Get your financial priorities straight

When money is tight, it can be tough to decide whether to pay your bills or save for an emergency. Both seem important, right? Liz Pulliam Weston, who writes for MSN Money, recently broke it down for her readers: from one to five, these should be your priorities:

1. Bills, bills, bills. You got ’em, and unfortunately, you’ve got to pay ’em. From rent or mortgage payments to utilities and insurance premiums, get these out of the way first. Even better: limit these expenses to half of your after-tax income. If you’re paying more, downscale.

2. Emergency fund. Having $500 in the bank may seem like a luxury in dire times, but you never know when a tire might blow or a trip to the doctor might set you back $100. A little cushion will ease the blow.

3. Save for retirement. Pulliam Weston suggests saving “10 percent for basics, 15 percent for comfort and 20 percent to escape.” Cutting back on or eliminating contributions to 401k or IRA funds is not a good idea.

4. Get rid of that dreaded debt. That means credit cards, folks. Start paying them off.

5. Back to No. 2. You got it—start adding cashola on top of that $500. The more you have in your emergency fund, the less stress you’ll endure if you lose your job or some other unforeseen event occurs.