advice?

[tjw]

Would like some advice. This is kind of jumping the gun here, but we are expecting to get about $5,000 to $7,000 back from taxes this next year. We are trying to decide whether to:

 

A) pay off debt incurred from when my husband was out of work (credit card debt).

take that amount and put it toward paying off our car (still would take about 2 years to finish paying off if we paid the monthly payments after that).

 

I know this may seem like a really stupid question, but we are trying to figure out what would make more sense in the long run. On one hand, all the debt we had incurred on CC's would be paid off and gone, but on the other hand, we'd still have a $300-per-month car payment for another 4 years.

 

We are just out of BK in April, trying very hard to manage our finances, but having one disaster after another and we just can't seem to get ahead. Trying to figure out what would be the best.

[Seabee]

I would probably choose A.

 

Your credit card interest rates are probably higher than that on your car loan, so you'll save more money by paying those off.

 

If you pay off your credit cards you won't have those payments at all any more - you'll free up that payment each month for other things. If you pay down your car loan, you'll still have to make your regular monthly payments.

[texastech97]

I would pay off the debt with the highest interest rate first. Then go down from there.

[tman]

I would pay off the debt with the highest interest rate first. Then go down from there.

 

Agree

[mdj2000]

I would pay off the debt with the highest interest rate first. Then go down from there.

Yep, that's what I would do

[Cleaning_Credit]

I would pay off the debt with the highest interest rate first. Then go down from there.

 

I agree with this also.

 

In addition, I'd change the tax withholdings so that less taxes are taken out of paychecks. Why let the gov't build interest on your money? We try to have withholdings set so that when tax time comes, we receive back as close to $0 as possible or owe $0. That way, you get more in pocket each paycheck instead of the huge return at the end of the tax year.

[CallMeJo]

why not pay off the CCs completely, & then use the money you would've spent on the payments to paying off the car as early as possible? That way, you get the best of both worlds.

 

Also, it makes sense to keep your holding the same if you're not the tyrpe to save up $400 a month & put it directly into your savings. If you'd be liekly to spend even some of that, then you can look at your refund check as your extra savings account instead.

[OneStep]

First, do you have an emergency fund for when those disasters happen? If not, I would set one up with that money.

 

Second, if you do have an emergency fund, I also would pay off the debt. Then take the money from that payment and snowball it into the auto loan and get it paid off quicker.

[tjw]

Thanks so much everyone for your advice.

 

I agree that we will need to change our withholding amount for the next year. This is actually the first year in about 4 years that we have had an employer taking out taxes, so we didn't want to get stuck paying IN, unfortunately for us this year has been a horrible financial year and we're so poor, we're getting practically everything back!!! Next year, with him making more money and me working now also, I suspect things will change a bit.

 

No emergency fund, no nothing right now, so I'm hoping we can dodge any big emergencies until this all happens, then sock away a bit for "just in case."

 

Thanks again! : )