I have a question. I just purchased your book, and I'm about $20,000 in debt not including mortgage and car payments. We make over $117,000 a year. I'm going on a budget and have printed your worksheets. I have no savings, only $9,000 in our 401(k) plan (we are going to max out 401k this year to help taxes). We pay a lot of taxes - over $20,000 a year. My husband and I need help. I'm getting back $4,500 for taxes - should I put it in savings or pay off credit cards? Any tax break ideas? Thank you - enjoying your book.
Elizabeth
I would get rid of that credit card debt first - especially if you are paying high interest rates on it. With your income and the tax refund, you should be able to pay $20,000 off quickly. You should find making a budget almost fun if you can see that you can be credit card debt free in six months! With your husband on board, you can try a "baseline" budget and find out just what you can live without temporarily. Recently, we tried to go one month without eating out and although we succumbed to brunch with friends one morning, we saved a lot of money. Eating out was more special when we went back to it, and we haven't gone back to our prior lax habits.
The next thing you want to work off will be your car payments. How fast could you pay off your cars if you could take what you are now spending on credit card debt and prepay your car loans? Imagine how much more comfortable your budget will be when your credit card debt and car loans are gone!
One more thing - if you are getting a $4,500 tax refund, check on your tax withholding. Never let Uncle Sam hold your money for free while you are paying interest elsewhere. You can find the income tax withholding online calculator on the IRS Web site at www.irs.gov.
Keep me posted,
Sally