What comes first: savings or debt payoff?

Dear Liz: Should I pay off my debts before I start my emergency fund savings?

Answer: It’s smart to put at least a few hundred dollars in the bank before you begin to pay down your debts. That way, if you face a small financial setback, you can tap your emergency fund and not have to add to your debt. But it doesn’t make sense to wait until you have several months’ worth of expenses saved before you pay debt, because that can take years to accomplish and you’d pay a fortune in interest in the meantime.

Ways to reduce the cost of your meds

Dear Liz: My husband recently was placed on a pricey medication ($20 a day) that is not covered by insurance. Any suggestions to getting help with this added $7,000-a-year expense?

Answer: Doctors can be surprisingly ignorant of the cost of medications, so your first call should be to your pharmacist to see if there are more affordable options, such as a generic drug. If so, call the doctor back to see if your husband can switch.

Either way, start shopping around. Medication costs vary enormously from pharmacy to pharmacy. You also should check to see if a mail-order pharmacy might save you some money.

Be sure to ask about discounts. Pharmacies may offer discounts for cash or with certain memberships, such as with AARP. Prescription discount cards are easy to find — just type “prescription discount card” into an Internet search engine — but steer clear of those that charge fees.

Also check NeedyMeds.org, which lists discounts and assistance programs specific to hundreds of medications. NeedyMeds also has a free prescription discount card.

How to prioritize your savings

Dear Liz: I put 10% of my income into my 401(k) retirement account and my employer matches up to 6%. Should I also be saving another 10% in a regular savings account? I have $2,500 in regular savings right now.

Answer: You don’t say how old you are, how much you’ve saved for retirement already or what your other debts are. All those factors help determine where your savings should go.

You’re smart to be contributing to a 401(k) and getting the full company match. You can use an online retirement calculator, like the one at ChooseToSave.org, to see if you’re saving enough. If you’re not, you can boost your contributions.

If you’re on track for retirement, the next step is to pay off any toxic debt such as credit cards. (Toxic debt is any debt that carries high or variable rates and that erodes, rather than enhances, your wealth.) Once that’s paid off, you can focus on building up your emergency fund. In general, it’s smart to have at least three months’ worth of expenses in a savings account to be tapped in case of real emergency, such as a job loss.

Using cards as an emergency fund can hurt your scores

Dear Liz: Help! In the last year, my credit scores have dropped 30 points. I don’t know why except that my credit reports noted that I used 10 credit cards recently. (I’ve had many dire emergencies lately, but I paid off all my balances as usual.) I’m terrified of more drops. What can I do?

Answer: Build up your emergency fund.

Because you charged your emergencies, you used up more of your available credit. The more of your credit you use, the more negatively your scores tend to react. It doesn’t matter that you paid your balances off each month. What counts is the balances that your credit card issuers report to the credit bureaus, which are typically the balances on your latest statements.

Now, the good news is that your scores probably will recover as soon as you start charging less. But you should take this as a sign that credit cards are a poor substitute for savings. An emergency fund could help you survive life’s inevitable setbacks without having to run to your cards.

Finding advice on truly frugal living

Dear Liz: Most of the articles I read about saving money seem to be written for people who make a lot more than I do. I don’t eat out, drink lattes or buy clothes anywhere other than discount stores. Where are the articles for me?

Answer: All over the Internet. Start with one of the oldest frugal-living sites, the Dollar Stretcher, at www.stretcher.com. It’s filled with articles and tips for every budget, including the tightest. Mary Hunt’s Debt-Proof Living at www.debtproofliving.com is another good one to try. You also should check your local library for the book “Your Money or Your Life” by Joe Dominguez and Vicki Robin. It will open your eyes to the possibilities of financial freedom on any income.