My Journey out of Debt

Featured customers currently enrolled in a CareOne Debt Relief Plan, share journey to become debt-free; hear how they juggle family, finances, and more.

Tax Season-It All Add's Up!

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If you're enrolled in CareOne's Debt Management Plan like me, you keep a watchful eye on the progress tracker to see how much your debt has decreased, and how much time you have left on the plan.  Like me, you may also fantasize about the day when you become debt free, 4 years and 5 months from now, for me. Then the money you send to CareOne each month goes into your pocket instead.  Would you like to make that happen sooner?  Maybe it can! 

According to the IRS, the average federal tax refund this year will be $3036.  What if you applied that to your DMP?  I know, I know...that is just an average. Some will get more, some will get less.  Plus, it isn't any fun to get a big refund, and then send it in to your DMP.  How about a compromise? 

For the purposes of this illustration, let's say that your taxes didn't turn out quite that well, and your refund is only approximately one third of that average: $1000.  Practicing the art of compromise, you decide to give half of that ($500) to your DMP, keeping the other half to buy or do something nice for yourself, or for your family.   If you're on the program for five years, and you do this each year, you would apply $2500 ($500 per year, multiplied by 5 years) towards your DMP. 

While we're being fiscally responsible, can you give up $5 a week?  I know many of us are strained to the point that every dollar is necessary to get by, but what if you could?  What could you give up that costs about $5 a week?  How about that cup of coffee from a convenience store a couple of times a week?  What about the bag of chips that you feel terrible about eating afterwards anyway?  How much would you save by purchasing generic brands of cereal?  See if you can find a way to save $5 a week - after awhile, you'd adjust, and you wouldn't even miss it. Imagine, $5 a week for 52 weeks is $260.  What if you could do that for 5 years?  $260 a year for 5 years is $1300. 

If you did both the tax exercise, AND saved $5 a week, you would apply an extra $3800 to your debt over the life of the program.  How many payments to your CareOne plan is that?  How many months would that shave off your program timeline? 

Please share your tax refund spending tips in the comments.

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  • I agree. This is what we plan to do too, make an extra payment. However, I want it applied to my acct with the highest interest rate.

    ALSO, once in a while, when the kids want bagels, we just order them & ask them to cut them. We butter them ourselves when we get home. Saves us $2 which might not seem like much, but it does add up. Take $2 x 52 weeks and that's $104! IT ALL ADDS UP ;)

  • Thanks for your comment, Moschella1!  You're definitley all adds up. Anything that can be done to save a little on a consistant basis will help enormously in the long run.

  • What if you have to pay taxes, I had to pay $109. this year.

  • HI butterfly21847, great question.  One would only be able to follow the suggestion in this blog post if you received a tax refund.  There are lots of things that a person could do with a refund - lots of people use it to buy something new, or go on a trip, etc, etc.  My suggestion is that you apply it to your debt.  If you are lucky enough to get a refund each year, and you apply it to your debt each year, you can make a significant impact with respect to how fast you can pay off your debt.

    If you don't get a refund, the upside is that you didn't give the government an interest free loan for the year, but you wouldn't be able to utilize this suggestion.

  • this would be a wonderful idea,,,, however, tax time for me,,,,, is a small refund anyway.... tax time for me is when the car gets inspected taking most of it, the other half of it goes to pay taxes on my mobile home... our school taxes are high here and our job doesnt take out enough for it.... im so happy to get that tax refund and then i kiss it goodbye... in one hand out the other. booooooooooo DISLIKE lol

  • I actually owed taxes last hoping that we can turn that around this year and apply some extra funds!

  • I like it when someone takes the thoughts in my head and voices them for me:P

  • LOL, 4xdogs - great minds and all that, huh?

  • I usually use my tax refund to pay for my kids camp, they offered a great deal where I would save $800 on sending both of my kids if I pay by 9/30.  I bit the bullet and charged, yes charged it. With my Nov bonus I paid 1k and i will be paying the balance with my tax refund.  It only cost me $150 in interest so I stll saved $650 dollars. i wish I had used my tax refunds earlier.

  • My account has been inactive. I plan to use my tax return to restart my account. Is it possible?

  • Hi bicamsan80, it sounds like you put your tax refund to good use!  You indicate that you wish you had your funds earlier...on thing you could to is adjust your withholdings, have less taxes taken out,  and save the money yourself instead of having the government hold onto it for you. Just something to think about.  Good luck!

  • That's a great question, teresa7611, unfortunately, I don't have the answer.  I suggest posting a thread in the "ask the expert" forum, or calling CareOne directly.  Good luck!

  • As I continued answering the questions, and filling in numbers, the amount I owed was going down, but it soon became obvious that I when it was all said and done, I was going to owe more than I had been planning for.

  • I just applied this  idea to my plan.  I paid off one of my creditors and the payment that was going to that creditor, I will have it applied to my next creditor with the lowest balance.  I have approximately 15 months to go to be debt free :-)

  • congratulations on being able to apply your tax refund to your debt, genias12!   I hope the next 15 months go by quickly for you - keep doing what you're doing and you'll be debt free before you know it!

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