naturally Posted February 18, 2014 Share Posted February 18, 2014 I need some advice on what to do - the best way to use our tax refund. I know our situation is not ideal and we wish it wasn't so. Please be kind in any response. Here is what I have. Tax refund - $5700 Credit Card #1 - balance #1 - $2100 at 12% interest balance #2 - $3500 at 0% until July (this was from a major car repair this summer) Credit Card #2 - balance $2700 at 0% until October We have things that *need* to be done on the cars and house and some need to be paid in cash (these are things that can not wait to save up for - safety issues). That total is around $1700. We do not have an emergency fund or savings account. The credit card balances are not from frivolous things. We don't use them unless we have no choice. It kills me to have them but at least we did in the situations we've been in this year. What would you do? Any advice on the best way to "spend" our taxes. Quote Link to comment Share on other sites More sharing options...
MomtoCandJ Posted February 18, 2014 Share Posted February 18, 2014 Car repairs, the 12% interest card then split rest between two other cards and savings. Quote Link to comment Share on other sites More sharing options...
whitestavern Posted February 18, 2014 Share Posted February 18, 2014 Are you able to make th monthly payments on the 0% credit cards in order to pay them back on time? If so, I would pay off the 12% card, use $1700 for your necessary car/house expenses and put the rest in savings. Quote Link to comment Share on other sites More sharing options...
fraidycat Posted February 18, 2014 Share Posted February 18, 2014 I'd keep the $1700 cash needed for the immediate repairs, then put the rest toward CC#1, then work on getting the rest or as much as possible paid before July. Then, I'd focus on CC#2 since the interest free period is longer. Quote Link to comment Share on other sites More sharing options...
vonfirmath Posted February 18, 2014 Share Posted February 18, 2014 I'd pay off Credit Card #1 (And cut up/put away where you can't easily access) and use the balance on the needed stuff at your house. If it isn't quite enough, you can always use the amount you were paying on credit cards to save up for. Then get started working on a $1000 emergency fund while paying off credit card 2. Quote Link to comment Share on other sites More sharing options...
mytwomonkeys Posted February 18, 2014 Share Posted February 18, 2014 I would put $1,000 in an emergency fund I would pay $1,700 for car repairs & house I would pay off credit card #1 Quote Link to comment Share on other sites More sharing options...
MeghanL Posted February 18, 2014 Share Posted February 18, 2014 I second using the refund for the $1700 in needs, balance #1 and then put the rest in savings. The savings will allow you to not rely on credit cards anymore. Paying in cash instead of financing can also get you deep discounts on things like unexpected car repairs. Quote Link to comment Share on other sites More sharing options...
Annie Posted February 18, 2014 Share Posted February 18, 2014 I would put $1,000 in an emergency fund I would pay $1,700 for car repairs & house I would pay off credit card #1 This. Quote Link to comment Share on other sites More sharing options...
LuvToRead Posted February 18, 2014 Share Posted February 18, 2014 I would pay the $2100 credit card balance first, then the $1700 in home and car repairs. I would probably put $500 in savings, then apply the remainder to either of the credit card balances. Which credit card would depend on the future interest rates. I would be inclined to get the smallest balance paid off first, then roll that into the bigger balance. But, that would depend on what the interest rates will be. Kind of a dumb question --if you don't get the balance paid off in the interest free period, are you charged interest on the entire amount put on the card, or just the portion that remains? I know furniture stores do the zero interest for so many months, but if you don't pay it off, you pay interest on the entire amount. I don't know if credit cards work the same way. Quote Link to comment Share on other sites More sharing options...
bettyandbob Posted February 18, 2014 Share Posted February 18, 2014 What will the percentage be if you don't pay off card #2 and #3 on time? Yes, this needs to be a factor in consideration. Quote Link to comment Share on other sites More sharing options...
Upward Journey Posted February 18, 2014 Share Posted February 18, 2014 1. Pay off the cc that has interest. 2. Take care of your repairs etc. that need to be done. 3. Anything that's left use to pay on the cc that's due in July. 4. Start paying "just" the minimum on the 3rd cc, and put as much as you can over the minimum towards the 2nd card until it's paid off. 5. Once it is, then put that same amount (what you've been paying on the 2nd cc) + the minimum that you were already paying, towards that last card. Once you've paid off that last card: 6. Now start putting that same amount that you've been paying towards your cc into a savings account each month. You won't miss it because you haven't "had" it for the past many months :) DON'T use your credits cards again unless you already have the funds in the bank. You may still end up paying some interest. This method can be quite motivating because you can see progress being made each month. Quote Link to comment Share on other sites More sharing options...
Pawz4me Posted February 18, 2014 Share Posted February 18, 2014 I'd use the money for the needed car and house repairs and to pay as much as possible on the credit card balances. I'd need to know what the interest rates will be on the other two cards to decide which one to pay first. I wouldn't fool with an emergency fund. $500 or $1000 is a fairly piddly emergency sum, but it would go pretty far toward paying those balances. And in the worst case scenario you can always use a card for an emergency. If you pay $1,000 off now and have to put it back on in six months for an emergency, you're still better off because you won't have been paying interest on that amount in the mean time. Putting it in a savings account won't earn you much more than zero. If possible, I would take a good look at your tax situation ASAP. We don't believe in letting Uncle Sam use our money interest free (aka getting a big refund). A $5,700 refund means you could have had an extra $475 each month. That could go a long way in helping you avoid big credit card balances. Quote Link to comment Share on other sites More sharing options...
naturally Posted February 18, 2014 Author Share Posted February 18, 2014 Credit card #1 will be 12%.Credit card #2 will be 13% Unfortunately, we can't pay a whole lot more than the minimum payment right now. Once we get it paid down and the min pyt is less, I will keep some of what we are saving for other things and pay a little more on the card. For example, right now our min pyt on card#1 is $83. I pay $85. Once I lower the balance our min pyt might be around $30. I would pay $50 and "keep" the other $35 for other bills. DH is the only one working and bills go up while his pay doesn't. We are doing the best we can. We've looked at our exemptions. DH doesn't want $0 "taken" out so we have it so the minimum amount is deducted. The refund is the return of what little we did pay, the child tax credit, and the EIC. Quote Link to comment Share on other sites More sharing options...
Unicorn. Posted February 18, 2014 Share Posted February 18, 2014 Pay off the 12% balance, make the 1700 necessary repairs, and put the rest in emergency savings so you don't have to use the cc for another emergency. Pay minimum on card number 2, and more than min on remaining balance on card one until paid off. Put them up, and don't use them except for true emergencies. Quote Link to comment Share on other sites More sharing options...
Annie G Posted February 18, 2014 Share Posted February 18, 2014 I can't really answer until I know what the current minimum payments are on the cards and exactly what the needs are that you're using the $1700 for. My reasons involve knowing whether paying off a card is going to free up enough cash to fund any of the needs in a month or two. Generally I'm in favor of paying of debt and saving for needs...unless it's something that just cannot wait. Quote Link to comment Share on other sites More sharing options...
LuvToRead Posted February 18, 2014 Share Posted February 18, 2014 Credit card #1 will be 12%. Credit card #2 will be 13% Unfortunately, we can't pay a whole lot more than the minimum payment right now. Once we get it paid down and the min pyt is less, I will keep some of what we are saving for other things and pay a little more on the card. For example, right now our min pyt on card#1 is $83. I pay $85. Once I lower the balance our min pyt might be around $30. I would pay $50 and "keep" the other $35 for other bills. DH is the only one working and bills go up while his pay doesn't. We are doing the best we can. We've looked at our exemptions. DH doesn't want $0 "taken" out so we have it so the minimum amount is deducted. The refund is the return of what little we did pay, the child tax credit, and the EIC. I would probably still focus on credit card 2, even though you have a longer grace period. Is there any way you can get it paid off before October? If you pay the $1700 in car repairs, the $2100 on credit card 1, and put the remainder on credit card 2, you would owe $1900. If you can get that paid off before Oct, then you would only have one credit card that will start accruing interest. I would then "snowball" these payments toward credit card 1. Either way, the more you pay off now, the less interest you will pay in the long run. I do think an emergency fund is important, even if is only $500. Sure, $500 doesn't go a long way, but it will replace a battery in your vehicle, get your washing machine repaired, and little things like that. Quote Link to comment Share on other sites More sharing options...
Jerico Posted February 18, 2014 Share Posted February 18, 2014 How much wiggle room do you have in your minthly budget for paying off debt? I agree with car repairs, emergency fund, and then paying off the high interest card. Depending on your monthly needs, then make a plan to get the others paid off, then save for the future. Hopefully this will give you momentum. Quote Link to comment Share on other sites More sharing options...
whitestavern Posted February 18, 2014 Share Posted February 18, 2014 If you cannot pay those 0% cards before they're due, you will owe those higher percentages on the entire original balance, so my advice has changed. I would pay off the zero balance portion of cc #1 and put $1700 towards your necessary repairs. Any remaining balance should go to savings. Then try to figure out how to pay that second 0% card off before October. Then star paying as much per month as you can towards the last cc. Quote Link to comment Share on other sites More sharing options...
Guest Posted February 18, 2014 Share Posted February 18, 2014 I need some advice on what to do - the best way to use our tax refund. I know our situation is not ideal and we wish it wasn't so. Please be kind in any response. Here is what I have. Tax refund - $5700 Credit Card #1 - balance #1 - $2100 at 12% interest balance #2 - $3500 at 0% until July (this was from a major car repair this summer) Credit Card #2 - balance $2700 at 0% until October We have things that *need* to be done on the cars and house and some need to be paid in cash (these are things that can not wait to save up for - safety issues). That total is around $1700. We do not have an emergency fund or savings account. The credit card balances are not from frivolous things. We don't use them unless we have no choice. It kills me to have them but at least we did in the situations we've been in this year. What would you do? Any advice on the best way to "spend" our taxes. Have you committed any amount of money monthly towards paying down the cards and/or starting an emergency fund? Here's what I think I would do - definitely use $2100 to pay off the 12% interest balance. Next, I would pay for the necessary repairs with cash. Definitely keep this expense as low as possible; don't add on some upgrade that sounds nice because "oh well, it's expensive anyway." Kwim? Then, I would open a Money market saving account that is conveniently located and has No fees. I would start paying on the $3500 balance, but when you get to October, focus more towards paying the balance with the highest interest rate. I would strive to keep no less than $1,000 in the emergency fund, come hell or high water. IOW, I would not spend every penny to pay off the debt and wind up back in the same boat when another repair is necessary. Quote Link to comment Share on other sites More sharing options...
Rachel Posted February 19, 2014 Share Posted February 19, 2014 I think you got plenty of good advice about what to do with the refund. I think you need to talk to the hr person at your husband's work to reduce your tax holdings. Your refund would be smaller but you could have up to an extra $475 in your pocket every month. That would go a long way toward your debt and also help with the little emergencies that are causing the debt. Hugs to you, I know it can be stressful when money is tight. Quote Link to comment Share on other sites More sharing options...
LucyStoner Posted February 19, 2014 Share Posted February 19, 2014 I think you got plenty of good advice about what to do with the refund. I think you need to talk to the hr person at your husband's work to reduce your tax holdings. Your refund would be smaller but you could have up to an extra $475 in your pocket every month. That would go a long way toward your debt and also help with the little emergencies that are causing the debt. Hugs to you, I know it can be stressful when money is tight. Most of their refund is the EITC and additional child tax credit, neither of which they can get until they file as I believe the Advance EITC option has been discontinued. It sounds like they aren't withholding that much. If your federal tax liability is zero and you expect that to be the same for 2014, you can file a W4 to have no federal tax withheld but it sounds like the OP's DH didn't want to do that. All told though that is probably a pretty small part of their refund. Still unless you expect your income to change dramatically this year there is no reason to not file a new W4 and have $0 taken out. Your tax credits will more than take care of your 2014 taxes when it's time to file in 2015. Quote Link to comment Share on other sites More sharing options...
foxbridgeacademy Posted February 19, 2014 Share Posted February 19, 2014 I would do the needed repairs, pay off CC 1, and then put enough away to cover 1 months bills including: housing, Utils., groceries, gas, and minimum CC payments. If there were anything less it would go to the next CC. The 1 months savings could be used in cases of emergency (like car repair or job loss). Quote Link to comment Share on other sites More sharing options...
Kalmia Posted February 19, 2014 Share Posted February 19, 2014 You have gotten a lot of very good advice above. I did want to mention that to begin to turn around the financial train (so to speak) you might borrow The Complete Tightwad Gazette by Amy Decyzyn from the library or buy a used copy. It is the black belt money saving manual and has helped many people escape financial disaster. It is also funny and positive in tone. The numbers in the book are dated as it was written in the 1990s, but the advice is timeless, and I think it is the only book that expresses a true understanding of finding money when there is none. I have read about twenty other books on the topic and this is the one that is the most practical and the most encouraging with the broadest range of advice and a no-holds barred approach to wringing money out of thin air. http://www.amazon.com/The-Complete-Tightwad-Gazette-Dacyczyn/dp/0375752250/ref=sr_1_1?ie=UTF8&qid=1392796872&sr=8-1&keywords=The+Complete+Tightwad+Gazette Quote Link to comment Share on other sites More sharing options...
Guest Posted February 19, 2014 Share Posted February 19, 2014 You have gotten a lot of very good advice above. I did want to mention that to begin to turn around the financial train (so to speak) you might borrow The Complete Tightwad Gazette by Amy Decyzyn from the library or buy a used copy. It is the black belt money saving manual and has helped many people escape financial disaster. It is also funny and positive in tone. The numbers in the book are dated as it was written in the 1990s, but the advice is timeless, and I think it is the only book that expresses a true understanding of finding money when there is none. I have read about twenty other books on the topic and this is the one that is the most practical and the most encouraging with the broadest range of advice and a no-holds barred approach to wringing money out of thin air. http://www.amazon.com/The-Complete-Tightwad-Gazette-Dacyczyn/dp/0375752250/ref=sr_1_1?ie=UTF8&qid=1392796872&sr=8-1&keywords=The+Complete+Tightwad+Gazette I agree, but would also add the book " Your money or your life" by joe dominguez. I first learned of this book by way of The Gazette. The information on Treasury Bonds is pretty much useless for the current economy, but Dominguez is where I really pounded it into my head that EVERY choice matters. Quote Link to comment Share on other sites More sharing options...
Slache Posted February 19, 2014 Share Posted February 19, 2014 I would put $1,000 in an emergency fund I would pay $1,700 for car repairs & house I would pay off credit card #1 :iagree: Do I hear Dave? Quote Link to comment Share on other sites More sharing options...
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