DH and I had quite a bit of debt when I quit my job last year and things have been super tight, especially in winter because his work is seasonal, but we have been managing to pay things off. We are trying to decide which debt to pay off when we get our tax refund this year.

We owe Dell about $1400 and the interest is ridicilous so we would like to pay that off since right now we are only able to pay the minimum (about $44) each month. On the other hand we could pay off two loans and our Lowe's card with that cash instead. The interest isn't nearly as high, but it would free up about $230 each month for other expenses. I don't know what to do! I love the idea of the extra money each month and if I knew we would be disciplined enough we could double up on Dell payments and then pay the balance next tax season, but on the other hand, I don't like the idea of paying so much interest for another year. Suggestions please!

Ah you said the magic words Now answer the question honesty...Are you disciplined enough?
If you are, then I say go for it and pay off Lowes and the 2 loans and take that amount ($230 and add it to your Dell payment (44) and pay $274 to Dell every month).

If you are not disciplined enough then I'd take the other path and pay off Dell and be done with it, becasue the interest is stressing you out. Then try and take that $44 and apply it towards whatever is the lowest balance of the loans or lowes and pay it off, and so forth and so forth until all of them are paid.

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How is this for an idea ...

- Put MORE than half of your tax refund into a savings account.

- Use the other money to pay off one of the debts. If you want to pay off the one that is giving you the most headache or would free up the most cash flow, great. I'm all about freeing up cash flow.

- Adjust your husband's tax withholding so you DO NOT get such a large refund.

- Start an automatic savings program. Learn to live on far LESS than your regular income. Make sure you're putting money into a retirement fund - maximizing it, if you can - PLUS make deposits in an emergency fund.

- In 2008, when your husband's income is better than in the winter, use that extra money to pay extra toward your debts.

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"I've been rich and I've been poor but independently wealthy is where it is at."

Check out Daveramsey.com and his Total Money Makeover steps. He has baby steps lined out for getting out of debt! He is awesome!!

If you are good with your spending next year, you will save $2700 based on the $230 you would save by paying off your other debt. You could use that money to pay off your Dell payments half way through next year and then still have half to save.

Another way to look at it is:

Calculate how many dollars you are paying in interest with each Dell payment versus what you are paying in interest for your other debts. Then pay off the one that is greatest.

Sandra

Thanks everyone for your replies...you all had good points. I am going to try your suggestion Sandra, and see which has the highest interest. I hadn't thought about it that way. I want some concrete figures to present my DH when I make my argument about how to spend our refund!

I totally feel your pain. I'm in debt to Dell too but quite a bit more than you. $6500 actually OUCH! Stupid on my part I know. I talked to my husband about me getting a 2 year loan at the bank to pay it off and he is instead thinking of dipping into one of our CD's to pay it off and then deducting $200 a month from what we pay ourselves from our business each month. $200 a month is about what I pay Dell (min payment) anyways so I wouldn't be out any extra money monthly but our debt would be paid off and then we'd save that $200 a month that we cut from our pay.

In your situation I think I would pay off the other 2 loans that you have. Then take that extra money each month and pay towards your Dell card. It should be gone rather quickly that way. Of course I'm new to this trying to get out of debt and saving thing.

I work at the bank (just started working 5 months ago for the first time in about 10 years) and am wanting to learn to spend less and save more. I'm getting ready to open a savings account there and see what I can do. After I get the Dell card paid off we won't owe anything except our home which we only owe 83,000 on and it appraises for 165,000 so I feel okay about that. We don't have any other credit cards or car payments because we own a used car lot so we both drive dealer cars.

I am so excited about getting Dell paid off. They are blood suckers! LOL I know I did it to myself though.