For example, if you have:
- debt: credit cards, home loan, auto loan
- long-term goals: college fund(s), retirement fund, emergency fund
Assume your credit card interest rate is larger than your mortgage interest rate. And assume you can only put money in one at a time (a tad unrealistic I know, but for the sake of argument let’s assume you don’t have enough to do all at once).
How would you order, from “Pay off or Invest in First” to “Pay Off Last”
For me personally, I am doing the following:
- Establish an emergency fund up to $1,000;
- Pay off credit card debt;
- Pay off auto loan;
- Continue to build my emergency fund up to 6 months of living expenses;
- Pay off home loan.