Should Refund Equal Savings Or Debt Free?
Holly has plans for her income tax refund, but isn't sure which of her 2 options would suit her best.
QUESTION: Holly is expecting a $7,000 income tax refund. Her husband’s job is fairly unstable, and she’s wondering if she needs to bank that money or pay off debt, or prepay the mortgage for the entire year.
ANSWER: You do not want to prepay the mortgage. Park the money in a separate savings account and do not touch it under any circumstances unless there’s an emergency. That’s the best thing to do until his job stabilizes. Once that happens, you should pay off debt. Don’t worry about what the newspapers say about the economy; but pay attention to what’s going on at work.
Stop getting such a big tax refund from the IRS. Go to human resources and change your payroll deductions so he brings home more money per month. You have almost $600 a month coming out of your check. You loaned the government $7,000 for free throughout the year.