Subscribe
What To Do With A Tax Refund?
We got our tax refund this week - $615 was the grand total. That’s good, because it means we were pretty darn close with our estimated payments last year. Yeah for us. Anyway, now we have to decide what to do with it. We can put it towards our HELOC, we can put it in our IRAs, we can use it to pay down our Discover bill, or we can spend it (yeah, right). Logically, it probably makes the most sense to put the money in the HELOC or into our IRAs, since the HELOC is at 8.35% right now, and our IRAs are invested in the stock market. But psychologically, I think I want to put most of it towards the Discover bill. Besides our mortgage, the Discover card is the only only debt we have anymore; we owe $2400 on it right now. It’s from a balance transfer that we made in 2005, which was originally business start-up expenses. We know now that credit cards are not a wise way to fund a new business, but that’s what we did, and thankfully it all worked out. This month our interest charge was 78 cents on the Discover card - it’s zero percent interest on the balance transfer as long as we continue to make one purchase a month, which we have been doing for the last 18 months. We only pay interest on the new purchases, which are always under $2. So it’s virtually an interest free loan.Â
I know that it makes sense to pay as little as possible on the Discover card and just keep putting our money towards investments and the mortgage, but it would be so great to not have that bill anymore. To not have to remember to make a purchase every month. To have only a mortgage and no other debt… At the rate we’ve been going, it will take almost 2 more years to pay off the Discover card, and that bums me out. I think I want to ramp up the payoff and just be done with it. So we’ll probably give most of the tax refund to the nice folks at Discover, and then maybe increase our payment to $200/month. I think that the feeling of freedom we get when we finally pay that thing off will be worth it.Â
Yeahhh!!! you’re on your way to being Discover Card Free
April 23rd, 2007 at 4:47 am
[...] The HELOC is tied to our checking account, and we move money back and forth to it all the time. When we get paid, the money goes first to the HELOC until it’s needed for bills. So that reduces our monthly interest payment for the HELOC, but we still pay nearly $200/month in interest on that loan. Having it tied to our checking account has been nice in some ways, but the downside is that we just view it as a money storage account, and we’ve never actually paid it down. The money that we put into it each month invariably comes back out again. The end result is that balance in that account is only a few hundred dollars lower than it was when we got the loan. Now that we’ve paid off almost all of our non-mortgage debts (the only one left is our Discover Card), we need to take a hard look at the HELOC. 8.35% is not a terrible interest rate, especially compared with credit cards, but it’s still pretty high when you owe more than $28,000. The bank is happy to have us keep using the account as our short-term savings account, since they’re getting $2300/year (!) in interest from us. But this has got to stop. [...]
April 25th, 2007 at 4:23 pm