You can’t wait for that income tax refund to show up in your bank account. You have so many things you want to buy.
And that’s where your debt problems begin, or continue. That’s why you have to resist the urge to spend your tax refund on something you would like to have, and instead put it toward something you need to do.
The first thing you want to do with that tax refund is to pay down your debt. Could be a good idea; could be like doing something into the wind.
I understand what you are thinking: If you just pay down these debts by (fill in the blank: $2,000, $3,000, $4,000, $5,000), then my life will be sooooo much easier because my monthly payments will be lower by (fill in the blank: $100, $200, $300, $400). Could be true. But will that really be enough to change your financial health?
Let’s look at a typical of situation. Let’s suppose you owe $36,000 in credit cards and unsecured loans and that your payments are $800 per month, most of which is going to interest. If you pay $3,000 on this debt, it will reduce your balance to $33,000. Your payments might be reduced to $700 per month. But what happens if you need an emergency car repair of $2,500? If you haven’t put away any money, such as your tax refund money, you will have to charge yet another bill and accumulate even more interest. Is that what you want to do?
Here’s an alternative: Look into Chapter 13. Chapter 13 will pay off that debt at 0% interest. And, in many, if not in most situations, you may not have to pay the $36,000 in full. You may only have to pay $25,000, or $13,000, or $7,000, or even zero depending on your circumstances. How will you find out how much you have to pay, or if you have to pay at all? By meeting with us, for free, in one of our convenient offices. At Steidl and Steinberg we are really easy to get along with; none of that stuffed-shirt attorneys demeanor for us. In fact, none of us even own any stuffed shirts.
So stop lamenting what you can’t accomplish with your tax refund, and start looking at what you can do with it. We can help you at Steidl and Steinberg. It’s free, and you will feel much better when you have a real game plan. Now take that tax refund and go get that car repaired!