New on FinoLib · Volume V: Personal Finance
I have added a new article to FinoLib, my finance education website: Financial Order of Operations Example: A $75,000 Paycheck Plan, part of Volume V: Personal Finance. It is part 2 of a 2-part guide. This page gives you the core of the topic in expert but plain language; the full article goes much deeper.
A closer look
Forty-five paychecks is 90 weeks — about 21 months. Without the card, steps 2 and 5 take $14,063.40 ÷ $432.72 = 32.5, so 33 paychecks, about 15 months (the 1.4 timeline); the $5,000 balance costs about 12 paychecks and roughly $232 of interest. From paycheck 46 the household saves $4,875 (6.5% to the 401(k)) + $2,250 match + $4,400 HSA + $7,500 Roth IRA = $19,025 a year, about 25.4% of its $75,000 salary. Both IRA types are open to it: income is far below the 2026 Roth phase-out of $153,000, and taxable wages of about $63,100 (after the 6.5% 401(k), health premiums and payroll HSA) are below the $81,000 point where the traditional IRA deduction starts to phase out (6.3 helps choose).
Part 1 built the plan — the budget, the emergency fund target, the automated transfers. This Part covers the plumbing that plan runs through: the accounts that hold money, what happens in the instant a card is tapped, the different rails money can travel on to get somewhere else, what happens when there isn’t enough of it, and which kind of institution should be holding it in the first place.
A worked example
Worked Example — The $75,000 Household, Paycheck by Paycheck
The household’s savings share from 1.3 is $432.72 per paycheck (20% of $2,163.60). One month of needs is $2,343.90 (1.4); six months is $2,343.90 × 6 = $14,063.40. To show step 4, assume the household also carries the $5,000 card balance at 20% APR used in 3.3, with its minimum payment inside the needs budget holding the balance flat until step 4 starts.
Decision rule
Rank every debt by its after-tax rate: the rate × (1 − your marginal tax rate) if the interest is deductible, the rate itself otherwise. If it is 8% or more, it belongs in step 4: after the match, before the full emergency fund. If it is 5% to 8%, split extra money between the debt and steps 6–8; half to each is a reasonable default, not a law. Below 5%, pay the minimum until steps 6–8 are full.
The costliest mistake
Stopping the 401(k) match to pay off a card faster. Take the running household at step 4 of the worked example above and suppose that, from paycheck 6, it stops its 6% contribution until the $5,000 card is gone, sending the extra $135.00 of take-home pay per check (the $173.08 contribution minus the $38.08 of tax it saved) to the card. The card is cleared at paycheck 15 instead of 18, and interest falls from $231.84 to $169.27: $62.57 saved.
Where Experts Disagree
The standard view: collect the full employer match before attacking high-rate debt. It is step 3 here, and step 2 in the Bogleheads wiki’s prioritization, which says that not getting a match “is like letting your employer keep part of your salary.” Its assumptions: the household keeps making extra debt payments with the rest of its savings share, and the match will vest.
Edge Cases: When the Standard Answer Changes
The order assumes a match that vests, debts with clear rates, and an HSA-eligible plan. These situations move a step up, down or out: Situation What changes Why Number or rule Match not yet vested and you expect to leave Step 3 is worth only the part that will vest Unvested employer money is forfeited when you leave Federal maximums: 100% after 3 years (cliff), or 20% a year from year 2 to 100% at year 6 (6.7: Vesting, Rollovers…
Recap
A household with a limited savings share needs a sequence, and this volume’s runs in nine steps: essentials and minimums, a one-month starter fund, the full employer match, high-interest debt, the full three-to-six-month fund, an HSA, an IRA, more 401(k), then everything else.
More from the article
■1. Essentials — Paid from the $1,081.80 needs bucket, not the $432.72 — Ongoing
■2. Starter fund — $2,343.90 ÷ $432.72 = 5.4; paycheck 6 needs only $180.30, leaving $252.42 — 6
■3. Match — 6% = $173.08 pre-tax already leaves every check (1.6: Paychecks Decoded) and collects the full $2,250 match — 0
■4. Card — $252.42, then $432.72 each check; interest of 20% ÷ 26 per two weeks adds ≈$232 in total — ≈12.5
■5. Full fund — $14,063.40 − $2,343.90 − $213.22 = $11,506.28; ÷ $432.72 = 26.6 — 27
What the full article covers
The full article includes worked examples, a clear decision rule, the one mistake that costs people the most, a recap, a reveal-on-click quiz and the official sources behind every figure.
Volume V: Personal Finance
Read the full article on FinoLib
The complete article, Financial Order of Operations Example: A $75,000 Paycheck Plan, with every worked example, diagram, quiz and source, is free to read in Volume V, Personal Finance on finolib.com.
Explore the Finance Education Series: Vol. II — Capital Markets · Vol. I — Global Economy · Vol. III — Finance Encyclopedia · Vol. IV — Finance Careers · Vol. V — Personal Finance