[jeffrey]

What is best really depends on what you feel most comfotable with. I say that because the stress of doing it a way you're not comfortable with can cause more problems than paying a little more and keep you from doing anything. That being said, here are some choices:

If you have made the commitment to reduce your debt and feel confident that you are not going to use your credit card, then you are better off paying your debts before creating you emergency fund. Since your credit card rate is low, you have a nuber of choices on how you want to approach it.

What is the rate on your car loan? If it is significantly higher than the credit card rate, you might want to consider paying this off first. Otherwise I would opt for paying off the credit card first. Now, your mortgage rate is higher, but I wouldn't go for this first for the following 2 reasons.

1. Credit card rates change (even for fixed rates) so how long that 3.9% rate will be in place is anyone's guess.

2. If you do have an emegency, paying off the house loan first will leave you without a lot of free room on the credit card and no savings which could end up being a bad situation.

I would probably opt for paying off the credit card first and designating it as your emergency fund if you have the confidence you can do that. Then if an emergency arises, you have the card to pay for it. If you don't, you can begin tackling the other debts.

There are a lot of people who just feel better having a cash emergency fund. While this will cost you more, they do better at saving overall with the cushion. If you are this type of person, then an emegency fund is worthwhile for the stress relief it provides and giving you more motivation toward tackling your debt.

Once you have your emergency fund or credit card paid off, then you can pay down the car loan first and then the mortgage. Again, the most important aspect in any of this is setting up a system you are comfortable with since that will almost always determine whether you follow through or not.