I am getting about $19k in taxes back. I owe $2400 on a credit card. My emergency fund is $900 and I have a soft loan of $63k at 15%
I don’t technically make more than my bills every month ($1600 soft payment is killer)
I want to avoid keeping this cycle going.
How do I get out of debt and make the best decisions here?
What to do with tax refund
byu/Wintertrees408 inpersonalfinance
Posted by Wintertrees408
3 Comments
Pay off the CC
Pay as much of the “soft loan” as you can. That will reduce how much future payments should be.
Why do you owe that much at that rate?
And also change your withholding, you havent given much real information but it sounds like you are negative each money because you overpay taxes.
I think the math says you should put it all on the loan to reduce the balance. If you put it in something like VOO, then you might end up with 2x,000 in the 54 months it would take to pay off the loan at 1,600 per month. Basically, you get 15% ‘returns’ by paying the loan down but the investment funds are lower than that on average.
If the loan repayment amount does not change with a large payment, just reduces the payoff date, then that does not solve the immediate problem of not making enough each month.
I would still add some to your emergency fund as one unexpected expense such as a car repair will be hard on the budget.
19K in tax refunds? What in the world?!