- 5 years ago
- Wedding: August 2015
I’m a big fan of saving a bit per month while you are paying off debt completely. My husband and I are aggressively paying off debt right now, but have always had a $200 automatic withdrawal set up at our bank, part to go into our savings account and the other part into our emergency account. We don’t miss it when it’s gone, and we have a good buffer because of that. Paying yourself first is important! We also contribute to our retirement funds, but any extra money is going toward debt. That way we save on interest AND we can then work with our entire income to save aggressively.
I would prioritize it this way — I am very inspired by Dave Ramsey and his “baby steps” make sooo much sense:
- Baby Step 1 – $1,000 to start an Emergency Fund
- Baby Step 2 – Pay off all debt using the Debt Snowball
- Baby Step 3 – 3 to 6 months of expenses in savings
- Baby Step 4 – Invest 15% of household income into Roth IRAs and pre-tax retirement
- Baby Step 5 – College funding for children
- Baby Step 6 – Pay off home early
- Baby Step 7 – Build wealth and give!
These baby steps are written for someone who already has a mortgage, but if I were in your shoes I would start saving for a house AFTER you pay off debt. We follow these loosely, but personally right now we invest as much as I can into retirement savings now because that way time is on our side and our money will grow. I don’t want to wait until baby step 4 to do so because our investments have already grown a ton in the past few years.