Vivian Tu

So S stands for savings.

It's so important to get that emergency fund first.

You break your leg, some bad happens to you, you're going to need it.

And if you don't have it, you're going to get worse into debt.

Emergency fund.

If you are a singleton who rents, three to six months is totally fine.

If you got a family, you got a mortgage, the stakes are a little higher, you probably want to be closer to nine to 12.

T stands for total debt.

And I say total debt because people think about debt as this evil thing.

Not all debt is created equal.

And debt with higher interest rates, things like credit card debt, when you're looking at a 22% to 25% interest rate, is a lot dicier than something like federal student loan debt.

You might have like a

3% interest rate on that.

Those two do not compound at the same rate.

It's just math.

So what you do is you rank your debt from highest to lowest interest rate and you pay it down in that order.

You pay off the minimum balance of every single account.

So you pay off the minimum balance on everything.

But any money you have left over to pay down debt, you put towards the highest interest rate.

Yes.