| Getting $12K tax refund--need advice on what to do with it |
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agales
First Time Poster
Cash: $ 0.25
Posts: 1
Joined: 18 Apr 2005
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| Getting $12K tax refund--need advice on what to do with it |
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The short story is that my husband and I are receiving a tax refund of about $12,000. I think the refund is so big because we purchased a new house in 2004 and rented out our previous house. We had a lot of deductions we were able to take on the rental property, as well as the mortgage interest on both houses. Also, we have 4 children. My husband is the only one working and he has 6 exemptions listed for state and federal withholding.
We are trying to determine what to do with the tax refund. We have a lot of credit card debt and I think we should just put a sizable amount of money on the credit cards and use the rest of the money for household repairs.
My husband thinks we should invest the money in real estate-----buy a house cheap, fix it up and resell it to make a huge profit and then we would have more money to use to pay down our debt.
Our credit card debt represents about 15 years of credit card misuse. We do not use any credit cards now. Our credit is good except for the high debt/income ratio.
We need advice!
Here is how our financial picture looks now:
Gross income: $105k/year
Gross Income from rental prop.: $934/month
401K: $40K
Savings: $1K
Credit card debt: $45K---All interest rates are between 5% and 9%
Car loan 1: $10K
Car loan 2: $4K
Mtg on rental: $96K
Mtg on home: $204K
What should we do with this $12K tax refund???????
We are looking forward to hearing from anyone who has an opinion or advice.
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Mon Apr 18, 2005 5:11 pm |
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xboxundone
Senior Member
Cash: $ 67.83
Posts: 796
Joined: 19 Sep 2004
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I would say pay off your debt...
Why have this debt when you don't have to
Credit card debt: $45K---All interest rates are between 5% and 9%
Car loan 1: $10K
Car loan 2: $4K
Pay off your highest intrest rate debt first... I assume this is your CC debt... then snow ball it to the rest then you will be out of debt soon.
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Mon Apr 18, 2005 7:04 pm |
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Riz
Contributing Member
Cash: $ 5.30
Posts: 27
Joined: 22 Mar 2005
Location: San Francisco
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I think getting rid of debt is always a good thing. But sometimes it can take the backseat to security. When determining what to do with the money you will be receiving from your return, you should figure out what's most important. With 4 kids, I would assume sercurity would be the most important. If so, you should think about just putting that money in a savings account (no disrespect, but 1k is not enough). Also, (depending on how much your monthly payments are for your credit cards) you should be thinking about paying them off. But, if the monthly payment is not going to be significantly different after y'all decide to pay it down, you are better off just saving that money. It's not a bad idea to invest it in real estate, but make sure it is a good investment.
If you decide to just save the money, just think, in another year, with your next return. Y'all would have (roughly) 20k. If you think a little further than that, in three years y'all would have at least 25 - 30k. Something to think about, whatever you do always remember:
Debt that isn't paid off in full, a balance remains
Money that isn't spent in full, a balance remains
"What we have today, is only as good as we preserve it for tomorrow"
-Riz
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Mon Apr 18, 2005 11:31 pm |
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xboxundone
Senior Member
Cash: $ 67.83
Posts: 796
Joined: 19 Sep 2004
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quote:
Originally posted by Riz
I think getting rid of debt is always a good thing. But sometimes it can take the backseat to security. When determining what to do with the money you will be receiving from your return, you should figure out what's most important. With 4 kids, I would assume sercurity would be the most important. If so, you should think about just putting that money in a savings account (no disrespect, but 1k is not enough). Also, (depending on how much your monthly payments are for your credit cards) you should be thinking about paying them off. But, if the monthly payment is not going to be significantly different after y'all decide to pay it down, you are better off just saving that money. It's not a bad idea to invest it in real estate, but make sure it is a good investment.
If you decide to just save the money, just think, in another year, with your next return. Y'all would have (roughly) 20k. If you think a little further than that, in three years y'all would have at least 25 - 30k. Something to think about, whatever you do always remember:
Debt that isn't paid off in full, a balance remains
Money that isn't spent in full, a balance remains
While you make some good points to me security is being debt free and owing nothing..... but i do agree You should have a reserve of atleast 3 months of money to support yourself incase something happens 6 months to a year is preferred amount but 3 gives you some time.
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Tue Apr 19, 2005 12:49 pm |
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