6. Emergency fund

6. Save 6 months worth of living expenses in a money market fund or CD ladder. The money must be liquid (easily withdrawn)

Now that you are out of debt (bad debt anyways) start diverting the money you were using to pay off debt to build an emergency fund. You should sock away 6 months of living expenses in a money market or cash equivalent account. You can use your budget to tell you how much money that is. As far as the type of account is concerned you want be able to to access this money at a moments notice. Such as an online savings, money market, personal Savings, or CD Ladder. 

To make a ladder divide your emergency fund by 5 and put the first 5th in a 5 year CD. The second 5th in a 4 year CD. The third 5th in a 3 year and so on. When the 1 year CD comes due put that money in a new 5 year CD. When the 2 year CD comes due put that money in a new 5 year CD and so on. After 5 years of this you will have five 5 year CDs. The CD ladder may make you more interest but it can be difficult to take it all out without penalty. In today's market, interest rates are so low that the difference between an online savings and a 5 year CD is negligible. The ladder can be adapted to bonds as well. This is how many people get their nest-egg to make them a regular income. When rates go up a few points I will reconsider using the ladder approach.

Some financial advisers suggest building up your emergency fund before you pay off your bad debt. I found this hard to do. I would build a little savings and BOOM car repair or BOOM medical bill. I had a much easier time focusing on my debt first. Plus as you pay off individual cards the "extra" money left over every month grows. This allows you to pay off the rest of them faster. If you have to pay all of the minimums while building up you emergency fund it can be a long slog.