Financial Advisors Please Help!?

Question

I have a unique situation. Last year we paid for an extravagent wedding and still owe about $20,000 which is on credit cards. We also owe $13,000 in taxes for which we have an installment agreement. Now, our cards which are two different cards, are at extremely high rates almost 22-29%. I have $20,000 in the bank and need to make a decision which to pay off first. Would you pay the credit cards first, or would you pay your taxes first. I believe there is a standard interest on the taxes, and I don't believe it is nearly as much as the credit cards. Do I pay one off the cards and continue the installment, or pay off the taxes and keep getting the high interest on the cards. Please no mean answers. We have good jobs, and should be making enough to pay off all by the end of May. Thank you for your answers.

Answer 1

Pay of the credit cards. That is where you biggest and quickest gain is. These high interest rates are choking you, and the best investment you can make with your cash in the current situation is to get rid of the credit card debt. As you said the tax is in installments and on much better terms, so they don't cause you as much trouble, and you will manage to pay them of from your savings from income, once the credit card debt is gone.

So make the payment on your credit cards NOW ! Do not delay, it is the best use of your cash.

Answer 2

You said you can pay if off by may? May 2007? That's only 3 months away. But for conversation sake here's my 2 cents. Plan A: Run to a bank and take a personal loan for 4 months to cover all the outstanding debt. Pay it back to the bank in weekly or monthly installments. Or if you meant by May 2008, you can do the same thing just for a longer term. - OR - Plan B: Find one or maybe two of those 0% for 12 or 18 months credit card offers and tranfer the balance onto it. Some of them will give you a check that works like a transfer so there is a small fee to use it but it still only has a 0% rate. Use the check to pay the IRS. Just remember that many of these offers allow for the option to change the 0% rate at any time so there is a small risk of losing the 0%. Just make sure you never miss a payment. They can chenge the due date of you payment, so when I did this I made a payment every week so thay couldn't catch me in that trap. Plan C: If you have a 401k that allows loans and has a balance of twice the debt amount then you can take a loan against yourself. At least the rate won't change on you. THis is the best option of the 3. - Or rough it out and pay off the cards first and then the IRS. - The creadit card thing worked extremely well for me. I put three cards onto one as well as my car loan. I paid it off in 16 months. It stayed at 0%. I probably saved at least $1000 doing this. Just whatever you do, set goals, make budget, work ogether as a team, laugh a little and stick to the plan. Money issues can put a lot of stress on a relationship. You have to really work as a team and be there for each other. It was far more stressful on my wife than it was for me. Good luck

Answer 3

Since you already have an installment agreement with the IRS, keep paying on that. The interest rate you are paying them is much lower than what you are paying on your credit cards. I hate to see anyone take money out of their savings. However, the interest you are earning on that money is minimal at best. You would be better off getting the credit card balances paid off. Also, paying these to a zero balance will raise your credit score. I hope that helps.

Answer 4

I would look into transfering the balance of your credit cards to a card with a much lower rate. 22 to 29% is outrageous. If you can find a rate for your new card which is lower than the current rate on your tax installment, transfer the old card balances and pay the taxes off first. (Just beware of companies that charge a high balance transfer fee.) Otherwise, pay off the debt with the higher rate of interest.

Please note, I am not a financial advisor. I just read books and articles on the subject from time to time.

Answer 5

THE CARDS!!!

It will help your credit score, you're being charged far less from the IRS in interest and in the end the IRS will wait around forever to get their money (with little penalty to your credit score). Credit cards, however, will not.

You're throwing away money to the CC company.

Also, if you have a home-equity line of credit you should consider using that for large purchases in the future (that you cannot pay cash for), as the interest rates on those are curently 5-6% annual.

Answer 6

some advisors will make investments you money very conservatively and your annual returns are not very nearly as magnificent as purely taking the vast majority of you funds and making an investment 10% in bonds and something else in an S&P Index fund or different index funds. you extremely do not ought to pay a lot interest to those funds on a weekly foundation and also you may probable be added ahead. My consultant run element added in hardship-free words about 5% for the completed 2014 3 hundred and sixty 5 days yet my corporation 401K added 23% interior a similar time period. there have been no trades finished contained in the 401K. i ought to were added ahead if all my funds were in corporation sponsored plan. I had to pay $6300 to the consultant and not in any respect something to constancy. i have self assurance a lot of those advisors are too conservative because they're fearful of losses yet together how can they justify charging those prices at the same time as handing over so little in go back?

Answer 7

First call your credit card companies and negotiate down the interest rates with them. Do not tell them you have 20k to pay down a card. They will negotiate with you. Also be clear that any change they make to your terms of service DOES NOT move you to two-cycle billing. *some CC companies will change terms without telling you any time you contact them.

Then pay down the debt with the highest interest rate first. This will allow you to reduce the maximum interest fees from your overall debt.

Good luck!

Answer 8

The one thing that seems to be overlooked here is that the credit card companies cannot make your life as miserable as the IRS can and the cc companies don't have their agents running around with guns. My vote is pay the man with the biggest gun first then worry about the pipsqueaks.