek?

The emergency fund is your "no risk" money.  You might consider one of these online banks: http://www.magnifymoney.com/blog/earning-interest/best-online-savings-accounts275921001
   
If your 401k options are poor (i.e., high fund fees) you can check http://forum.mrmoneymustache.com/investor-alley/to-401k-or-not-to-401k-that-is-the-question-43459/ for some thoughts on "how high is too high?"

[Glenstache]

Yes. What MDM said.

Also, the Bernstein book, "Investor's Manifesto" is probably a good book to read for a nice overarching framework as you get started. It's probably available at your library.

[Bateaux]

Open a Roth IRA today and fully fund by the end of the year and every year.   Get at least the match on 401K add more when you can, the tax savings are great.  Take on no new debt and work down the smaller of those student loans then attack the other.   I'd keep about 5k in the emergency fund (checking and savings combined) all the rest would go against the student loans..

[Monkey Uncle]

MDM pretty much covered your situation, but here are a few additional minor points:

You mentioned having penalty-free access to your 401k at age 65.  That actually happens at age 59.5, and there are ways to access the money before then.  See: http://forum.mrmoneymustache.com/investor-alley/how-to-withdraw-funds-from-your-ira-and-401k-without-penalty-before-age-59-5/

If all your deductions get your taxable income down to 37,451 or below (which I'm guessing will be the case), you pay no federal tax on capital gains and dividends.  So a taxable account is functionally equivalent to a Roth IRA, at least until your taxable income increases into the 25% marginal tax bracket.  If you do a Roth pipeline to fund your early retirement, you'll need some assets in a taxable account to get you through the first 5 years.

Your mortgage rate seems a bit high.  Have you looked into refinancing possibilities?

[ooeei]

You can withdraw CONTRIBUTIONS from a Roth IRA at any time without any penalties.  What you can't withdraw is the EARNINGS. 

My vote is to maximize your Roth IRA with some of that savings account money, even if you just put the $ in a money market fund (basically a savings account in your IRA).  Since the Roth has such a low annual limit, getting money in there is good if you don't know what to do with it.  If you decide in 3 years you need the money, you can take out all of your contributions. If you find out you don't need it right away, now you have $16500 in a tax free account to invest how you want.

edit:  http://jlcollinsnh.com/stock-series/ is a good source of reading about stock market investing.  Worth a look.

[Retired To Win]

...  I realize I have WAY too much money in my savings account that isn't "working" for me... That said, I would like to put a portion of my $32k somewhere where it could still serve as an emergency fund but also be making a good return.  If would I channel that money into my 401k or open a Roth IRA, but then do end up having an emergency, I think I would be penalized if I touched it.  (I realize there are hardship exemptions, but I'm not 100% sure how those work.)  Would it be wiser to put a portion of the $32k into a taxable account (like a Vanguard index fund) so I have easier access to it in case of emergencies?

The job of an emergency fund is to be liquid and available in case a financial emergency does crop up.  It is not the job of that emergency fund to be "making a good return."  There is no way to keep the funds liquid (without running the risk of significant loss upon liquidation) and still try to achieve investment-level returns on that money.  You need to let go of that notion.

In your shoes, I would calculate what the correct size of my emergency fund should be based on my present living expenses, set that cash aside in as high-yielding a savings account or money market fund as I could find and call that a victory.

Good luck.

[Mr Money Mutton Chops]

Personally, once I had an emergency fund up to my satisfaction, I'd start banging down the debts. Guaranteed returns, plus psychological benefits. Maybe that's not such a big factor to you, but it can't feel good having that much debt.

4. At the end of the day, is there a hierarchy of To-do steps that one should complete in a certain order before moving on to the next step?  Maybe I'm thinking too much into everything and there's a simple time-tested strategy that applies to everyone, if only they can hunker down and start hardcore saving!

As far as I can tell (established members, correct me if I'm wrong), the only set rule is as long as you're saving, you're headed in the right direction.

[runningthroughFIRE]

Personally, once I had an emergency fund up to my satisfaction, I'd start banging down the debts. Guaranteed returns, plus psychological benefits. Maybe that's not such a big factor to you, but it can't feel good having that much debt.

4. At the end of the day, is there a hierarchy of To-do steps that one should complete in a certain order before moving on to the next step?  Maybe I'm thinking too much into everything and there's a simple time-tested strategy that applies to everyone, if only they can hunker down and start hardcore saving!

As far as I can tell (established members, correct me if I'm wrong), the only set rule is as long as you're saving, you're headed in the right direction.

Technically the only set rule is to not be a Complainypants Consumer Sucka spewing forth rivers of frivolous luxury bullshit from your every pore (put nicely as optimize your happiness and think carefully about how you spend your resouces), but this usually results in saving.  Close enough.

[MDM]

Rules?  What rules?  Nobody told me anything about rules.... ;)

See http://forum.mrmoneymustache.com/welcome-to-the-forum/our-mustachian-sacred-cows/ for some irreverent opinions.

[runningthroughFIRE]

Rules?  What rules?  Nobody told me anything about rules.... ;)

See http://forum.mrmoneymustache.com/welcome-to-the-forum/our-mustachian-sacred-cows/ for some irreverent opinions.

Fun thread link, thanks!
I, for one, welcome our new mustachian-police overlords =p