I owe about $18,000 between two high interest credit cards. Should I just knock those out? Also I have about $1000 due for taxes. I rent and my car is paid off. Thank you.
I'm getting about a $23,000 lump sum from a settlement. Should I just pay off all my debt?
byu/maaaastwa inpersonalfinance
Posted by maaaastwa
38 Comments
Yes; it’s boring and not fun…..but it’s good for your future
oh high interest credit cards?? yes absolutely.
Imo yes. Not having that weight on your shoulders to worry about is huge. No investment is going to reliably beat high interest debt too so it’s not just a mental win but a math win too. Plus, you’d now have an additional margin per month you could put int savings or something instead of paying your monthly minimums or whatever you were paying before on the debt.
The only caveat I’d say is you should definitely make sure you have at least some money in an emergency fund first as well even if that means not fully paying off the debt.
Before you receive your $23,000 lump sum, you have -$19,000.
After you receive your lump sum, you will have +$4,000.
The question is, do you want to have $4,000 with or without debt?
Totally. Exactly the right amount at the right time sounds like. It’s your lucky day! Cut up those credit cards so that doesn’t happen again.
Pay the bills, fill up on gas, and go somewhere fun with the rest.
Yes yes yes!! Not only the smart thing financially but I promise you being debt free will feel fantastic. Future you will thank you.
Yes. Payoff the debt and put the remaining der in a HYSA for an emergency fund. Once you have a 3-6 month emergency fund then start retirement savings.
Yes, especially credit card debt.
yeah just kill the credit cards tbh, that interest is brutal. set aside the $1k for taxes, wipe the $18k, and keep whatever’s left as a small buffer. that alone puts you in a way better spot
Yes, pay off high-interest rate debt first. You would need to make in excess of a 20% return on your investment to make it work and that’s unlikely.
Yes pay off the debt and that leaves you with 4K you can buy something nice with or put into a hysa for a year (or longer) and buy something even nicer
What kind of question is that?
Yes, and stop running up credit card debt.
How did you get yourself into the credit card debt in the first place? If you’re still charging to your credit cards paying off the debt isn’t going to do much besides allow you to build the debt up again. I’d pay them off and close all your credit cards otherwise in a few months you’ll be back in the same position. If you haven’t been charging anything to the credit cards recently and now feel you can responsibly use credit I think it’s fine to pay them off and leave them open.
You have no idea how good you will feel after you’ve paid those cards off. Better than if “you’d bought yourself something nice”
Seek a life of minimalism. Stop buying junk. If you have to buy something make sure it is functional and serves purpose. Want to buy the next new bobble head for your collection, no, stop it. Strive for a life of zero debts, all of that is a tax on your money, which is a tax on your time.
Set aside an emergency fund, then invest what you can even if it’s a small amount, time compounds investments.
>I owe about $18,000 between two high interest credit cards. Should I just knock those out? Also I have about $1000 due for taxes.
Pay off your high interest debt.
And pay your taxes.
Then, live within your means.
Your settlement will likely be considered as taxable income so consider how that will affect you next tax season. Definitely pay your taxes then figure out what your options are with high interest debt. Whether amounts can be negotiated down or transferred over to a zero interest account, or even paid off. Interest is bad when you’re the one paying it.
Keep on mind any tax responsibilities for it.
Yes, pay off your debts, especially the high-interest ones. The best “something nice” you can gift yourself is financial security and independence.
Credit card debt kills financial freedom as u pay HUGE banks 28% interest. pay it off and create 6 month emergency fund. Ur future state self will thank u!
Pay off the debt. It’s a sense of accomplishment, knowing that you can keep your entire upcoming paycheck.
Only if you cut up the cards. If not, you haven’t suffered enough yet. If you can’t pay cash, you can’t afford it (homes excluded).
Yes, you should. But if you don’t learn anything from the debt and payoff, you be back to -18k in a year
Yes. Did this when i got my first big paycheck after some extended unemployment following the dot com bust. Had worked up about $35k in debt. The $40k bonus paid it off and I’ve been debt free every since. And trust me when i say that having the debt pressure removed feels great
I would see this as the perfect situation to pay off high interest debt. You’re still in a surplus and it does wonders for your mental health
Yes. You’ll have more cash every month than you have had for a long time. Put a lot of it to your own savings. You have been paying banks. NOW PAY YOURSELF.
i’m no expert but i was just in these shoes. pay off your debt it does better for you in the long run. I think paying it off over time does move for you scoring purposes than all at once. Also if you work it’ll make life easier over the year. I paid my debt in increments all at once and it did minimal change when i did the remainder at once i barely saw any increases. the amount you can do with good credit is with more than the money your receiving.
Maybe pay off the credit cards, then still make the payments to a saving account until you have paid yourself back. That way you are still being financially responsible, and setting yourself up.
Pay off your debts, but also understand the possible tax implications of your settlement. If the settlement is regarding e.g. wages it may be taxable and so you would set aside the balance to cover your taxes on it due in 2027 (or make an estimated payment this year). Don’t get yourself immediately into more debt by forgetting about this part.
Taxes, then credit. Get a nice dinner and start tracking your budget more carefully
Good luck. Glad you can zero out.
Hell yes. Get out of debt and never get back in. Never take out a loan on an asset that goes firm in value over time. Buy cars for cash. You only have $5500? Fine. There are cars you can buy for that or less. Debt is awful and ties you down. It forces you to stay on bad jobs. Free yourself from debt and the habits that got you almost $20,000 in the hole. You will have way less stress and much more freedom.
It’s a no brainer. Pay off the cards. That saves you $300-$400 per month. If you care about your credit score leave them open and don’t use them.
Gotta learn the lesson not to run debt up again though may not have another bailout coming
Yes but DO NOT run them back up. But don’t close them either.
First thing I did with an inheritance was pay off all my debt. I even kept a little slush fund to tackle anything that might pop up. I’m debt free for the first time since 18 years old. Best gift I could have afforded myself and my family. Do it. And don’t get into unmanageable debt again!
Pay off all your debts my friend.
Then take whatever your monthly payments were and start putting that into an emergency savings account instead.
Resist the urge to start spending with your credit cards again.
Yes. Paying them off is an instant 25+% a year return (or whatever your “high interest rate” is). No investment that you could make will come close to that.
Take a bit of what’s left and do something nice for yourself, and save the rest as a cushion so you can try to avoid that kind of CC hole in the future.