When creating a budget, the top priorities should be:
- Building an emergency fund : Establishing a safety net of at least a few months of essential living expenses to cover unexpected events is critical. Start with a smaller goal, such as $500, if a full fund isn't immediately possible, and grow it over time.
- Meeting employer 401(k) match : Contributing enough to get the full employer match is effectively free money towards retirement savings and should be prioritized.
- Paying off high-interest debt : Focus on paying off debts with the highest interest rates, such as credit cards and payday loans, to reduce financial burden.
- Covering essential expenses : Prioritize spending on basic needs such as housing, food, healthcare, and utilities to maintain financial stability.
- Saving and investing for future goals : Once emergency fund and high-interest debts are addressed, allocate funds to other goals like retirement, education, or major purchases.
- Tracking and adjusting regularly : Monitor spending closely, use tools or apps to stay on top of budget categories, and adjust the budget as necessary to align with changing circumstances.
These priorities help ensure financial security while progressing towards longer-term financial goals.