Each of us lives only now, in this brief instant. The rest has been lived already. So make the most thoughtful choices you can today that will lead to a better future.
Steve's Thought of the Day
Stop drifting and hoping a magic solution will appear. Instead, you can participate in rescuing yourself. Find peace by pursuing facts through trusted advisers and research rather than the blind trust of salespeople trying to sell you something by almost any means necessary.
Steve's Thought of the Day
Make decisions to deal with your debt with logic and facts, not assumptions, and worry about what other people will think. People who judge you will soon be forgotten. Nobody thinks about anyone that much.
Steve's Thought of the Day
The world is nothing but constant change. Your life is only a perception. Choose a way out of debt based on facts, not assumptions. Do what is best for your future because those that judge you will not feed you.
Steve's Thought of the Day
Do you have a greater responsibility to repair your financial past or your financial present and future? Make good choices that allow you to tackle your debt and immediately start building your emergency fund and saving for retirement. Tomorrow will be here before you know it. Lost time is a sin.
Steve's Thought of the Day
There is no sense in wasting a perfectly good financial mistake. Instead, learn from it and do better moving forward. The past is gone. Turn and face the future now.
Steve's Thought of the Day
Those who judge you for past financial mistakes are not your friends. So don't make choices about your future out of fear of what they may think. Instead, make choices based on truth, fact, and what is best for you moving forward from today.
Steve's Thought of the Day
Don't believe everything you think. Challenge your assumptions about getting out of debt. Do what is best for you, not others.
Steve's Thought of the Day
Is it less moral to file bankruptcy or to not take action that leaves you old, broke, hungry, and dependent on others?
Steve's Thought of the Day
If bankruptcy is so bad, why did our Founding Fathers specifically include it in the U.S. Constitution as protection for financial difficulties?
Stop listening to people that say bankruptcy is a last resort. It is neither first nor last. It is a tool like credit counseling, debt settlement, and others. For the best result, you need to use the right tool for the job.
Steve's Thought of the Day
People that tell you to avoid bankruptcy want to sell you something else are repeating something they heard or do not know what they are talking about. Get the facts and then make your own decision. Don't let an unskilled script-reading commissioned salesperson make life decisions for you.
Steve's Thought of the Day
Debt problems are like fingerprints. No two are alike. A one-size-fits-all solution will give you a one-size-fits-all result. You deserve better.
Steve's Thought of the Day
You are not your debt. Your value, self-esteem, and existence should not be defined by the money troubles you may be facing right now. Debt problems are solved with proper action, not guilt, self-hatred, and disgust.
Steve's Thought of the Day
Debt is nothing more than math wrapped in emotion. The math is easy, the emotional part leads us to do impulsive things. Not the right thing.
Steve's Thought of the Day
What type of money personality do you have? It is important to know. Take my online test now and discover how you unconsciously deal with money, credit, and debt.
Steve's Thought of the Day
How much retirement savings are you willing to throw away by dealing with your old debt instead of preparing for your financial future? Find how much you will lose by making the wrong choice. Use my online debt repayment calculator now.
Steve's Thought of the Day
Does it make more sense to ask for life-altering debt advice from an unskilled and untrained commissioned salesperson in a call center or an experienced debt coach like Damon Day that provides a customized solution for money troubles?
Steve's Thought of the Day
Should I Use My Tax Refund to Pay Off My Credit Card Debt? – Cassandra
I’m a 39 year old single-mom of two, who makes about $30,000/yr. I currently have credit card debt of about $7800. No savings. No 401K.
I usually get a tax refund of around $4000. So, my question is, do I pay off as many credit cards as I can with the refund or do I bring the balances down as much as I can, put some money in savings and come up with a re-payment plan for paying off the credit cards?
Cassandra”
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Dear Cassandra,
Wait till you see how simple this is going to be to change your finances for the better.
The underlying issue here is that your tax withholdings are out of whack. You are having far too much taken out of your check each month, when you really need it, if you are expecting such a big refund back.
Letting the government use your money for free when you could be using it to pay off expensive debt is something to be avoided.
I would suggest you put $2,000 in an emergency fund and use the other $2,000 to reduce your highest interest rate debt. If you then go to your HR office and get your withholdings adjusted so you will break even on your taxes at the end of next year you’ll put about $333 extra in your check each month. As long as you can leave a good balance in your emergency fund and not put more debt on the credit cards you can pay off the rest of the credit card debt in less than two years.
Sincerely,
You are not alone. I'm here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don't give up.
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7 thoughts on “Should I Use My Tax Refund to Pay Off My Credit Card Debt? – Cassandra”
Her large refund may have NOTHING to do with her withholdings. Most of the really large refunds come from the Additional Child Tax Credit which has nothing to do with withholdings. Also, the Earned Income Tax Credit is partly responsible for the large refund, and with that credit you can only take some of it throughout the year in your paycheck.
I wish people who gave financial advice would buy a clue as to where most of these large refunds originate from. It, 99% of the time, has nothing to do with a person’s withholdings and has everything to do with these refundable credits.
Her large refund may have NOTHING to do with her withholdings. Most of the really large refunds come from the Additional Child Tax Credit which has nothing to do with withholdings. Also, the Earned Income Tax Credit is partly responsible for the large refund, and with that credit you can only take some of it throughout the year in your paycheck.
I wish people who gave financial advice would buy a clue as to where most of these large refunds originate from. It, 99% of the time, has nothing to do with a person’s withholdings and has everything to do with these refundable credits.
Ok, let me chime in. Something is wrong here. If you make $30,000, and have two kids, you have a combined standard deduction and exemptions of $19,300 if my addition is correct. (see http://www.fairmark.com/refrence/index.htm for tax chart) Publication 15 http://www.irs.gov/pub/irs-pdf/p15.pdf from the IRS (Circular E – Employer’s tax withholding guide) shows that with just the 3 withholding allowances, your money withheld should be $38/week on a $600/week income. This is less than $2000 and includes FICA and medicare. How are you getting back $4000 every year? How much is your employer actually deducting? Your total federal tax for the year will barely touch $1000. You should sit down with payroll to figure this out, and then follow Steve’s advice to use the new cash flow to pay off your debt. Please let us know how you do. I wish you well in the new year. .-= JoeTaxpayer´s last blog ..The Decade With No Name =-.
Steve, thanks for taking the time to reply to my question. It was very helpful. Regarding the withholdings comment, my current W-4 looks like this: Marital Status-Single; Federal Withholdings-9; No State Income Tax. I was advised that 9 withholdings was the maximum allowance and this would ensure more take-home pay? Your thoughts?
Her large refund may have NOTHING to do with her withholdings. Most of the really large refunds come from the Additional Child Tax Credit which has nothing to do with withholdings. Also, the Earned Income Tax Credit is partly responsible for the large refund, and with that credit you can only take some of it throughout the year in your paycheck.
I wish people who gave financial advice would buy a clue as to where most of these large refunds originate from. It, 99% of the time, has nothing to do with a person’s withholdings and has everything to do with these refundable credits.
Her large refund may have NOTHING to do with her withholdings. Most of the really large refunds come from the Additional Child Tax Credit which has nothing to do with withholdings. Also, the Earned Income Tax Credit is partly responsible for the large refund, and with that credit you can only take some of it throughout the year in your paycheck.
I wish people who gave financial advice would buy a clue as to where most of these large refunds originate from. It, 99% of the time, has nothing to do with a person’s withholdings and has everything to do with these refundable credits.
Because she gets Earned Income Credit and 1000 dollars tax credit per child.
Good point. All the more reason her employer shouldn’t withhold any Fed tax at all.
Ok, let me chime in.
Something is wrong here. If you make $30,000, and have two kids, you have a combined standard deduction and exemptions of $19,300 if my addition is correct. (see http://www.fairmark.com/refrence/index.htm for tax chart)
Publication 15 http://www.irs.gov/pub/irs-pdf/p15.pdf from the IRS (Circular E – Employer’s tax withholding guide) shows that with just the 3 withholding allowances, your money withheld should be $38/week on a $600/week income. This is less than $2000 and includes FICA and medicare. How are you getting back $4000 every year? How much is your employer actually deducting? Your total federal tax for the year will barely touch $1000. You should sit down with payroll to figure this out, and then follow Steve’s advice to use the new cash flow to pay off your debt.
Please let us know how you do. I wish you well in the new year.
.-= JoeTaxpayer´s last blog ..The Decade With No Name =-.
Steve, thanks for taking the time to reply to my question. It was very helpful. Regarding the withholdings comment, my current W-4 looks like this: Marital Status-Single; Federal Withholdings-9; No State Income Tax. I was advised that 9 withholdings was the maximum allowance and this would ensure more take-home pay? Your thoughts?
Cassandra,
I’m not a tax advisor so you’d need to speak to one or maybe use the IRS online withholding calculator to figure it out.
Steve