Ask Terry Questions Tax Return

Tax Return

By Terry Savage on January 31, 2018 | Credit/Debt

Hi Terry, First I want to say I love all of your advice and I have worked hard to decrease my debt using your tips. My husband and I are getting a substantial amount back in tax returns this year. We have a small credit card balance that we have automatic payments on, zero balance til November of this year. Our plan now we should be able to have it paid before then. I have a small loan on my 401K that Has a year and a half on. My question. Which do we pay first? I feel like paying back my 401K will give me more money in my check that will allow for us to live and not have to use the credit card between checks. Thoughts?

Terry Says

This is a tough choice.  For sure you are paying a lot of interest on your credit card, so the balance is building.  But if something happens and you leave your job without repaying that 40l(k) loan it will be considered a withdrawal -- and you will owe taxes and a penalty.  I guess if I were forced to choose, I'd pay down the credit card first --and then TAKE IT OUT OF YOUR WALLET!!   And what a great goal to get both paid off ASAP.  that should inspire someone to get a second or weekend job just to repay the money.  One other thing to keep in mind:  the 40l(k) debt impacts you -- because it is your retirement fund!  I'm assuming the credit card is in both of your names. So when you pay it down, you are helping him as well as yourself.  I think that means he should definitely participate in paying down the balance of your retirement plan loan!



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