What should I prioritize first: debt, emergency fund, or investing for my family?

C

curioloopholer

New Member
My husband and I are no longer living paycheck to paycheck, at least for the most part. A side business cleaning houses brings in some extra money. This is helping us get ahead.

What should we prioritize? Should it be debt, an emergency fund, or investing for retirement and our kids?

Our household includes six people. We earn slightly over $100,000 annually. Tax season causes anxiety. Without the child tax credit, we would have owed money.

We have two car loans. We have student loans; mine are in forbearance until next year, while his payments start in August. There is also a 401(k) loan with about $6,000 remaining.

No one ever taught us about building emergency savings or investing.

We currently rent. Our goal is to buy a house by next summer. We want to save at least $20,000 for a down payment and closing costs.

I need a clear, step-by-step plan. What should we do first? How should we organize our budget priorities?
 
Here's a clear, practical guide to handling your money

1. Save for taxes first. It's smart to set aside about 30% of your income for this.

2. Create a starter safety net. Save enough to cover one month of expenses and keep it in a High Yield Savings Account (HYSA). This is your first emergency fund.

3. Tackle your debt. Focus on paying off any debt you have as quickly as you can.

4. Build a full emergency fund. Grow your saety net to cover at least 6 months of essential bills. A good target is $10,000 or more.

5. Invest for your future self. Start saving for retirement. Try to invest at least 15% of your income.

6. Plan for big purchases. Begin setting up separate savings sinking funds for future goals, like buying a house.

7. Look ahead for your kids. Once your own retirement plan is solid, you can start investing for your children's future.
 
Start with your emergency fund first.
Figure out your monthly expenses and multiply by two. That's your target amount.

Next, focus on your debt. List it from smallest to largest.
Pay the minimum on all debts, and put any extra money toward the smallest one.

When that loan is gone, move the money you were paying into the next smallest debt.
It’s like clearing one step before moving to the next.
 
We have a single credit card. My husband uses it for building his credit. He also uses it for car repairs and oil changes. The balance isn't paid off yet. However, we're reducing it quickly. We always pay more than the minimum.
 
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