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?