[noodle]

this is how i typically recommend people to prioritize their money:

(1) pay your bills (2) get a small emergency fund together (enough to pay for a small emergency, car breakdown, 1 month's living expenses, etc) (3) pay down high interest debt (credit cards, etc) (4) get a large emergency fund together (enough to support you for a few months if you lose your job, major emergency, etc) (5) invest and pay down low interest debt (mortgages, student loans, etc).

creating a smaller emergency fund to start sets the best precedent because it creates a safety buffer. what happens if you throw tons of cash at paying down your CC bill every month and save nothing, but then you lose your job and have 0 income? you're going to end up missing payments, get penalized, and your debt will snowball again quickly. you need to have something to fall back on when bad things happen, just in case.

[phillmv]

That is bad advice. Always always get out of debt first.

CC debt is highly liquid. If you're fucked, you can max it out within 24hrs. Ergo, it doesn't make sense to have a pool of savings around and service the debt interest payments when you could clear out the debt and put that interest payment to good use elsewhere.

[eli]

I'd extend that emergency fund to more than a "few" months worth as soon as possible.

If you lose your job, it may take quite a few months to find a new one.

[noodle]

agreed, this is just a back-of-the-napkin beginner's advice.

[dailyrorschach]

This is exactly how I've been doing it. Auto-transfer set up on the bank account, and taking cash out for spending money instead of just letting myself use a credit or debit card.

[noodle]

credit cards are useful tools. i use mine and just pay it down monthly. if you have any plans on obtaining a loan/mortgage at any point in time, the easiest way to establish yourself with good credit is through actually using a credit card.

[mattw]

Everybody says this, but I've obtained three different mortgages in my lifetime and never had a credit card. In lieu of credit history, the bank has just asked for other evidence that I pay my bills, like statements from the utility company.

Maybe I'm just lucky, but in my opinion, wanting a good credit score is a pretty bad reason to get a credit card.

[noodle]

how long ago were the mortgages and how old were you when you tried to obtain them?

i think the climate is different now. i have a friend who is reasonably fresh out of school and tried to buy a place, but got turned down for mortgages due to lack of credit history (and presumably a lack of "other evidence" as well).

[mattw]

First one was in 2002 and I was 20. Last one was about 21 months ago.

I've heard that a lot of rules have changed as well, but I don't know how much changed after I got the last one. Some changes definitely affected me at that time, but the hassle in my case was related to the fact that I was buying another house before selling the current one so I need to hold two mortgages simultaneously. Required more documentation of cash in the bank due to debt/income ratio.

Ironically, once around 2007 while trying to take advantage of a 10% off deal from a home improvement store on a big purchase, I got turned down for their line of credit due to lack of history. (Glad it happened that way in retrospect.) But mortgage companies have never given me trouble.

Maybe I'm lucky. (I'm not independently wealthy.) Mortgage companies are inscrutable. :)

[dailyrorschach]

I don't mean that I don't use it all. I just don't use it for every single thing, every day. I was doing that, and was paying it off timely. But I found my spending was higher then I'd care for.