$2100 Tax Refund - What to Do?

30 replies
Here's the situation. And this is all about opportunity cost.

I am getting a $2100 tax refund.

I have a full time job and I am not going to be laid off. So the bi-weekly paychecks will bring in the bacon. Currently from my day job income I am chipping away at my credit card debts - all set up on automatic payment plans.

I have one active credit card that has a balance of $2200.

What would you do? Pay the darn thing off, or make a fat payment on it and use the other portion to fund your IM business?

I'm at a loss for ideas as I really want to pay the thing off and just be done with it.
#$2100 #refund #tax
  • Profile picture of the author apatters
    It seems to me like you should allocate 100% of the refund to paying off your credit card debt.

    Why would you *ever* carry a balance on a credit card when you can afford to pay it off? It will just sit there accumulating interest and getting bigger.

    If you pay down $2100 on the card, now you have another $2100 of credit available to you -- whether you choose to spend up to $2100 investing in your IM business is a totally different question.

    I wouldn't use "I just got a $2100 check" as the motive for investing in your IM business. Assess the opportunities available to you, and what strategies you think are most likely to generate income. Then, if they cost money, and the risk/reward seems like a good tradeoff, spend that money. But getting a check from the gov't won't change the risk/reward profile of your ideas!

    Good luck!
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    • Profile picture of the author jasondinner
      Originally Posted by apatters View Post

      It seems to me like you should allocate 100% of the refund to paying off your credit card debt.

      Why would you *ever* carry a balance on a credit card when you can afford to pay it off? It will just sit there accumulating interest and getting bigger.
      Good luck!
      it's amazing how many well meaning people make blanket statements without actually
      knowing why they say the things they say.

      It's easy to just pay off your card and not have any debt.

      But did anyone even think to ask the OP if they are trying to build credit?

      If they are, they should always maintain a balance of 40-60% of their limit.

      This will build their credit score.

      I would take that money and invest it into something that they can get the
      most ROI from.

      What that investment is all depends on what the OP is looking to accomplish.

      - It could be a specific IM product
      - it could be a set of needed tools to market online
      - it could be put into an ING account
      - it could be put into a CD at his local bank
      - he could invest in the stock market (not the best idea, unless he knows what he's doing)
      - he could stuff it under his mattress LOL

      Paying off the credit card probably won't be the best use of that money
      because he'll most likely run his balance up again.

      just my 2 cents

      Jason
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  • Profile picture of the author AverageGuy
    paying off the credit card debt == earning $, isn't it? unless your credit card is 0% APR.

    david
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  • Profile picture of the author Kim Standerline
    I'd pay the credit card off, then use the money I would have been paying on it every month to fund my IM business

    Kim
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    • Profile picture of the author Andy Fletcher
      Originally Posted by Kim Standerline View Post

      I'd pay the credit card off, then use the money I would have been paying on it every month to fund my IM business

      Kim
      I try not to make too many "yeah this" or "+1" type posts but I agree with Kim 100% here.

      Ask yourself what ROI you can expect from IM activities. Not what guides promise you can make but what you have made in the past. If that's been consistently higher than the interest rate on the card then by all means invest the money now. Otherwise pay off the credit card immediately as its the best expected value you've got.

      After that you'll have spare cash each month to invest into whatever you want. Maybe take a month off and buy yourself something nice and fun but after that I'd be looking to invest it in building a revenue stream for yourself.
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      • Profile picture of the author apatters
        Originally Posted by Andy Fletcher View Post

        I try not to make too many "yeah this" or "+1" type posts but I agree with Kim 100% here.

        Ask yourself what ROI you can expect from IM activities. Not what guides promise you can make but what you have made in the past. If that's been consistently higher than the interest rate on the card then by all means invest the money now. Otherwise pay off the credit card immediately as its the best expected value you've got.

        After that you'll have spare cash each month to invest into whatever you want. Maybe take a month off and buy yourself something nice and fun but after that I'd be looking to invest it in building a revenue stream for yourself.
        This is such a smart way of looking at it, Andy deserves kudos. That's right, if the ROI on your business is better than the interest rate on the debt you should stay leveraged.
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    • Profile picture of the author shane_k
      Originally Posted by Kim Standerline View Post

      I'd pay the credit card off, then use the money I would have been paying on it every month to fund my IM business

      Kim

      Exactly. Pay off the credit card debt and then use the money that you are taking out of your checks to pay down that debt, to fund your IM business.


      I love this!


      Shane_K
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  • Profile picture of the author B3n
    Originally Posted by MattSanti View Post

    I'm at a loss for ideas as I really want to pay the thing off and just be done with it.
    I think the answer's in your initial question.

    Pay the credit card off - that'll give you a great return straight away as you won't have to pay interest anymore.

    Plus it will allow you to "be done with it".

    Also, go without some treats for a couple of weeks and pay the extra $100 off at the same time.

    Then you've got a clean slate and a credit card balance at $0.00.

    Once you've got to that point, follow Kim's advice and use the money which was going to used to pay CC debt and use that for gambling with IM. At least then you won't be building debt whilst trying to make money online.
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  • Profile picture of the author MattSanti
    Kim, that's an awesome way of thinking in terms of the money. That makes so much sense! Thank you all of you guys. Time to pay that bad boy off. Matt
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  • Profile picture of the author derrickp
    I am going to agree with the majority here, pay off any credit card debt. You can start internet marketing with very little money. If you look around here many of the successful people started when they were down and out and had very little money.

    People will tell you it is easier to start when you have some extra money but the problem is people spend the money in the wrong areas that won't add to the bottom line.
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  • Profile picture of the author B3n
    All hail King Jason!

    Originally Posted by jasondinner View Post

    it's amazing how many well meaning people make blanket statements without actually knowing why they say the things they say.
    Pot... kettle...

    Jason, he said this in the opening post:

    Originally Posted by MattSanti View Post

    I really want to pay the thing off and just be done with it
    Originally Posted by jasondinner View Post

    But did anyone even think to ask the OP if they are trying to build credit?
    No, because he didn't make any kind of hint towards wanting to do that.

    Originally Posted by jasondinner View Post

    I would take that money and invest it into something that they can get the most ROI from.
    The most GUARANTEED way of getting a good ROI is to pay off the card and stop paying interest on the debt. But, let's consider your other suggestions:

    Originally Posted by jasondinner View Post

    It could be a specific IM product
    Yep, but I would guess that if he needed said IM product, he would buy it - tax refund or not. And in most cases, if people hold off buying the latest, greatest IM product and wait two weeks or so they will likely find they never needed it anyway.

    Originally Posted by jasondinner View Post

    it could be a set of needed tools to market online
    Likewise, as above

    Originally Posted by jasondinner View Post

    it could be put into an ING account
    Does that earn more interest that the amount he would be paying to the credit card company? Yep if it's on a 0% deal but if not, very unlikely (disclaimer: I don't know how easy it is to get a 0% credit card in the US)

    Originally Posted by jasondinner View Post

    - it could be put into a CD at his local bank
    As above

    Originally Posted by jasondinner View Post

    he could invest in the stock market (not the best idea, unless he knows what he's doing)
    Not a good idea, I agree.

    Originally Posted by jasondinner View Post

    Paying off the credit card probably won't be the best use of that money because he'll most likely run his balance up again.
    I didn't realise you knew Matt personally.
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  • Profile picture of the author jasondinner
    oh man ben

    you got me

    you're right

    I was only speaking from my personal experience.

    so matt, I'm sorry.

    maybe i should have asked you exactly what you wanted to do as per Ben's suggestions and offered my unsolicited advice as my own suggestion.

    Ben, you should be king because you RULE!!!
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  • Profile picture of the author B3n
    We're not all here to advertise Lakshay. Or to preach.
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  • Profile picture of the author Kim Standerline
    To be honest I found ben's response amusing and jason's response after that very gracious

    I don't think Ben is a person I'd want to indulge in a war of words with lol

    Kim
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  • Profile picture of the author MikeStronghill
    Hi Matt,

    I would pay the credit card off as fast as possible. The reason for this is that the interest rate on a credit card is so high that I can't believe legally credit card companies can get away with it.

    With IM, you can be building your business without spending a lot of money. You have a good job and you have a steady pay check, always prepare for a rainy day. Pay off the debts and then move forward with capital for your IM business.

    The truth is that like 90% of the IM don't make money. That isn't going to happen to you, but I want you to be realistic and pay down debt and then charge into your IM business and make a ton of money.

    Just being business smart.

    Mike
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  • Profile picture of the author dean mcevoy
    i would pay of the cards, as others have not paying anymore intrest will be a good thing.

    then save up the money you would have spent on repayments and use it to start up you business

    perhaps release a product like
    "how to get the goverment to give you $2100!"
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    • Profile picture of the author MattSanti
      Maybe this will help clarify some things.

      This is my one open and active card that I have. The other 4 credit card accounts I did have are all closed as of the last year, interest rate is at 9.9% and each month $400 automatically goes to them. I entered into a debt management plan in November 2008.

      All payments are consolidated into one and then the credit counseling agency I used is free of charge for me as I went through my credit union. I've got 4 more years on a 5 year plan to be paying off. Obviously the goal is to get it done sooner.

      Not sure where I heard the phrase - use what you got - but that's what I've finally started doing. Part of the reason why I have so much credit card debt is due to the fact I was a product chaser for far too long and never did anything.

      Well I changed that back in December 2008. I took a private label book that allows me to do whatever I woud like with it, turned it into a membership course for free with an OTO on the backend. For submitting to about 100 directories, writing about 20 articles and then posting them on satellite blogs, I've actually had 15 sign ups for the free course since January 1. Not bad for not doing any additional marketing.

      So I began finally using what I have. Funny how that works out. Other thoughts?
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      • Profile picture of the author ShayB
        I will give a slightly different opinion.

        I, personally, would use most of it to pay down the debt.

        I would save $100 or so of it to invest in my IM business.

        You don't mention whether or not you have an "emergency fund" or savings account. Not having an emergency account is one reason people get into debt in the first place - the car needs repairs or the refrigerator breaks down, and they need something quickly. Out comes the credit card.

        If you do not have an emergency fund, I would suggest taking out another $100 to start one. Add to it each payday.

        So put around $1900 on the debt, and the rest for an emergency fund and for incidental costs for your IM biz.

        That, of course, is JMHO. YMMV.
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      • Profile picture of the author Floyd Fisher
        Originally Posted by MattSanti View Post

        Maybe this will help clarify some things.

        This is my one open and active card that I have. The other 4 credit card accounts I did have are all closed as of the last year, interest rate is at 9.9% and each month $400 automatically goes to them. I entered into a debt management plan in November 2008.

        All payments are consolidated into one and then the credit counseling agency I used is free of charge for me as I went through my credit union. I've got 4 more years on a 5 year plan to be paying off. Obviously the goal is to get it done sooner.

        Not sure where I heard the phrase - use what you got - but that's what I've finally started doing. Part of the reason why I have so much credit card debt is due to the fact I was a product chaser for far too long and never did anything.

        Well I changed that back in December 2008. I took a private label book that allows me to do whatever I woud like with it, turned it into a membership course for free with an OTO on the backend. For submitting to about 100 directories, writing about 20 articles and then posting them on satellite blogs, I've actually had 15 sign ups for the free course since January 1. Not bad for not doing any additional marketing.

        So I began finally using what I have. Funny how that works out. Other thoughts?
        After reading this, the only question I have is why would you do anything else?

        If you fail to do this, and they find out, you'll get kicked out of the debt management program on your keister, and all hell will break loose on you.

        Been there, done that (and got more scars than most people). Pay off the debt and don't think about it.
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        • Profile picture of the author MattSanti
          Originally Posted by Floyd Fisher View Post

          If you fail to do this, and they find out, you'll get kicked out of the debt management program on your keister, and all hell will break loose on you.

          Been there, done that (and got more scars than most people). Pay off the debt and don't think about it.
          The only way according to my contract agreement for getting kicked out and 'burned' is if I were to acquire any new debt (department charge cards, credit cards, whatever) and that obviously would be reported to the credit bureaus. At that point all the credit card companies that I am under a renegotiate contract with could say see ya later fool.
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  • Profile picture of the author Steve Mount
    I'd think of a great idea, outsource the entire project, sell the product, make even more $$, pay off the debt, and buy a beer.
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  • Profile picture of the author Floyd Fisher
    Originally Posted by MattSanti View Post

    Here's the situation. And this is all about opportunity cost.

    I am getting a $2100 tax refund.

    I have a full time job and I am not going to be laid off. So the bi-weekly paychecks will bring in the bacon. Currently from my day job income I am chipping away at my credit card debts - all set up on automatic payment plans.

    I have one active credit card that has a balance of $2200.

    What would you do? Pay the darn thing off, or make a fat payment on it and use the other portion to fund your IM business?

    I'm at a loss for ideas as I really want to pay the thing off and just be done with it.
    It's a no brainer...pay off your debt.

    Where else can you get an instant 10% + ROI, and have extra disposable income each and every month to invest in your IM business??????
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  • Profile picture of the author askloz
    Just as well, good to see that the thieving basket cases gave you a refund, it's illegal any ways.

    With that money, I'd hunt out some dropshippers / wholesalers and get some stuff dirt cheap and knock it out on ebay... I bought 2k worth of stuff the other day, expected ROI is over 6k... what kind of stuff? playstation 3 60GB, @ $210 each, and getting over $400 for each - most went for 550-600$.

    Originally Posted by MattSanti View Post


    I am getting a $2100 tax refund.
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  • Profile picture of the author Samuel Lee
    Great post, I'd probaly pay the credit card off, first things first, then use the funds for the monthly payments to set up and fund my internet marketing business. Money well spent! Hope this helps!
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  • Profile picture of the author gadget_man
    Did you decide whatto do in the end? I'd pay off the debt, but I'm often accused of being too sensible.
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  • Profile picture of the author MattSanti
    I paid off the card. No since in letting debt stick around when I had the means to pay the darn thing off.
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  • Profile picture of the author Mar
    What a nice sensible solution; they way I look at is that the bank of ME is much kinder and cheaper than the Bank of .... well, absolutely anywhere else!

    I know that there are arguments for making your money work harder for you - but my feeling is that it's just GREAT to get out of the clutches of those greedy b.....s who sit like Shylock, rubbing their hands in glee, making money out of people's need.

    My own aim this year is to get rid of my business overdraft (I run a small shop). So I can feel a weight lifting off your shoulders as you get rid of the debt.

    Best
    Margaret

    ps - my financial year end is the end of April .... now there's a wee challenge for me - pay the overdraft off by the end of the financial year!
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