PRIORITY NO. 3: PAY OFF HIGH-INTEREST DEBT
A NerdWallet study found that 30% of Americans plan on paying off one or more of their debts in full in 2026. [1] If this is one of your goals, focus on high-interest credit card debt or loans, such as personal and payday loans, title loans and rent-to-own payments. Look into ways to help with your debt — like a debt management plan or bankruptcy — if either of these things is true for you: • You can’t repay your credit cards, medical bills or personal loans (i.e., unsecured debt) in the next five years, even if you cut your spending a lot.
• Your total debt (not including things like a mortgage or car loan) is as much or more than half of what you make before taxes.
PRIORITY NO. 4: SAVE FOR RETIREMENT (AGAIN) Once you’ve paid off your high-interest debt and have some extra money, focus on saving for retirement. Financial experts suggest saving 10-15% of your income before taxes for retirement. For many people, that’s a goal to work towards over time. Just know that your company match, if offered, counts toward that 15% total. If your job doesn’t offer a 401(k), or if you’ve already put in enough to get the full match, you can look into other options, such as a Roth or traditional IRA.
PRIORITY NO. 5: GROW YOUR EMERGENCY FUND
Keep adding to your emergency savings. Try to build up enough to cover three to six months of basic living expenses — like rent, groceries and utilities. It might take a long time to reach this goal. That’s OK. Use the fund when emergencies happen, and try to put the money back when you can. PRIORITY NO. 6: PAY DOWN THE REST OF YOUR DEBT Once your emergency fund is in good shape and your retirement savings are on track, focus on other debts. These payments go beyond the minimum required to pay off debt, if you have any remaining. If you’ve already paid off your high-interest debt, what’s left is probably lower-rate, such as student loans, or tax-deductible debt like your mortgage. Tackle these when the goals listed above are covered.
Try not to take money away from your emergency fund and retirement savings to do this.
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