Refund Anticipation Loans Are Not Wise!

Good morning!

If you live paycheck to paycheck, like the majority of Americans, you really look forward to your tax refund.

I’m a big proponent of investing at least 20% of your refund in the stock market.  But the reality is that most people’s tax refund will go to catch up on past due bills or some other “emergency”.

Many tax services, such as H&R Block, will offer you the opportunity to get your refund immediately.  Now if you’re in a financial bind, I understand why you might do it.  But it’s not wise.

Let me explain.

You work all year for this tax refund.  This is your money coming back to you.  If you opt to receive a refund anticipation loan, you’re going to pay interest on the money you’ve earned over the last 12 months.  That makes absolutely no financial sense at all!

Decisions such as taking out a loan against your tax refund have contributed to your poor financial situation in the first place.  Start making good choices.  Be patient enough to wait to receive your full refund.

 

My book, The Stock Market is For Everyone, is a short guide for the beginning, inexperienced investor that is easy to understand and can be put into action immediately.

Click the image of the book at left to be taken to its Amazon page.  (Disclosure: As a participant in the Amazon Services LLC Associates Program, I earn a small commission on each sale generated through these links.)

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One Way or Another, You Pay Credit Card Debt.

Good morning.

I wanted to take a break from the markets today and talk about debt for a bit.

One of the biggest financial mistakes people make is getting too deep into credit card debt.

Too much credit card debt can come back to haunt you in the event of a loss of income due to a job loss or illness.

Here’s an example.  Let’s say you have $10,000 in credit card debt, suddenly lose your job, and find yourself unable to pay back the loan.

Eventually the credit card debt will go into default, and the credit card company will charge the debt off as a loss.  You will then be hounded by debt collectors who purchased your debt from the original credit card company in hopes of recouping some, if not all, of the balance you owe for a profit.

Debt collectors have a seven-year window to legally collect the debt from you.  If they fail to do so in that time limit, they cannot legally pursue the debt.

At that point, you may think you’re in the clear.

Not quite!

The IRS will recognize any debt that you have been excused from paying as income…and tax you accordingly!

So the $10,000 in debt you did not pay will be considered income as far as the IRS is concerned, and you may get hit with a tax bill of between $2000 and $3000.

So just remember, when it comes to credit card debt (or debt of any kind), you will pay one way or another.

 

My book, The Stock Market is For Everyone, is a short guide for the beginning, inexperienced investor that is easy to understand and can be put into action immediately.

Click the image of the book at left to be taken to its Amazon page.  (Disclosure: As a participant in the Amazon Services LLC Associates Program, I earn a small commission on each sale generated through these links.)