How do I prioritize debt repayment versus saving for retirement with a limited income?

First, congratulations on taking control of your finances and creating a budget that works for you. It's great that you're thinking about both debt repayment and saving for retirement, as both are important for long-term financial stability. Now, let's break down your situation and explore some strategies to help you prioritize debt repayment versus saving for retirement.

To start, it's essential to understand the concept of high-interest debt and how it can impact your finances. In your case, the credit card debt is likely to have a higher interest rate than your car loan, so it makes sense to focus on paying off the credit card debt first. Consider using the debt avalanche method, where you pay off debts with the highest interest rates first, while making minimum payments on other debts.

On the other hand, saving for retirement is crucial, especially since you're 30 years old and have a head start. The power of compound interest can work in your favor, so it's a good idea to contribute something to your 401(k) each month, even if it's a small amount. If your employer offers a 401(k) match, try to contribute enough to take full advantage of the match, as it's essentially free money.

Given your limited income, you might consider the 50/30/20 rule as a guideline for allocating your $500 monthly surplus. Allocate 50% towards debt repayment, 30% towards saving for retirement, and 20% towards other goals or expenses. This can help you strike a balance between debt repayment and saving for retirement. For example, you could put $250 towards debt repayment, $150 towards your 401(k), and $100 towards other goals or expenses.

Additionally, you can explore other strategies to optimize your finances. Consider