'I got a big raise, but should I pay off my credit card or the mortgage?'

Jayson Thornton, CFP is an award-winning Financial Advisor and host of Pocket Watching with JT a financial advice podcast and YouTube channel. Below he answers a recent question from a subscriber:

Charles from NJ asks: "I recently got a raise. I went from $3,000 a month to about $4,500-$5,000 a month. My current debt is $7,500 in credit card debt and I pay $2,400 in bills/rent a month. Me and my sister pay our parents' mortgage, which is why my expenses are only at $2,400. I would like to move out once we complete the mortgage, which will be next year.

I only have $1,000 in emergency fund. With my new money, should I pay my credit card debt and look to move out? Or pay more to the mortgage? Side note: I need to stop eating out so much." 

Pocket Watcher: Hey Charles from New Jersey! I salute you on the raise. That is a major win, and I want you to feel good about that financial progress. But here's the tough love part: a bigger paycheck doesn't fix a broken financial system. You're asking about Step 3 (Debt Planning) and looking ahead to Step 6 (Wealth/Future Planning), but you're skipping Step 2, and that's going to mess up your entire plan.

Here is your clear, actionable plan based on the Pocket Watcher's Seven Money Rules

Step 1: Get Your Money Scorecard (Budgeting) 💳

First, you already know your biggest problem: the "Side note: I need to stop eating out so much." That's your "Want Money". Your new paycheck is fantastic, but that extra $1,500 to $2,000 a month is going to disappear just like the money before if you don't track every dollar.

• Action: You need to create your Money Scorecard immediately. List every single expense—from your $2,400 bills/rent to every takeout meal. This is about gaining clarity and control over your cash flow.

• Result: You've just found your "Debt Fuel". You're going to use the money you stop spending on wants to attack your debt, which is how you get your own "Maria moment".

The Right Order: Stop the Debt Spiral Before Moving Out

Now to your main question: Do not pay extra on the credit card and do not pay extra on the mortgage right now. You have to follow the steps in their mandatory sequence.

• Your biggest immediate risk is a Debt Spiral. You only have $1,000 in emergency savings. That’s not a safety net; that's a speed bump. A single car repair or trip to the emergency room will immediately put you deeper into that $7,500 credit card debt.

Step 2: Build Your Safety Net (Emergency Savings) 🛡️

Your new, higher income is the key to finally getting safe. You have to fill this savings account before you move on.

• Goal: Build a safety net of 3 to 6 months of essential living expenses. Even with your low rent, you should aim for at least $7,200 to $14,400 ($2,400 x 3 or 6 months).

• Action: Take all that "Want Money" and a large chunk of your raise, and throw it into a High-Yield Savings Account (HYSA). This is your Debt Spiral Guardrail. Do not invest this money; it needs to be liquid and safe.

Step 3: Kill the Money Monsters (Debt Planning) 💰

Once your emergency fund is built, then—and only then—do you attack that $7,500 credit card debt.

• Action: Since you're looking for a quick win to build momentum to move out next year, I recommend the Debt Snowball method. This method targets the smallest balance first, which is a great psychological motivator.

• Don't Touch the Mortgage: Do not put extra money toward the mortgage. Your focus needs to be on aggressively eliminating the high-interest consumer debt. The credit card interest rate (the "Monster's Teeth" ) is eating your future cash flow. Kill that first.

  
  

Keep your eye on the prize. If you follow Steps 1 and 2, you'll be debt-free and safe from the Debt Spiral. Then you can focus on moving out and saving for your own home.

You are in control, Charles. Financial freedom is not about making one big transaction. It's about building new money habits, and watching your pockets. Your next step is to go to www.PocketWatcher.net and follow the Pocket Watcher 7 Money Rules! 

About

Jayson Thornton, CFP is the founder of Thornton Financial and host of Pocket Watching with JT where he answers your financial questions. To learn more or submit a finance question go to www.PocketWatcher.net

For press inquiries, contact Jayson Thornton, CFP at PocketWatcherJT@gmail.com or 314-776-9076.