How a case is worked
The Method
The same order of operations, applied to every household on this site, computed rather than asserted — and written down every time we set it aside.
Every household is different. The way we work through its finances is not. Each case begins with the same questions, moves through the same financial priorities, and shows where judgment enters the picture.
That consistency matters. It lets you see how one framework behaves across very different lives, instead of getting a new set of rules every time the facts change. This page is that framework, written out in full, so nothing in a case file comes as a surprise.
First, the honest part
We did not invent this order. It is close to the conventional order of operations you will find in planning textbooks, forum flowcharts and other people’s advice. That is easy enough to verify, so there is no reason to pretend otherwise.
What is ours is the discipline around it: the same order applied to every case, computed rather than asserted, and a written record every time we set it aside.
Start with the life, not the spreadsheet
Before deciding where a dollar should go, we need to understand what that dollar is supposed to accomplish. So every case starts in the same place, and three things are established before any recommendation is made.
What matters here
Money is only useful in relation to a life. A household may want more time with young children, a larger home, the freedom to leave a job, fewer monthly obligations, an earlier retirement, or simply enough margin that an unexpected expense no longer feels like a crisis.
So every case starts with the goals, financial and otherwise, in the household’s own words. They do not settle the answer on their own, but they tell us what the plan is trying to solve for.
Where things stand
Then we build the current picture. What comes in each month, what goes out, what they own, what they owe, what is liquid, and what is already spoken for.
We do this before making recommendations because small details can change the answer substantially. A household earning $200,000 with $5,000 left each month has a very different problem from one earning the same amount with $500 left.
What has to give
Most households have more good uses for money than money available. Save more for retirement. Pay down the mortgage. Build cash. Travel. Replace the car. Fund college. Renovate the kitchen.
The difficult part is usually not identifying worthwhile goals. It is deciding what happens first — what comes now, what waits, and what the waiting costs.
A budget is a check on priorities
We do not treat a budget as a scorecard for whether someone is “good with money.” It is a way to compare what a household says matters with where its money is actually going. Sometimes those line up perfectly. Sometimes they do not, and the gap is the finding.
If a family says flexibility matters most but has built a life around large fixed payments, that gap matters. If travel is one of the things they value most and they can comfortably afford it, we are not interested in eliminating it simply because another category could theoretically be smaller.
The point is alignment, not austerity.
The ten steps
Once the current picture is clear, available monthly cash moves through the same sequence in every case. The numbers change. The order does not.
Think of it as a waterfall. Cash fills the highest unfinished priority first, then moves to the next one.
The order of operations
| # | Step | What it covers |
|---|---|---|
| 1 | Essential debt payments | Contractual minimums on every liability currently due |
| 2 | Basic living expenses | Essentials only — housing, utilities, food, transportation, insurance |
| 3 | Starter emergency reserve | One month of basic living expenses |
| 4 | Employer match capture | Retirement contributions up to the employer’s match |
| 5 | High-interest debt | Balances above the band, and balances inside it unless the case elects otherwise |
| 6 | Full emergency reserve and short-term savings goals | The rest of the reserve the case selects, then goals within three years |
| 7 | Retirement maximization | Remaining tax-advantaged room — 401(k), IRA, HSA |
| 8 | Low-interest debt | Balances at or below the band, plus liabilities nothing is yet due on |
| 9 | Long-term savings | Goals beyond three years, or with no date recorded |
| 10 | Taxable investing | Everything still unallocated |
The first dollars go to the top of the list, and each step is filled before the next begins. A case shows where the household currently sits in that sequence, what is keeping it there, and what changes would move it forward. These ten steps are implemented in the engine that computes every file, and the engine is what governs.
The boundary constants
Some financial decisions live in gray areas. Rather than quietly changing the rules from one case to another, we publish the boundaries we use. A few numbers in the method are settled in advance and published, rather than chosen case by case, so the same situation is never treated two different ways in two different files.
They are not laws of finance. They are consistent starting points.
The high-interest band
Debt above 8% APR moves toward the front of the line, at step 5. Debt at 5% or below generally waits until step 8. Between the two, the answer is less mechanical — it may depend on liquidity, taxes, risk tolerance, the type of debt, and what else the household is trying to accomplish. Inside the band the method leans toward repaying, because that return is the guaranteed one; a case may invest instead, and when it does, the case says so.
The starter reserve
One month of basic living expenses, at step 3. A larger emergency fund comes later, at step 6 — depending on the household, that may ultimately mean three months, six months, or something else entirely. Separating the two keeps a household from sitting on a large pile of cash while carrying very expensive debt, without asking it to operate with no cushion at all.
The short-term horizon
Three years. A goal expected within three years is treated as short-term and funded at step 6. Goals beyond three years — or with no date recorded — generally sit later, at step 9, alongside other long-term savings.
These are published so they can be argued with. If one of them changes, the change is dated and the files it affects are reopened, rather than a new number simply appearing in the next case.
What the method does not do
The order of operations tells us how to deploy money that is available. Sometimes that is not the real issue.
The method has no step for canceling a commitment, selling an asset, changing jobs, moving, or renegotiating anything. And that matters more often than it sounds. A household may have no meaningful monthly surplus. It may own an asset that no longer makes sense. Housing may consume too much of its income. A car payment may be crowding out every other goal. Income may simply need to rise. Those are upstream questions.
When the math shows that rearranging the leftover cash will not materially change the outcome, we stop rearranging it. The case then turns to the bigger levers — expenses, assets, debt structure, income, or other commitments — and says so plainly, rather than publishing a plan full of zeros.
A ten-step waterfall is useful. It is not a substitute for thinking.
When a case departs from the method
The framework gives us a default sequence, not an excuse to ignore the facts of a particular household. There will be cases where following the standard order produces a worse real-world result. When we depart from it, we do three things.
The deviation rule
We show the departure. It is marked on the step graphic in the file, and written up in a note that states which priority moved and where it moved to. You should never have to reverse-engineer whether we followed the normal framework.
We explain why. The reason is written in plain language. Maybe liquidity is unusually important. Maybe a debt carries an unusual risk. Maybe an employer benefit creates a temporary opportunity. Maybe a life goal makes a mathematically imperfect choice entirely reasonable.
We show the cost. The engine models both paths, and the case states what the departure costs — additional interest, a different payoff date, a lower projected value, more months before another goal can begin, or some other measurable consequence. Whenever the trade-off can be quantified, we quantify it.
The reason belongs next to the case it applies to.
Then you can decide whether the trade is worth making. That is an important part of how we think about this work: a choice does not have to maximize the spreadsheet to be the right choice, but its cost should be understood.
Why use the same framework every time?
One case can be persuasive. A collection of cases is more useful. Over time you can see what happens when the same principles meet different incomes, debts, goals, families, careers, housing decisions and personalities. You will also see the places where we make judgment calls, and the places where we deliberately choose something other than the financially optimal answer.
That is what the Casebook is for: not a collection of prescriptions, but a body of financial decisions you can examine, challenge, and compare with your own. The files are in the Casebook, and Standards sets out what this site guarantees about them.