If you want to pay off debt, buy a home and save for the future, here’s what to do first – CNBC

If you want to pay off debt, buy a home and save for the future, here’s what to do first – CNBC

This story is part of CNBC Make It’s One-Minute Money Hacks series, which provides easy, straightforward tips and tricks to help you understand your finances and take control of your money.

Buying a house, saving for retirement, paying off debt: With so many competing financial goals and limited funds, it’s hard to know exactly what to goals to focus on. But financial experts say there are three things to prioritize before anything else.

First things first: Start an emergency fund. This is a savings account specifically for unintended events, whether that be something life altering like a job loss or temporarily inconvenient like a broken cell phone.

Many financial planners advise aiming to set aside three to six months of essential expenses, including enough to cover your housing payment, groceries, utilities, loan payments and more.

Others, like Suze Orman, financial expert and former CNBC television host, say stashing away eight to 12 months’ worth of expenses is more realistic. Ultimately, your goal should be to put away the amount that helps you sleep more soundly at night.

If you’re starting from zero and even three months of expenses seems overwhelming to save, start with whatever amount you can and build from there. Even a small cushion is better than nothing.

Second, put as much as you comfortably can into a retirement account. Financial experts advise putting away 15% of your salary, although this will vary depending on how much you can reasonably afford. Ideally, this is done in tandem with contributing to your emergency savings account.

If your employer offers a 401(k) and a match, contribute up to their matching contribution rate. Not doing so is almost like taking a pay cut. 

If you don’t have a 401(k) or a match, then look into an individual retirement account (IRA) at a brokerage like Fidelity or Vanguard. There are traditional and Roth accounts, which offer different tax benefits. You can read more about the differences here.

Your third priority is to pay off any high-interest debt — typically anything over 8%. Doing so will save you more money in the long-term and help ease your financial anxiety.

One way to tell if you’re better off putting more money toward your debt or toward another goal like investing is to think about the return. If you have credit card debt with the national average 16.22% interest rate, then it makes more sense to focus on paying off that debt than investing outside your retirement account, where returns will most likely be lower.

Taking care of these three priorities will put you on the path to solid financial footing. And once they’re accomplished, you can move on to other goals, like investing more or saving for a home.

Check out: Meet the middle-aged millennial: Homeowner, debt-burdened and turning 40

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