speaking of tax refund

**Dancing Lotus** · 02-16-2008, 06:49 PM

What would you do?

I am getting enough tax back to pay off all our debt and that would be great but we have exactly 7.33 in our EF and dh thinks we should keep half of it to fund the EF.

Do you think we should spend all 100% of it to pay off bebts or do you think we should pay off some bebts and keep some in the EF?

**brenda67** · 02-16-2008, 06:52 PM

I'm sure I'm a minority here..but I would boost the EF to where you are comfortable then use the rest to pay down some dept if you are getting enough back..JMO..

**HisDaisy** · 02-16-2008, 07:04 PM

I would vote for putting at least some of it in the EF and paying the debts. If you payoff the debts, but don't have any emergency money, you can end up back in debt.

**suki** · 02-16-2008, 07:11 PM

For me it would depend upon the amount of interest on the debt and the payment amount. If I could build up the EF quickly and pay off the debt, I would go ahead and use it all for that purpose. However, if the interest was nill or low and the payments low, I'd split the money.

**emily_hope** · 02-16-2008, 08:27 PM

I would put money into the EF and then pay on the debt, JMHO.

**dolphin** · 02-16-2008, 08:38 PM

Sorry but I'm with your dh on this one. Save atleast $500.00 for an EF fund, more if possible. Even if you pay off ALL of your current debts there is no emergency fund! What if, God forbid, your hot water heater went out tonight. Would you have the $300 to replace it if you paid off all of your debts today? I've learned my lesson on this the hard way, always have some extra cash for the emergencies!

**freyadog** · 02-16-2008, 08:42 PM

Originally Posted by suki

For me it would depend upon the amount of interest on the debt and the payment amount. If I could build up the EF quickly and pay off the debt, I would go ahead and use it all for that purpose. However, if the interest was nill or low and the payments low, I'd split the money.

Yep my thoughts exactly.

**dcompton** · 02-16-2008, 09:04 PM

I think you could do it either way. I agree with Suki and Freyadog - it depends partly on how much interest you are paying. Also how quickly you could then build up the EF.

This is doubtless complete heresy here, but if you paid off the debt completely and had no EF, do you have a cc that you could use if you had to in an emergency? If so, I might pay off the debt and then start building the EF. The emergency might not happen, who knows? But if it did, you would at least have saved the interest that you would have been paying in the interval before you had to put something back on the card. I say this only because you say you could pay off your entire debt. If there were still debt left over after all the refund is put on it, I would definitely say the EF had to get a chunk. Also if there are no easy options for paying for an emergency except an EF - by all means, get a hefty EF first.

That said, having an EF is a great sense of security, and if the interest you are paying now isn't high, I would agree - at least $500 to an EF at once would be great for peace of mind. On the other hand, being debt free is great for peace of mind too!

So, in three words ... I don't know.

**celina** · 02-17-2008, 08:18 AM

dave ramsey, financial guru, as well as many others, say have a 1000$ baby emergency fund, and then attack debt if you dont, then the next emergency has you running for the credit cards

**suki** · 02-17-2008, 08:26 AM

However, that makes no sense if you are paying high interest and/or have big payments. If you can save paying the interest, you will be better off. I agree with an emergency fund, but I don't agree that it takes priority over paying off high interest debt. With that burden out of the way, the EF can be obtained more quickly.

From an investment perspective, it's a much better investment to rid yourself of paying interest whenever possible. Then, make your money work for you... put some emergency money in an interest bearing account.

**Dancing Lotus** · 02-17-2008, 08:40 AM

Everyone has a different opinion and I was expecting that. I just keep going back and forth with the options.

Here is the deal : we got back 2,100.00 for taxes and 600.00 from our escrow giveing me a total of 2,700.00

First and formost I have 300.00 alligated to start my bussinesss with. It's a small amount but I have seen people start bigger things with less. This is very important as we really need to bring in more money and I really need to do this for my selfesteam.

Then I have 100.00 planed for a used furniture set for my dd. She has no furniture and I feel awful becuase my older one has a beautiful bedroom and it just looks like we don't care about her room.

And I need to give my parents atleast 100.00 to start paying them back for the tooth they paid to have pulled for me. Total of 500.00

So we are left with 2,200

All the debt we have is past due so none of them is any more important then the rest.
With the exception of our citibank account , that is current and in good standing.

Citibank 997.00
matercard 1 330.00
mastercard 2 400.00
Old bussiness debt that we are indipute about but are willing to settle on for 450.00
Thats is a total of 2177.00

My thoughts are to not pay off the citibank and continue my 40.00 a month payment until this summer when we will be getting the stimulous package , then pay it off.

Anybody see any holes in this plan?

**Dancing Lotus** · 02-17-2008, 08:43 AM

Suki
Regarding your siggy.
All that we are is a result of all that we have thought.
I live my life by these words and when something isn't going well I say that to myself.

**Dancing Lotus** · 02-17-2008, 08:47 AM

Originally Posted by celina

dave ramsey, financial guru, as well as many others, say have a 1000$ baby emergency fund, and then attack debt if you dont, then the next emergency has you running for the credit cards

So true. The only reason we even have any of the debt is becuase of not haveing an emergency fund. We haven't used a credit card in two yrs. At all..... But we also havent even paid on some of them in the last year. There is no money in the budget to pay the bills. That is part of why I just want to pay it all off because its the only way we can pay it off. Atleast for a few more months.

**Darlene** · 02-17-2008, 08:49 AM

I'd pay all I owed except the citibank. That includes the total amount to your parents. Then I'd save towards the other things.
Personally I feel bad owing people, I mean if I were them wouldn't I want to be paid?

Good luck with whatever you decide.

Changed my mind, pay everything off, then start working towards your other goals. You would be debt free.
Interest is interest and is costing you money, get rid of those.

**suki** · 02-17-2008, 08:54 AM

Ann, it's a good mantra and helps me to keep my perspective.

If you can't afford to pay your bills, then by all means, you should pay them with this. I think your plan is a sound one. When you pay off Citibank, take that $40 and put it in your EF.

Good luck!