Debt Eradication (or: What We Did with Our Tax Refund!)

Operation Debt Eradication: our credit card debt over time (last 12 months)

Operation Debt Eradication: our credit card debt over time (last 12 months)

In order to keep our end-of-the-month February round-up to a reasonable length, I decided to give you an update that outlines how we used our tax refund!

It has all gone towards debt eradication or savings… except for about 10% of it.

I also chose to go ahead and allocate it as soon as possible, too. We got our state refund and I immediately sent it right back out to pay down debt. When we got our federal refund a couple of days later, I did the same thing. I get a crazy thrill from watching our debts go down down down on Mint!

Tax Refund ($3,986):

  • $585.43 to Chase credit cards (that balance was from our sucky January – also some of those charges are ones we would pay anyway this month because we put our gas and groceries on there anyway).
  • $300 to savings for H’s gift / business expense (this is the 10% I mentioned above)
  • $450 to “sinking fund”* (this is the amount we normally put in every month, and we decided it couldn’t hurt to have an extra month’s worth in there – that brings the total deposit for February to $900)
  • $696.91 to Citibank card (to bring balance to an even $2000, with our regular payment of $500)
  • $1,500 to car loan
  • $454.57 to…. hold on to until it’s time to put it towards the car.

We went back and forth for a few minutes on what to do with that last $400 and some odd dollars. I really wanted to go ahead and put it right towards the car loan, but since we’ve already gone over on our grocery budget for the month (due to a Sam’s club outing earlier), I knew that we could end up short this month. (Really? Who ends up short in their grocery bill in the shortest month of the year? Anyone? Anyone? Bueller?)

I don’t want to end up putting more charges on the Chase cards that couldn’t be immediately paid off, so we decided to keep it in our checking account, then use it (along with any remaining money from our budgets at the end of the month) to snowflake to the car loan.

Friends of ours (who are about 10 years older than us) once told me that they eradicated their student loans by putting all of their tax refunds into student loan payments. I’m hopeful that we’ll be able to do that next year, since we shouldn’t have any consumer debt at that point!

 Anyone else get back their tax refund yet? How do you use it? Do share!

Thanks for reading!

– M.

* I have heard that a “sinking fund” is what you call where you put your $ for periodic bills or known expenses, such as car repairs, auto insurance, etc. So now, instead of calling this our “savings”, I’m going to try to call it our “sinking fund,” even though the name kind of gives me a “sinking” feeling (hardy har har… but seriously, that’s not a very positive-sounding term, right?). I learned about sinking funds here, from Budget Loving Military Wife.

4 thoughts on “Debt Eradication (or: What We Did with Our Tax Refund!)

  1. Sounds like a great plan! 🙂 After a rough tax estimate, it looks like we should get a ~$2K refund. It will go towards paying down our mortgage! 🙂 Should put us securely in the $70K’s! But I need to get our taxes finished up this week!

    Thanks for the mention! 🙂


    • Anytime! I’m learning so much from bloggers like you! 😀 Sounds like you have a great plan for your tax refund. Doing taxes is more satisfying when you are going to get money back, I think, which is why I don’t want to change our withholdings…. also, I just know we have a more positive attitude mentally when we get money back!


    • I haven’t quite gotten to the point where I’m comfortable putting our income out there, yet…. not because it’s high (I guess it’s laughably not), but because I’m trying to get myself over the taboo of speaking about money. My parents (dad especially) always said that we should never discuss financial matters with strangers, and although I’ve gotten over it enough to put this kind of information out there on the blog (though anonymously, I hope!), I still balk at putting the income out there! I’ll say that my husband and I are teachers in a state that doesn’t really value education, and after 10 years in the field, we’re still making what we were making 5 years ago.


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