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All good comments, but I have couple of points to add. Paying down debt is important, but you need to pay yourself. If someone ended up at retirement with no debt but no retirement, are they well off? Or is the person who saved diligently, managed debt intelligently, and ends up with an income stream greater than their debt at retirement?
I agree that stupid loans with mad interest rates need to be paid down. However, house and student loans have fairly cheap interest rates. Of course, your loan can simply be too big, but lets assume that the loan principal would fit a reasonable standard of income. The choice is 401k vs loan payment. A loan is paid with after tax money, however the interest is deductible. But not the principal. Lets assume that the loan matches 50% on the dollar to X amount. Already, without any investments, the account is up 50%, even if it were placed in a fixed income account of 3% return per year. Contrast that with 6.5% or so loan. Plus, money goes in pretax. So you are already up 25 or 30%, whatever your taxes are. Also, inflation will eventually drive you salary up, but your loan stays as a fixed payment, so over time it becomes a smaller percentage of your costs. If you were planning on moving down the road, say from a townhouse or condo to a house, then your property over time will gradually increase in value, without you putting an extra penny into it. Even with huge market letdowns, the vast majority of people will find house appreciation over a decade.
Definitely keep 3-6 months cash available for emergencies. They will crop up in life. My wife and I spent too much time close to the edge, and we have managed to nix that habit before we got into trouble. I feel less secure now that I am older, and theoretically a little wiser.
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