My husband and I recently paid off all of our debt except for our mortgage. Yay! The problem is, now I'm feeling more overwhelmed than ever. I'm trying to figure out the best way to save our extra income, and I'm kind of struggling. Building a good emergency fund is a definite priority. We were skimming by with $1,000 dedicated for emergencies. Now, I have set up an automatic savings plan so the $500 we used to spend each month on debt goes to our dedicated emergency fund. We are aiming for 6 months of expenses because we are a single income household. I've estimated that it will take around two years to save up the full amount.

We often have a little extra money beyond that $500 that we could also save. Part of me wants to throw it at the emergency fund and get that finished as soon as possible, but I also see many other big expenses on the horizon that could put us back into debt if we haven't saved for them. My husband's car is 11 years old and I'm not sure how much longer it will last, and we moved into an old house that will need some work done. We do have a few thousand in savings from when we sold our house over the summer that I have been using for house projects and preparing for our new baby on the way.

How would you allocate the extra money? Is it important to get the emergency fund out of the way as quickly as possible before saving for other things?

Congrats on getting out of debt! You now have the luxury of deciding where your "extra" money will go, but as you've discovered there are so many choices that it's hard to make a decision. It's like standing in front of a shop with 43 flavors of ice cream but you can only choose one or two for your sundae.

Building your emergency fund does sound like a good plan. As for the remaining extra money, why don't you just set up some savings goals and budget for them -- a little bit toward the house, a little bit toward the car, whenever you have the money to do so?

If you don't want to do a budget, you could set up separate savings accounts for these goals and dump money into them whenever you can.

Congratulations! Not having consumer debt is a very big achievement, one that many people (including myself) would love to have.

Especially with the baby on the way, I would sock away any money you can into an emergency fund until you have your six months of expenses. Once that is set up then you can start saving for those other big-ticket items.

What big ticket items are you possibly seeing on the horizon? You mentioned the car but cars can be relatively cheap if you need them to be (<$5k), so what else are you worried about.

It will be hard for people to give concrete advice without more concrete numbers. You don't have to share more than you're comfortable with, but keep that in mind.

Thank you both!

I think part of my problem is that I haven't sat down to put concrete numbers to the house projects that will need to be done. I have been looking at car ads to get an idea of how much that might cost (and if worse came to worse we could probably swing being a single car family for a while).

Our house has wood siding, so we will either need to have it painted (around $5,000?) or re-sided within the next few years. We have knob and tube wiring that we want to replace, and fortunately my dad can do a lot of it so we will only need to pay for materials. I think we should also save for a new furnace. We have a very old one, and although it's chugging along just fine, you never know with those things. All in all, I would estimate $15,000 as a good starting point for the house projects that are really needs. Of course there are many other "wants" that I would be sad not to accomplish, but maybe our financial situation will improve more than I expect in the coming years.

I'm thinking maybe we could have two separate accounts for the car and the house, and then divide any extra money in half between them.

This is just a suggestion, but it really worked for me -- there's a great piece of software called You Need a Budget (YNAB) that might be able to help with meeting multiple financial goals. Basically whenever you get paid, your first step is to "give every dollar a job" in YNAB: you set up budget categories and assign every dollar a task in whatever categories you need to fund. Then you spend according to your budget, rather than spending according to your account balances. YNAB is flexible and recognizes that nobody's budget forecasts can be accurate, so you can move allocations around over the course of the month as you need to. But YNAB forces you to deal with your own finite pool of money, so you never risk going into debt again. More importantly, it helps keep you on track to meet your various goals.

I used to think "as long as more money is coming in than going out, I'm fine," and that was true to an extent, but I wasn't making much progress on meeting my goals. YNAB turned that all around.

YNAB is actually kind of a misnomer, because it's more of a spending plan than a budget. It's not so much "I'm only allowed to spend x this month on food," but rather "here's what I want to do with my money." Once you decide what you want to do with it, YNAB helps you stick to that plan, and it helps you see the costs of deviating from your plan because you have to rob from one budget category to pay for overspending in another. I never thought budgeting would be fun, but YNAB is addicting and I've found it really useful in my own post-debt financial management.

I know it is tough to solely focus on an emergency fund when you know there are so many other big expenses you have to save for. My suggestion is to prioritize your home improvement list. The knob & tube wiring would definitely be my #1 home improvement. I would split my money between the emergency fund and materials for the wiring.

My husband and I painted our house in 1 day using <$150 worth of paint, a $50 rented scaffold and the help of 4 kind friends... $5000 seems steep!

Maybe get your e-fund up to 3 months, then split your savings: 50% to e-fund, 25% to car, 25% to home.

This is a good suggestion in bold.