Budget to pay off credit card or throw into savings
With my tax return, I am getting a refund. It would actually be just enough to eliminate my credit card debt. However, I would like to keep a chunk of it in my savings.
I am getting the hang of the 4 rules but which would be best in this case: to spend the money on paying down the cards to zero or to have a buffer and continue paying them with my current goals.
That's great, Slate Blue Pilot (2903ac015cdb) !
The question I always ask when I'm talking to someone in this situation is: "How do your True Expenses categories look?"
If they're well-funded, go ahead and attack that debt. The reason Rule 2 exists is to prevent you from having to rely on credit when "unexpected" expenses show up.
So if your budget tells you you're on track for your annual bills, repairs, medical expenses, and so on, you're ready to pay down debt aggressively. If not, it's better to prevent future debt by bulking up your True Expenses—even if that costs you a bit of extra interest.
I just took the Financial Peace University course by Dave Ramsey. He recommends (as Baby Step #1) that you stash away $1000 as an emergency fund before you begin to attack debt. In our particular course, we determined to stash away $1000 per person in the household. If you then run into an unexpected expense, you've got an emergency fund to help keep you from acquiring more debt.