Ideas on how to "spend" our refund

[mysonshine]

Basic rundown:
Savings = 0
Monthly - we have enough to pay our bills, DH gas money for work, groceries. With *maybe* $100/month left for whatever else - extra gas and groceries usually.
CC1 $4500
CC2 $800 - This is Lowes, interest deferred (12 mos same as cash promo) due in June to not have interest

I'm only guessing at our refund as I don't have any papers yet to actually do them. But I *think* from state and fed we'll have around $4300.

What to do?????

I want to get rid of the CCs because later this summer we have a monthly bill starting that will "take over" that payment. So we would be a wash with those in our monthly budget. If I don't pay off the CC, this upcoming bill will be an additional bill each month. (This is not optional - please don't debate this or our bills. Please just advice on how to do our refund)

[cristina47454]

I think the general rule of thumb is $1000 in an emergency fund, and the rest to your credit cards. Kind of depends on your philosophy...Dave Ramsey says smallest card first (for the psychological benefit of seeing debt go away), others would say highest interest first, and then continue the snowball to pay off the rest of your debt. Depends on what your interest rates are and what happens with your Lowe's card come June, though.

[pollyanna]

Hi
I would pay off the Lowes card so you won't have to pay the intrest if it's not paid by june. Then I would probaly pay half of the other cc. put about 1000 in savings for emergancies(sp?) so I'm not using the cc.
Then I would take what I'm paying on both cards and combine them to make payments on that cc to get it paid by June.
I hope that helped.
excuse my spelling.

Pollyanna

[ArtsyMomma]

Originally Posted by pollyanna

Hi
I would pay off the Lowes card so you won't have to pay the intrest if it's not paid by june. Then I would probaly pay half of the other cc. put about 1000 in savings for emergancies(sp?) so I'm not using the cc.
Then I would take what I'm paying on both cards and combine them to make payments on that cc to get it paid by June.
I hope that helped.
excuse my spelling.

Pollyanna

This is what I would do also. I would pay off the Lowes card first (instead of the other card) even though it's no interest until june because (and this is just my personal preference) I like paying things off, having fewer bills. You would have about 3400 to put towards CC1 - and if you snowball your payments from CC2 you could pay off the remaining 1100 pretty quickly.

[Niamh]

I would immediately dump $1000 of it into savings and use the rest for the cc. Sure, that's $1000 that you're still paying interest on on the cc, but it's a mental relief to have that small bit in savings, a small step back from the edge of the financial 'cliff', if you will.

And ONLY use that savings for bona fide emergencies.

[Shakti77]

I'd do the same too.

$1000 goes to emergency funds.
$800 to Lowes
Remaining on the other card and keep increasing the payment bit by bit until there's no more debt left.

Emergency fund is very important because if an emergency crops up and you don't have the EF, then you end up paying it with your credit card..more debt..more interest..more payments.. more stress. I'd keep an Emergency fund and not touch it except for real emergencies.

Goodluck!

[Jenelle]

I just read Suze Orman's entire free book download last night... So from that perspective also, I am agreeing that I would immediately put $1000 in a not-easily-touched savings account for emergencies, pay off Lowe's, and put the rest to the other cc.

Not having a savings at all is a very scary thing at this point in our economy. I'm not a huge Suze Orman fan, but the download is free and she puts things very simply... If you can find a few minutes to read the chapters that pertain to you, there have been two threads on this forum lately with the link.

[lactivistmama]

Originally Posted by cristina47454

I think the general rule of thumb is $1000 in an emergency fund, and the rest to your credit cards. Kind of depends on your philosophy...Dave Ramsey says smallest card first (for the psychological benefit of seeing debt go away), others would say highest interest first, and then continue the snowball to pay off the rest of your debt. Depends on what your interest rates are and what happens with your Lowe's card come June, though.

This is exactly what I would do!! ER Fund then CC's starting with the Lowe's card

[Ruthiegirl]

Originally Posted by Shakti77

I'd do the same too.

$1000 goes to emergency funds.
$800 to Lowes
Remaining on the other card and keep increasing the payment bit by bit until there's no more debt left.

Yes! This is a great approach.

[mysonshine]

Little more info :-)
Lowes - right now we aren't paying anything on it. When we had to use it (dryer and lawn mower both went last summer) we planned on using our refund knowing we'd get the refund before it was due so we wouldn't have to pay interest (which will be around 21% I think).
CC - we pay $100/mo on it which is the minimum plus around $20. With all of our other bills, this is the most I can put on it.

[ArtsyMomma]

Originally Posted by mysonshine

Little more info :-)
Lowes - right now we aren't paying anything on it. When we had to use it (dryer and lawn mower both went last summer) we planned on using our refund knowing we'd get the refund before it was due so we wouldn't have to pay interest (which will be around 21% I think).
CC - we pay $100/mo on it which is the minimum plus around $20. With all of our other bills, this is the most I can put on it.

I would still stick to plan suggested. Paying $120 a month on CC1 it would take 10 months or so to pay off.

I think an emergency fund is important. A year ago I started to really get my finances in order, I had some unfortunate circumstances, but that EF kept my head above water during some rough times and I was very glad to have it.

[Logan's Mom]

Originally Posted by mysonshine

Little more info :-)
Lowes - right now we aren't paying anything on it. When we had to use it (dryer and lawn mower both went last summer) we planned on using our refund knowing we'd get the refund before it was due so we wouldn't have to pay interest (which will be around 21% I think).
CC - we pay $100/mo on it which is the minimum plus around $20. With all of our other bills, this is the most I can put on it.

Definately Lowes first -- this was your original plan and you have no other plan to pay it off without getting wacked with 21% finanace charges retroactive.

If it were me, I'd use the rest to pay off the the other CCs. Then set up your bank account to take the $120 per month your currently spending + squeeze another 20 out of your current budget and deposit it into a very difficult to touch bank account. This will be the begining of you savings plan.

[mtm]

I'd do $1000 to emergency fund, Lowes card and rest to 4300 cc.

[Mulvah]

Originally Posted by Logan's Mom

Definately Lowes first -- this was your original plan and you have no other plan to pay it off without getting wacked with 21% finanace charges retroactive.

If it were me, I'd use the rest to pay off the the other CCs. Then set up your bank account to take the $120 per month your currently spending + squeeze another 20 out of your current budget and deposit it into a very difficult to touch bank account. This will be the begining of you savings plan.

I would agree. With the info provided, I would:

1.) Pay off Lowes.
2.) Pay down CC2. You will have 1K left on that after the refund. I don't know your interest rate on this card, so I am not sure of the percentages I would use for the remaining debt on this card and your savings.

(I will say, you know your situation best. If you feel a $500 or $1000 emergency fund is smarter, do it. )

[mysonshine]

Interest on the card is 7.99.
Clarification - I pay $100/mo on the card, not $120. Min pyt is around $80.

Thanks for all the help. :-)

[StephandOwen]

Here's what I would do...

$1000 in emergency fund

$800 to Lowes

$2500 to credit card

Continue to pay $100/month on the first credit card. I would also try my hardest to take the "extra" $100/month that is sometimes used for gas/groceries and do without it for a month or two. If you find that you don't *really* need it I would start putting that towards credit card #1 also.

What do you plan on doing if summer comes and your new monthly bill starts and the credit cards aren't paid off?

[RGsMom]

I would definitly pay off the Lowe's right away even if you don't need to pay anything til June. Just better safe and done with. Then I would put the remainder towards the other CC completely (Okay, maybe I'd go out and get an iced coffee drink first), but that way you are paying a lot down on it and the interest that continues to acrue on that account will be so much less that you will have it paid off completely much quicker. Then you can start to save that money monthly and build up your savings while no longer paying interest elsewhere.