Tax Refund...........savings or debt ????

[goingtowdwwithkiddos]

So if you had a choice would you pay down debt or put it in savings?? I have about 6 months of DH income in savings so I decent cushion. My income is very unreliable great sometimes almost non existent others (So savings makes me feel secure). I work monthly paying extra on debt and we currently are done with car payments hitting CC and mortgage hard.

 

[QVCshopper]

If your credit card debt is at a substantial interest rate, I would get rid of that. I would have even gotten rid of that before the car payment, unless you are locked into zero financing.

 

[LJSquishy]

Since you have an emergency fund established, I would pay off your credit card debt and not worry so much about your mortgage right now. Once your credit cards are paid off, I would stuff more money into your savings account since you don't have a steady income all of the time.

 

[lcj19]

For me making sure I don't go further in debt is just as important as paying the debt itself....no since in paying something off if you have to run it up again. However, you said you have savings already so I say pay off the debt.

 

[Shelly F - Ohio]

8,000 goes on the mortgage and the rest in the bank.

 

[tvguy]

Pay down debt.

When I lost my job the most comforting thing was my house and car were paid off. Having that money in the bank would have just gone to car and house payments anyway.

 

[ssawka]

Since you have a cushion, pay off debt. Also, take a serious look at your deductions for next year. It makes absolutely no sense to be giving Uncle Sam an interest free loan while you are paying interest on a CC.

 

[ICF]

Without a doubt pay down the debt.

 

[ptlohmysoul]

Since you have a cushion, pay off debt. Also, take a serious look at your deductions for next year. It makes absolutely no sense to be giving Uncle Sam an interest free loan while you are paying interest on a CC.

I agree!

 

[goingtowdwwithkiddos]

Op here
Logic was to pay off debt. I just love having money in the bank to even though my head doesn't say that's best. So debt pay down it is . I am self employed so deductions are different if I was getting a refund at a normal job I would be changing it when I had a normal job we did our best to break even.


Thanks for all the responses I love you guys.

 

[manning]

No brainer, pay off the debt. No way are you getting interest/ dividend at anywhere near what creditors are charging you.

When you get the debt paid off then start saving.

 

[goofytinkerbell]

1

 

[ssawka]

Good choice! If I may make a suggestion, look at whatever has the highest interest rate and start paying that debt first. It may seem counter intuitive, but in the long run it will cost you less.

That's how I paid off my student loans, car (it's old NOW though), bank loans and line of credit. Once I paid off the first one with the highest interest rate there was more money to put on the next highest, and it snowballed quicker than you'd think. Then you can beef up your savings.

I was self employed for a few years so I understand how terrifying it can be to have an unstable income

Why would paying off the highest interest rate debt first seem "counter intuitive"? I think that it makes complete sense.

 

[disneychrista]

8,000 goes on the mortgage and the rest in the bank.

Are you saying you are getting more than 8k back in taxes? Have you ever thought about adjusting your withholding?

 

[aliceindisneyland]

Why would paying off the highest interest rate debt first seem "counter intuitive"? I think that it makes complete sense.

I think because people are so used to hearing Dave Ramsey say to do a debt snowball by paying off the smallest to largest debt amounts to give yourself a psychological boost of knocking something out.

I prefer to pay less interest, so highest interest cc goes first for me.

 

[mblondie0509]

The one piece of logic I thought of when I read this also came from Dave Ramsey. Just for argument sake say your interest rate was 5%. Would you take out a loan in the amount of your income tax with 5% interest just to put into a savings account? That is the exact same thing as using that money in savings instead of paying off the debt.

I hope that makes sense...he always says it so clearly

 

[ssawka]

The one piece of logic I thought of when I read this also came from Dave Ramsey. Just for argument sake say your interest rate was 5%. Would you take out a loan in the amount of your income tax with 5% interest just to put into a savings account? That is the exact same thing as using that money in savings instead of paying off the debt.

I hope that makes sense...he always says it so clearly

The problem with this argument is that it completely ignores liquidity. If you suddenly needed a few hundred dollars for something, could you easily get a loan for a couple hundred dollars at your current interest rate? or would you have to access the money from a higher interest rate source? I am of course assuming that the money will be sitting in a savings account and not earning any interest.