Reply to What to do first? Debt vs Savings/Retirement

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[quote=Anonymous]Here's what Dave Ramsey would tell you, and it works:

Step 1 - Save $1,000 Emergency Fund

Step 2 - Pay off all your debts, except mortgage, smallest BALANCE first to largest balance

Step 3 - Start contributing 15% of income to retirement savings

Steps 4/5/6 - Extra on mortgage or save a down payment. Don't take a mortgage with a payment greater than 15% of your HHI on a 15-year fixed. Save for college.

The only thing I'd do to modify Dave's plan is to make sure you're saving for retirement up to employer matching. I know why he says not to, but I can't advise turning down an instant 100% return.

Specific to your situation, you're a good person, and you've had some tough luck, it sounds like recently, but you really need to understand how bad your situation is for people who are about 40 with a $200k income to have nothing for retirement. And no home equity. That's horrible.

You need to see the car and buy a $8k Corolla. I don't care if you're underwater on it. Put it on a credit card for now, but you need to get rid of that car. It's insane for two broke people to be driving those cars, I don't even care what it is. You don't need to "refinance it." You need to SELL it.

You may need to rent a cheaper place, too. 
[/quote]

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