What should I do with my refund?

What should I do with my refund.  Currently put into cd

I am loving this thread of comments. I got myself into a lot of debt, and am (thank goodness) super close to having it all paid off. I have less than 2k left to pay and am planning on paying it off with my refund, because I too would like to buy a house in a few years, not only will this get me out of debt but it will get my credit score back on track. The plan is to pay off the debt then put the rest into a savings account of some sort. 

This response will be a bit different BUT what I did last year with mine was buy things I could flip. Purchased an $800 vehicle that I flipped for $4800, Purchased a $4000 vehicle with that and sold it for $6200. I probably could have kept going but tue patience it took to find the right vehicle was to much for me. My point being invest what you have into guaranteed money if possible. If not take the safe route and Robo Invest. It's worked for me so far!

I definitely agree that you're going to want to pay down your debt first! Having debt brings your credit score down, which in turn will make it harder for you to get a good mortgage interest rate when you buy a house at some point. For your refund, the specific allocation percentage I'd recommend will depend on 1) what the balance of your credit card debt is, 2) how much your refund is, and 3) how much of an emergency savings you have, but I would probably recommend paying 80% of your refund toward the credit card debt, and 20% of your refund into a high-interest online savings account as an emergency fund (look for at least 2% interest). Then, make a budget of your monthly expenses and make a plan for how you'll allocate the portion of your income that exceeds those expenses.

I would recommend the following "order of operations," adapted from Dave Ramsey's Financial Peace University, for where you allocate your savings each month:

0) If your company offers a 401k with a company match, and you aren't enrolled already, sign up immediately. This will ensure you're saving for retirement and also gives you extra income for free! Do this even before you pay off any debt, because while you may be paying 20% interest on that credit card right now, the 401k match is a 50% or 100% "interest rate" in terms of return on investment (depending on what percent your employer matches)! If your company doesn't offer a 401k, ignore this step for now.

1) Save a $1000 emergency fund in a high-interest savings account, and leave it there. Only use it if an emergency occurs, to prevent yourself from taking on more debt.

2) Next, pay down all your debt--both the credit card and the car loan. Put everything you save each month (after you have the $1000 emergency fund) toward paying these off ASAP, because otherwise you're paying a lot more interest than you otherwise need to!

3) After you're debt free, switch back to saving into your emergency fund and aim to increase it to at least 3x your monthly expenses. This way, if you are ever between jobs or have healthcare copays and deductibles that add up, you won't have to go back to credit card debt.

4) Once you're debt free and have at least a 3-month emergency fund, start saving for a down payment on a house. If you have a good credit score (which the above steps will ensure!) then you only need a minimum of 10% down on a house for a good interest rate.

5) Once you have your house (congrats!), start putting more money into a Roth retirement investment account--at least 15% of your gross income each year. If your employer offers a 401k match, you're already contributing to it (see Step 0). For example, if you're currently putting 10% of your income into your 401k, then now is the time to bring your total retirement savings rate up to 15% by putting at least 5% of your income into a Roth IRA. I highly recommend opening your Roth IRA with a low-cost index fund, like Vanguard's S&P 500 Index.

Good luck!

Great ideas.  HOWEVER, take a portion and do something nice for yourself.  It does not have to be a large amount.  Take your loved one(s) to a nice dinner, something that you normally could not afford or would not do because of the cost.  It is very important to be financially responsible, but it is equally important to enjoy yourself now.  It will make a great memory and help everyone relax or reduce their stress.

You should use it to upgrade part of your house. For example last year I spent mine redoing the master bedroom closets, and this year I'm getting new counter tops in my kitchen. That way, you're adding value to something you own, and getting something you can enjoy relatively soon 🙂 

Tally one more vote for debt-payment. It’s a no-brainer to me. My opinions on the subject have already been noted... but I would like to add:

Microsoft Excel has been a BIG part of helping me with my finances. I started using a spreadsheet of my own design about five years ago. I calculate my paycheck with it. I list EACH and EVERY recurring payment that I make. I take about 20 minutes each week to review every purchase I make, enter the amount in my spreadsheet, and then track what my balance will be throughout the year (even predict if I’m overdrawing myself months in advance). 

I’ve found that, going through the motion of building this spreadsheet, updating it, and building little side-sheets with the data (retirement, debt payoff goals, future taxes, etc), I have a REALLY strong grasp on My finances. Anyone that’s completed high school algebra can do it too! 

Good Luck!!! 

Cocaine and Hookers

Pay off your high interest credit card forst.