Paying off Bills with Income Tax Refund

Well, it's tax season. For some of us that means paying in, while others get a refund. Somehow we ended up getting a nice chunk of change this year. My husband and I decided that we would pay off all our credit card debt and save the rest. We paid over $6000 on credit cards and are now debt free in regard to credit cards. The only debt we have left is the van loan and school loan. Since, we would like to get a house built on our land as soon as we can, we have decided that we will save the rest for a down payment.

It feels really awesome to not have the weight of all that debt on our shoulders anymore. We were spending about $200 on credit card debt a month (we always paid extra) and now we have that money to put in our savings each month. I was also able to add $450 to our emergency fund so now we have $1000 in there.


Even if you are only getting a small amount for a tax refund, you can use this amount to reduce your debt. You can either use it for your highest interest debt or your smallest debt. Paying off your smallest debt first gives you a sense of accomplishment when it is paid off. As an added bonus, you also now have that amount to put towards the next debt to pay off. This is called snowballing.


What are you doing with your tax refund? I'd love to hear from you.