Yes, increase your withholding to 1. But be sure to save the extra money that will be in your paycheck -- don't let it go to waste.
Does your company offer matching on the 401k? General rule of thumb is to put enough in your 401k to maximize the match and then put the rest in a Roth IRA. By the way, a Roth IRA should be for retirement. Yes, it can be used for other things, but it shouldn't be.
Aim for
~5% interest on your emergency fund and your house savings.